A risk retention group unit’s property policy, which was transferred upon a property’s sale without its knowledge or permission, is void, says a federal appeals court, in affirming a lower court ruling.

Cheshire, Connecticut-based Housing Enterprise Insurance Co., which is a unit of the Housing Authority Risk Retention Group Inc. and the Housing Authority Property Insurance, a Mutual Co., had issued a commercial property insurance policy to Knoxville, Tennessee-based One South Place LP, the owner of a residential apartment complex, beginning in 2012, according to Tuesday’s ruling by the 6th U.S. Circuit Court of Appeals in Cincinnati in Housing Enterprise Insurance Co. Inc. v. South Ridge Housing LLC.

When One South sold the apartment complex to Nashville, Tennessee-based South Ridge Housing LLC in 2016, it assigned the insurance policy to South Ridge as part of the sale, but without HEIC’s knowledge or consent, according to the ruling.

The apartment complex was subsequently damaged in a fire. When One South provided HEIC with notice of a claim, after an investigation HEIC declared the policy void and sent One South a check representing a pro rata return of One South’s insurance premium.

HEIC then filed suit in U.S. District Court in Greeneville, Tennessee, seeking a declaratory judgment the insurance policy had become void because its policy’s reassignment had been made without its consent. The District Court granted HEIC’s motion, which was affirmed by a unanimous three-judge appeals court panel in Tuesday’s ruling.

“Tennessee law makes clear that the purported assignment in the 2016 sale of the apartment complex was invalid without HEIC’s consent,” the ruling said.

“The insurance policy in dispute contained an anti-assignment clause, and neither One South nor South Ridge requested HEIC’s consent to the assignment. South Ridge thus acquired no rights to the insurance policy through the 2016 sale of the apartment complex,” said the ruling, in affirming the lower court’s ruling.

Alan Lyons, the New York-based chair of Herrick, Feinstein LLP’s Insurance & Reinsurance Group, said in a statement, “This decision has significant implications on insurers’ ability to enforce anti-assignment clauses in insurance policies. Now that these clauses are fully enforceable, insureds must ensure that they obtain prior consent of the insurer to an assignment of an insurance policy. Otherwise, courts will strictly enforce the anti-assignment clause and invalidate the purported assignment. Additionally, courts will not obligate an insurer to consider a retroactive request by an insured for consent to an assignment.”

Attorneys for South Ridge could not be reached.