In 2005, owners of Ocean Beach Resort Condominium began entering into negotiations with a development company for the sale of their individual units. When Hurricane Wilma struck in October of that year, approximately 45 owners had already agreed to sell. The other 21 owners agreed to sell shortly after the storm occurred. In 2006, the developer took possession of all of the units as well as the association.

Like many associations, Ocean Beach was insured by Citizens Property Insurance Corporation and made a claim for Wilma damages. Citizens paid part of the amount claimed but refused to pay all amounts requested by the association.

After the sale of the units and the developer took control of the association, the former unit owners filed a class action suit against Citizens. The former owners alleged that the property was a “total loss” and demanded that Citizens reimburse them the policy limit contained in the association’s policy. For purposes of standing to sue Citizens, the unit owners alleged that they had been assigned the right to any future insurance payouts in the sale of the units.

Citizens, as well as the developer, disputed that the lawsuit should go forward. Both claimed that the rights to the insurance proceeds were not assigned and could not be assigned to the previous owners because such an assignment would violate the condominium association’s governing documents.

After a bench trial, the court dismissed the action, finding that the association had no power to assign the future proceeds of the claim and that any assignment was invalid as beyond the scope of the association’s powers.

The appellate court reversed the trial court’s findings, holding that nothing in the condominium’s governing documents barred the association from assigning the post-loss insurance claim. It also held that the trial court did not abuse its discretion in certifying a class action against Citizens on the matter.

As the appellate court noted, post-loss assignments of insurance claims are generally permitted. An association, however, must still act in accordance with its governing documents and cannot violate them by assigning a claim when such acts are not permitted. If you have a question about whether an insurance claim can be assigned, you should first check the association’s declaration and by-laws. If there is nothing expressly prohibiting it, there is a good chance that any assignment can be valid.

To read the full appellate opinion, click here.