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Lingel v. Olbin8/29/2000
. The "nonassignability rule" to which Harleysville referred and on which it relied was found in § 547 of the Restatement of Contracts and read:
When an Assignment of a Claim or Bargain to Assign It Is Illegal.
(1) An assignment of a claim against a third person or a bargain to assign such a claim is illegal and ineffective if the claim is for
(d) damages for an injury the gist of which is to the person rather than to property, unless the claim has been reduced to judgment.
In order to find that an injured person could not assign a portion of any recovery prior to judgment, the Harleysville court was required to first support its conclusion that personal injury causes of action were nonassignable. Having reached that conclusion, however, it is even more interesting to note the court's final pronouncement that "nothing herein should be construed to prevent an assignment of all or part of a claim for personal injuries which has been reduced to judgment or otherwise liquidated." 2 Ariz. App. at 543, 410 P.2d at 500. Of course, the judgment or settlement terminates the claim, so nothing would remain to be assigned except the proceeds of the judgment or settlement. This leads me to conclude that the court in Harleysville, this state's seminal case on the assignability of personal injury causes of action, not only need not have concluded that such actions were not assignable, but needed only to narrowly construe the rights of the insured and his insurer, pursuant to § 14-477 and their insurance contract, to that portion of the insured's personal injury recovery necessary to repay the insurer. When the court extended its decision far beyond what was necessary to decide the narrow issue before it, in an area of the law that is not only confusing but peppered with conflicting decisions from several jurisdictions, our jurisprudence was started on a rocky and difficult path.
That is demonstrated in Allstate, where our supreme court held an automobile insurance policy provision requiring the insured to repay the insurer any medical expenses it had paid from the proceeds of any recovery the insured obtained "unenforceable as an assignment of the insured's cause of action against the third party tortfeasor." 118 Ariz. at 304, 576 P.2d at 492. The court noted that, although the provision did not expressly attempt to assign the cause of action to the insurer, that was the practical result. Accordingly, the court said, "Whatever the form, whatever the label, whatever the theory, the result is the same. Such an arrangement . . . is the legal equivalent of an assignment and therefore unenforceable." Id. The court noted that this conclusion was consistent with its earlier determination in State Farm Fire & Casualty Co. v. Knapp, 107 Ariz. 184, 484 P.2d 180 (1971), that an automobile insurance policy provision subrogating the insurer to the rights of the insured for any medical payments made on the insured's behalf "amount to an assignment and . . . a claim for personal injuries is not assignable." Allstate, 118 Ariz. at 303, 576 P.2d at 491.
The essence of the holdings in Knapp and Allstate has continued with the supreme court's decision in Brockman and with Division One's decision in Karp. Both continue the prohibition against the assignment of personal injury recovery proceeds. All, however, are grounded in the principles first announced in Harleysville.
Although the court in Harleysville referred to many valid reasons why some courts and commentators have concluded that assigning personal injury causes of action should be prohibited, it never used or relied upon the traditional common law words "maintenance," "champerty," or "barra
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