An assignment of policy rights made before the policy was issued was ineffective. W. Alliance Bank v. Nat'l Union Fire Ins. Co., 2016 U.S. Dist. LEXIS 19936 (N.D. Cal. Feb. 18, 2016). The bank issued a loan to Sorrento Networks, Inc. in 2011. As collateral, Sorrento gave the bank a continuing security interest in all of Sorrento's personal property, including its inventory, commercial tort claims and insurance proceeds. The loan agreement authorized the back to act on Sorrento's behalf in collecting any money owed to Sorrento and prosecuting any claims that Sorrento might have. In 2012, National Union issued a commercial crime policy that named Sorrento as an insured. The policy provided $1 million of coverage for different forms of crime, including employee theft and theft of money and securities inside the premises. The policy included a non-assignment clause, which said that the insured's rights and duties under the policy could not be transferred without National Union's written consent. In January 2014, Sorrento announced it was going out of business. Employees at a subsidiary were instructed to leave property in the premises. When the CEO arrived at the subsidiary's office a month later, all of the property was missing. The bank then brought suit against National Union in its own name. National Union moved to dismiss. The court found that the bank could not sue as an assignee of Sorrento's benefits under the policy because Sorrento never assigned to the bank its contractual rights. Sorrento borrowed money from the bank in April 2011, over a year before the National Union policy took effect. Sorrento could not have assigned away its rights under a policy that it had not yet purchased. Further, the non-assignment clause barred any assignment that took place before the loss occurred. This precluded Sorrento from assigning away its rights. A non-assignment clause was void only as to transfers that occurred after a loss happened. The purported assignment took place in 2011, years before Sorrento suffered the loss. Therefore, the complaint was dismissed with leave to amend.
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