Opinion ID: 2994699
Heading Depth: 2
Heading Rank: 1

Heading: The Language of the Assignment Clause

Text: The validity of the assignment at issue can be determined by examining the language of the assignment clause in Gilliam’s insurance policy. Gilliam’s policy, issued pursuant to a federal statute providing military veterans with insurance, is a written government contract. See Prudential Ins. Co. of America v. Athmer, 178 F.3d 473, 475 (7th Cir. 1999) (discussing life insurance policy issued pursuant to the Servicemen’s Group Life Insurance Act of 1965, 38 U.S.C. sec.sec. 1965-1979). Interpreting the meaning of a provision in a federal government contract is a matter of federal common law, and therefore, we must apply federal common law rules of contract interpretation to determine whether the purported assignments of Gilliam’s insurance proceeds were valid. See id. at 475; see also Pitcher v. Principal Mut. Ins. Co., 93 F.3d 407, 411 (7th Cir. 1996). When applying the federal common law rules of contract interpretation we must first determine whether the clause of the contract at issue is ambiguous. Grun v. Pneumo Abex Corp., 163 F.3d 411, 420 (7th Cir. 1998) (citing Ryan v. Chromalloy American Corp., 877 F.2d 598, 602 (7th Cir. 1989)). The language of a contract is ambiguous if a section of that contract is subject to reasonable alternative interpretations. Id. (citing Hickey v. A.E. Stanley Mfg., 995 F.2d 1385, 1389 (7th Cir. 1993)). In reviewing contract language for other possible interpretations, we are required to interpret the language ’in an ordinary and popular sense as would a person of average intelligence and experience.’ Id. (quoting Pitcher, 93 F.3d at 411). If a contract is not open to any other reasonable interpretations, and is therefore unambiguous, then the written words of the contract must dictate the disposition of a dispute involving that contract. Central States, Southeast and Southwest Areas Pension Fund v. Kroger Co., 226 F.3d 903, 911 (7th Cir. 2000). Furthermore, except for the highly unusual instance where literal application of a text would lead to absurd results or thwart the obvious intentions of its drafters, if a contract is found to be unambiguous, then we are not to examine any extrinsic evidence. Grun, 163 F.3d at 420 (internal quotation marks and citations omitted). When the language of an unambiguous contract provides an answer, then the inquiry is over. Id. (citing Wikoff v. Vanderveld, 897 F.2d 232, 238 (7th Cir. 1990)). There is nothing ambiguous about the assignment clause in Gilliam’s NSLI policy. The clause provides that [a] beneficiary may assign all or part of his/her interest in the policy. The clause also provides, however, a very specific and limited list of individuals to whom such a beneficiary may assign all or part of his or her interest. A beneficiary of an NSLI policy may only assign his or her interest to the Insured’s widow, widower, child, father, mother, grandfather, grandmother, brother or sister. Applying the limitations of the unambiguous assignment clause, we conclude that the two assignments at issue are invalid. Although the initial assignment from Shirley and Dwight Gilliam to Keith Gilliam was proper, the next two assignments are clearly prohibited by the policy’s assignment clause. Keith Gilliam is the son of Gilliam and is, therefore, one of the limited individuals to whom the assignment clause permits Shirley and Dwight Gilliam to assign all or part of their interest in the policy’s proceeds. Neither Hall-Jordan, to whom Keith Gilliam attempted to assign his interest in the policy, nor Funeral Financial, to whom Hall- Jordan tried to assign its purported interest in the policy, however, can claim to be included in the limited group of individuals to whom Shirley and Dwight Gilliam could permissibly assign their interest in the policy. Thus, we find these two assignments to be in direct violation of the assignment clause and invalid. Funeral Financial asserts that the restrictions on the assignability of Gilliam’s NSLI proceeds only apply to the first assignment, from the initial beneficiary, Shirley and Dwight Gilliam, to the initial assignee, Kevin Gilliam. Funeral Financial contends that any re-assignment of the insurance proceeds is not hindered by the restrictions placed on the original beneficiary. This argument fails for two reasons. First, when a party to a contract assigns its interest in that contract to another party, the assignee, then that second party stands in the shoes of the assignor and assumes the same rights, title and interest possessed by the assignor. Perry v. Globe Auto Recycling, Inc., 227 F.3d 950, 953 (7th Cir. 2000) (internal quotation marks and citations omitted). When Shirley and Dwight Gilliam properly assigned their interest in Gilliam’s policy to Keith Gilliam, he stepped into the role of beneficiary, and the restrictions of the assignment clause limited his ability to assign his newfound interest in the insurance proceeds. Thus, Keith Gilliam’s assignment of his interest in his father’s policy to Hall-Jordan is forbidden by the assignment clause. It follows that the attempted assignment from Hall-Jordan, who never actually obtained any interest in the policy, to Funeral Financial, an impermissible assignee, is also invalid. Secondly, Funeral Financial’s interpretation of who is bound by the assignment clause undermines the purpose of including any assignment restrictions in the insurance policy. The assignment clause in Gilliam’s policy, implemented pursuant to 38 U.S.C. sec. 1918(a), is one of several steps Congress has taken to ensure that NSLI proceeds reach those individuals Congress and the policyholders intended these policies to benefit./2 Applying the same restrictions to those individuals who have themselves been assigned an interest in the policy through a proper assignment protects the rights of those individuals who stand ready to benefit from future valid assignments. As the district court pointed out, allowing an initial assignee to re-assign the interest in the proceeds he or she received from the designated beneficiary without any restrictions whatsoever would create an end-run around the anti- assignment provisions of the statute. Funeral Fin. Serv., Ltd. v. United States, No. 98 C 7905, 2000 WL 91919, at  (N.D. Ill. Jan. 18, 2000). We will neither create nor endorse a method for individuals to bypass restrictions intentionally implemented by Congress.