California Supreme Court Overrules Henkel and Holds Insurer Consent Is Not Required For Assignment

In Fluor v. Superior Court (August 20, 2015) 61 Cal.4th 1175, the California Supreme Court overruled its prior decision in Henkel Corp. v. Hartford Accident & Indemnity Co., 29 Cal. 4th 934 (2003) and found policyholders could assign rights to insurance coverage without obtaining insurer consent.  This returned California to the position held by most other jurisdictions in the nation.  The holding addressed consent to assignment provisions in insurance policies and whether or not an insurer must provide consent for such an assignment to be effective.  The issue often arises in connection with long tail liabilities coupled with corporate reorganizations or transfers.  For example, if Company A is potentially responsible for a historic release of contamination in the 1970’s, it could face a present day claim.  If Company A still exists in its present format as it did as a named insured under the historic policy, it can tender the claim for coverage under that historic policy.  However, if Company A reorganized and/or transferred assets/liabilities into a new business entity, then its present iteration could face obstacles obtaining coverage.  In Henkel, after a series of agreements, plaintiff Henkel Corporation (Henkel) acquired the metallic chemical product line of Amchem Products, Inc. (Amchem No. 1) and assumed all related liabilities. However, the California Supreme Court would not allow that Henkel also acquired the benefits of the insurance policies issued to Amchem No. 1.  In Fluor, a subsequent reverse spinoff company of the historic insured was able to obtain coverage after the California Supreme Court overruled Henkel and held that an insurer must honor an insured’s assignment of the right to invoke defense or indemnification coverage for an injury that occurred within the time limits of a policy.  The Fluor Court justified its new position by claiming it was based upon Insurance Code section 520—a statute tracing back to 1872, which was not cited to or considered in Henkel.

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