Owen v. CNA Insurance/Continental Casualty Company

Supreme Court of New Jersey · 2001 · Contracts

771 A.2d 1208 (N.J. 2001)

Updated July 26, 2026

ContractsAssignmentStructured settlementsNon-assignment clausesnon-assignment clausestructured settlementRestatement (Second) of Contracts § 322Restatement (Second) of Contracts § 317

Facts

In 1983, Carol Owen settled a personal-injury suit with Continental, receiving an initial lump sum, attorney's fees, and five deferred periodic payments under a structured settlement agreement. The agreement stated that the deferred lump sum payments "shall not be subject to assignment, transfer, commutation, or encumbrance, except as provided herein." In 1997, because of unrelated medical bills, Owen entered into an agreement with Metropolitan to sell her rights and benefits under the settlement in exchange for a lump sum and then directed Continental to send future payments to a new address. Continental refused, asserting that the payments were not assignable and that it had to send them to Owen's actual address.

Issue

Whether the non-assignment clause in Owen's structured settlement agreement was enforceable so as to prevent her assignment of future payment rights. More specifically, the court considered whether the clause voided the assignment under contract law principles and whether the assignment materially increased Continental's burden or risk.

Rule

Under New Jersey law, applying Restatement (Second) of Contracts sections 322 and 317, a contractual term prohibiting assignment ordinarily limits only the right to assign, not the power to assign, unless the contract specifically states that a nonconforming assignment is void, invalid, confers no rights on the assignee, or will not be recognized by the obligor. Even if the clause lacks that specificity, an assignment may still be ineffective if it materially changes the obligor's duty or materially increases the burden or risk imposed on the obligor.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Portland, Oregon, Nadia Ruiz settled a negligence claim with Pine Harbor Indemnity. The settlement agreement provided that future payments "shall not be assigned or transferred," but it did not say any attempted assignment would be void, invalid, or unrecognized. Nadia later assigned one future payment to Cascadia Funding Group, and Pine Harbor refused to honor the assignment solely because of the clause.

If Cascadia sues to enforce the assignment, which is the best result?

Explanation. Under the majority rule adopted by the court, a contractual term prohibiting assignment ordinarily limits only the right to assign, not the power to assign, unless it specifically states that a contrary assignment is void or invalid, that the assignee acquires no rights, or that the obligor will not recognize it. Language that payments "shall not be assigned" is not enough by itself. Thus, absent additional facts showing material increase in burden or risk, the assignment remains enforceable.