The Indiana Supreme Court recently aligned itself with the Hawaii Supreme Court in deciding an insurance policy could not be assigned without the insurer's consent. Travelers Cas. and Sur. Co. v. United States Filter Corp., 2008 Ind. LEXIS 953 (Ind. Sup. Ct. Oct. 15, 2008). The holding in Travelers is consistent with the Hawaii Supreme Court's decision in Del Monte Fresh Produce (Hawaii), Inc. v. Fireman's Fund Ins. Co., et al., 2007 Haw. LEXIS 380 (Haw. Supr. Ct. Dec. 26, 2007).
U.S. Filter was sued for allegedly causing the underlying plaintiffs' exposure to silica from working near a blast machine previously owned by Wheelabrator Technologies, Inc. ("WTI"). U.S. Filter sought coverage under several comprehensive general liability policies issued to WTI and other predecessors-in-interest. More than eighty policies issued over the years were potentially implicated. The policies contained a provision prohibiting assignment without the consent of the insurer.
The intermediate court held that a chose in action arose under the occurrence-based policies at the moment of each loss, or each claimant's initial exposure to silica. As freely transferable assets, the choses in action carrying coverage rights passed to U.S. Filter through a sale of assets.
The Indiana Supreme Court reversed. The assignment of the policies through corporate transactions involving the sale of assets was invalid because there was no consent by the insurers as required by the policies.
U.S. Filter argued, however, that certain claims under the policies transferred as choses in action. The Indiana Court acknowledged two lines of cases existed. One group of cases, represented by the Ninth Circuit in Northern Ins. Co. of New York v. Allied Mut. Ins. Co., 955 F.2d 1353 (9t Cir. 1992), did not distinguish third-party losses as choses in action and allowed post-loss assignment of insurance claims. Another group of cases, represented by Henkel Corp. v. Hartford Accident & Indemn. Co., 129 Ca. Rptr. 2d 828 (Cal. 2003), recognized potential risks to the insurers and upheld their contractual right to accept or reject the assignment. Hawaii's Del Monte case aligned itself with Henkel.
The Indiana Supreme Court joined the growing number of jurisdictions following Henkel. A chose in action only transferred if it was assigned at a moment when the policy holder could have brought its own action against the insurer for coverage. Under the policies at issue here, that moment did not arrive until a claim was made against the insured. To the extent the injuries caused by the blast machine had occurred but had not yet been reported at the time of the transfer of assets, they did not constitute an assignable chose in action. Accordingly, U.S. Filter did not have a right to seek coverage under their predecessors' CGL policies for these claims.
