Assignment
Definition
An assignment is the legal transfer of rights, interests, or benefits from one party to another. Through assignment, the original holder (assignor) transfers their contractual rights to a third party (assignee), who then “stands in the shoes” of the original holder and can enforce those rights. Assignments commonly occur in insurance contexts, contract law, and legal claims.
How It’s Used in Personal Injury Cases
Assignment appears in personal injury cases in several important ways. Most significantly, when an insurance company unreasonably refuses to settle a claim within policy limits and exposes its insured to an excess judgment, the insured can assign their bad faith claim against the insurance company to the injured plaintiff. This allows the plaintiff to pursue the insurance company directly for the excess judgment amount. However, Texas law limits what can be assigned—purely personal tort claims like emotional distress generally cannot be assigned.
Practical Example
A jury awarded $1 million against a defendant whose insurance policy had only $100,000 in limits. The plaintiff had previously offered to settle for $100,000, but the insurance company unreasonably refused. The defendant faced personal liability for $900,000. To avoid personal bankruptcy, the defendant assigned his bad faith claim against his insurance company to the plaintiff in exchange for a “covenant not to execute” on the excess judgment. The plaintiff then pursued the insurance company directly for the $900,000.
Why It Matters to Your Case
Understanding assignment is crucial when dealing with policy limits situations or when insurance companies act in bad faith. If an insurance company unreasonably refuses to settle your claim and you obtain an excess verdict, assignment gives you a path to collect beyond the policy limits by pursuing the insurance company’s bad faith conduct directly.
Key Takeaway
Assignment allows legal rights to be transferred from one party to another—in personal injury cases, this can provide a path to recovery beyond policy limits when insurance companies act in bad faith.