The answer to this question depends upon a variety of factors, all of which are set out in the case of Delia Andrews Hyde v. RF&G Insurance Company Limited, Civil Appeal No 1 of 2016. As is usual in cases involving insurance law, the short answer is, “It depends.”
A slightly longer answer is that, yes, a cause of action may be assigned to a third party if several strict requirements are met. In case you don’t wish to read through the entire article, those requirements are as follows:
- The claim, debt, or other cause of action must be one that is already in existence. Except as anticipated under the doctrine of subrogation in insurance contracts, one cannot preemptively assign a claim to a third party in the anticipation that one will arise.
- Notice of the assignment must be expressly provided in writing to the debtor in compliance with The Law of Property Act.
If the case law is any indication, it appears that courts will be extremely hesitant to find that these conditions are met unless the assignee and assignor meet every technical and formal requirement under these conditions
Delia Andrews Hyde v. RF&G Insurance Company Limited
Before we embark upon an explanation of the conditions that must be met for a valid assignment to exist, a discussion of the leading case of Delia Andrews Hyde v. RF&G Insurance Company Limited, Civil Appeal No 1 of 2016 (Hyde) is warranted.
That case was an appeal of a decision of Griffith J. on November 27, 2015 that found in favor of RF&G. The facts, briefly, are as follows:
Delia Hyde was involved in a vehicle accident on November 29, 2013. She collided with a truck driven by Roselia Vallecillo, causing significant damage to it. Vallecillo was insured by RF&G, who paid her over $40,000 to settle the contract of insurance. Hyde was insured by Home Protector Insurance Co., but only for $20,000. Home Protector Insurance Co. paid RF&G the full $20,000 allowed by statute in Belize as Ms. Hyde was adjudged to be negligent and at fault for the collision.
Thereafter, RF&G sued Hyde for an additional $17,980 to cover the remainder of its settlement of the insurance contract with Vallecillo.
The trial judge found that Ms. Hyde was liable for the accident. He ordered Ms. Hyde to pay RF&G $16,805 plus costs and interest.
Ms. Hyde appealed, arguing, among other things, that RF&G had no standing to sue her in its own name because Ms. Vallecillo’s claim had never been assigned to RF&G.
The appellate court unanimously allowed Ms. Hyde’s appeal, finding that RF&G lacked standing to sue Ms. Hyde and that Roselia Vallecillo’s claim against Ms. Hyde had never been validly assigned to RF&G.
The Doctrine of Subrogation and Exceptions Thereto
The doctrine of subrogation applies to all contracts of non-marine insurance, including motor and fire insurance. It prevents the insured from recovering more than full indemnity and effectively allows an insurer to recover its losses against a tortfeasor who has harmed the insured. (See Paragraphs 32 and 33 of Hyde.)
Such actions are brought in the name of the insured, rather than the name of the insurer. However, there is an exception to the doctrine of subrogation. Where the insured has assigned its claim to the insurer, the insurer must bring a claim in its own name.
In an assigned claim, it is imperative that the plaintiff establish a valid assignment of the claim at issue, either in law or in equity.
In the Hyde case, the respondent, RF&G Insurance, attempted to rely on Condition 5 of its contract of insurance with Vallencino, which read as follows:
No admission offer promise or payment shall be made by or on behalf of the Insured without the written consent of the Company which shall be entitled if it so desires to take over and conduct in its name the defense or settlement of any claim or to prosecute in its name for its own benefit any claim for indemnity or damages or otherwise and shall have full discretion in the conduct of any proceedings and in the settlement of any claim and the Insured shall give such information and assistance as the Company may require.
(Hyde, Paragraph 28)
A number of facts were fatal to RF&G’s argument in favor of a valid assignment, however. Most importantly, the condition described above did not assign a valid, existing claim to RF&G. Instead, it merely assigned the right to pursue a claim that was not in existence at the time the contract was written. At that time, there was no loss and there was no payment for loss.
Further, the assignment was not in compliance with Section 133(1) of the Law of Property Act, Chapter 190. I will turn to that subject next.
The Law of Property Act
Section 133(1) of the Law of Property Act, Chapter 190 reads as follows:
(1) Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, shall be effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice –
(a) the legal right to such debt or thing in action;
(b) all legal remedies for the same; and
(c) …
A careful reading of the foregoing provision will show that “express notice in writing” must be given to the debtor for a valid assignment to exist.
In Hyde, the respondent insurance company argued that it’s attempt to secure reimbursement for its loss prior to instigating proceedings against the appellant counted as “express notice in writing.” The appellate court rejected that argument, finding that no less than formal notice in full compliance with the section was required.
An Equitable Assignment
The respondent insurance company also argued that there had been a valid equitable assignment insofar as the insured Vallecillo and RF&G entered into a valid contract for good consideration for the assignment of the former’s claim to the latter.
The appeal court rejected that argument for the same reason that they rejected the claim that the assignment was valid at law. Basically, when the contract was signed, there was not yet any claim to assign. It was a mere hypothetical. No loss had occurred and no payment for that loss had yet gone out.
Requirements for the Valid Assignment of a Claim in Belize
In Belize, therefore, a number of things must occur before a party can assign a claim, debt, or other cause of action to another party. They are as follows:
- The claim, debt, or other cause of action must be one that is already in existence. Except as anticipated under the doctrine of subrogation in insurance contracts, one cannot preemptively assign a claim to a third party in the anticipation that one will arise.
- Notice of the assignment must be expressly provided in writing to the debtor in compliance with The Law of Property Act.
Note that these are the requirements for assigning a claim at law. It is also possible to equitably assign a claim to a third party, although, simply complying with The Law of Property Act and the legal requirements are more certain and simple than relying on an equitable doctrine to ground one’s assignment.
Final Thoughts
In sum, it is possible to validly assign a claim, debt, or other cause of action to another party in Belize. However, the case of Hyde demonstrates the potential pitfalls and traps of doing so without due care or caution.
That case shows that courts will pay strict attention to the requirements found under The Law of Property Act and will not be quick to interpret the actions of an insurer or other assignee as meeting the requirements found in that act.
Insurers and other parties should take extreme care to ensure that both the timing and notice requirements set out in Hyde are met if they wish to rely on the assignment of a third party’s debt, claim, or cause of action.
Steven Toews