What is a legal "assignment"? You many know the answer intuitively: it's when you give or receive the rights to a claim to/from some one else (i.e., a "third party").
Why is this important? Because legal environment concerning these types of claims is in flux, which itself is surprising because the law on assignably of claims dates back some 400 years.
Let me give you an example from the Arizona Supreme Court, which recently handed down a decision in _ Webb v. Gittlen._ That decision holds that a professional negligence claim against an insurance agent is assignable (e.g., where an insurance agent fails to properly provide appropriate coverage). This was a "big deal" and surprised a lot of people who thought otherwise.
You see, long ago the courts in England decided that certain types of assignments were morally "unfathomable." One type of assignment that was particularly offensive to these courts was the assignment of "personal injury claims." The idea being that it was unseemly to allow people to "buy and sell" claims for personal injury because ... well, just because.
At first blush, you may or may not agree with this, but consider that it happens everyday with "collection agencies." They purchase debt or judgments at a discount and then recoup their money, and profit, from what they collect. Like it or not, it's a business.
So what was special about _ Webb v. Gittlen?_ The opinion is a actually a good read in that the Supreme Court takes us through centuries of anti-assignment history and jurisprudence, neatly summarizing Arizona law on this issue as follows:
The current principles under Arizona law for determining if an unliquidated claim may be assigned can be summarized as follows: (1) claims generally are assignable except those involving personal injury; (2) the legislature may specify whether particular claims are assignable; and (3) absent legislative direction, public policy considerations should guide courts in determining whether to depart from the general rule.
The Court then turned to the case at issue and, without specifically saying so, seemed to accept that a claim against an insurance agent -- relating to a wrongful death claim -- does not "involve a personal injury." While I think this is clearly correct, it is surprising how often the issue gets ignored or taken for granted -- namely, what constitutes an unlawful assignment of a personal injury claim?
For example, is a medical lien an unlawful assignment of a personal injury claims? Why not? Since most personal injury attorneys encounter these every day, wouldn't it make sense to know whether they are valid and why? Well, this opinion may shed some light on the issue where Court stated as follows:
Arizona case law generally allows the assignment of unliquidated legal claims except those involving personal injury. This distinction reflects the evolution of the common law, which once held that "choses in action" could not be assigned, except to the crown. Welch v. Mandeville, 14 U.S. (1 Wheat.) 233, 237 n.a (1816). A legal claim is one type of "chose in action," but the concept also encompasses "debts of all kinds" and "rights to recover ownership or possession of real or personal property."
While not the focus of the opinion, the Court's discussion of the affirmative assignably of "legal claims" and "debts of all kinds" is important. For instance, even though a medical lien creates an interest in a person's bodily injury recovery, maybe it is a valid "legal claim" since it covers a "debt." But if you think this is a slam-dunk, consider what the same Court said in Allstate Ins. Co. v. Druke, 118 Ariz. 301, 576 P.2d 489 (1978):
Whatever the form, whatever the label, whatever the theory, the result is the same. The [documents] create an interest in any recovery against a third party for bodily injury. Such an arrangement, if made or contracted for prior to settlement or judgment, is the legal equivalent of an assignment and therefore unenforceable.
Id. at 304, 576 P.2d at 492; Lo Piano v. Hunter, 173 Ariz. 172, 175-76, 840 P.2d 1037, 1040-43 (App. 1992) (holding that reimbursement provision was an unenforceable assignment of a personal injury claim). So it is still up in the air whether such assignments are valid.
Anyway, the substantive thrust of the Court's holding was to explain the difference between assignments of legal malpractice claims and professional negligence claims against insurance agents. Without holding whether legal malpractice claims were assignable, the Court went on to "assume they are not" and distinguished the attorney-client relationship with the insurance agent-client relationship, essentially saying that the later was of a lesser duty (i.e., generally not a fiduciary, which was a bit of a surprise to me) and drawing on other differences (without saying why the differences made a difference by the way). The Court just concluded that the relationship with an insurance agent was not "uniquely personal" to justify making claims against an insurance agent non-assignable.
Next, the Court addressed public policy arguments. Surely, the best line in this section is the following refreshing dose of common sense to the argument that allowing such assignments would "commercialize" the insurer-client relationship: "Although the agent-client relationship has personal dimensions, it arises from a commercial transaction - the purchase of insurance. It is therefore odd to suggest that it should not be commercialized." This, of course, begs the question -- isn't the relationship between an attorney and client commercial? That is, it involves the commercial exchange of money for services, so why should it get any different treatment?
It is probably too much to hope for, namely -- the complete abolition of anti-assignment law -- and even though it sometimes helps clients in the lien context, it has always seemed unnecessarily paternalistic and outdated to me, especially the nonsense about "trafficking in personal injury claims." Still, it was nice to see the Court tip its hat, in footnote 3, to commentators "who advocate allowing assignment of all tort claims."
In fact, the Court alluded to the inconsistent and strange genesis of the non-assignablity issue, noting that "[a]s courts became more accessible and litigation a more accepted means for resolving disputes, the prohibition on assignment gradually became the exception rather than the rule." The Court explained that the rationale behind the "exception" of prohibiting assignment of personal injury claims was basically tied to the idea that the claims were "personal" and did not survive death, therefore, they could not be assigned during the person's lifetime. But the Court observed:
This "survivability" test did not itself survive in Arizona after 1955, when the legislature enacted a [now amended] statute providing for the survival of most causes of action, including personal injury claims. Although this statute undermined one rationale for refusing to allow the assignment of personal injury claims, courts did not abolish the rule. Instead, they resurrected the common law public policy rationale - fear of vexatious litigation.
In other words, the reason we still have non-assignment law today is simply a function of judicial activism from 50 years ago. So it's possible that, one day, courts will see it differently -- afterall, who would have thought the Court would permit assignment of a claim against an insurance agent, but not a lawyer?
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