In a major ruling, the California Supreme Court applied a statutory provision to overrule its prior decision in Henkel Corp. v. Hartford Accident & Indemn. Co., 29 Cal. 4th 934 (2003) and ruled that liability policies can be assigned despite non-assignment provisions. See Fluor Corp. v. Superior Court, 2015 Cal. LEXIS 5631 (Cal. Aug. 20, 2015). The Hawaii Supreme Court relied on Henkel when it also found anti-consent provisions valid. See Del Monte Fresh Fresh Produce (Hawaii), Inc. v. Fireman's Fund Ins. Co., 117 Haw. 357, 183 P.3d 734 (2007) [see posts here and here].
For decades, Fluor Corporation performed engineering, procurement, and construction (EPC) operations through various corporate entities and subsidiaries. Beginning in 1971, Hartford issued up to 11 CGL policies to Fluor from 1971 to 1986. Each policy contained a consent-to-assignment clause reading: "Assignment of interest under the policy shall not bind the Company until its consent is endorsed hereon."
Beginning in the mid-1980s, Fluor Corporation was sued in numerous lawsuits claiming personal injury from asbestos exposure. Fluor Corporation tendered the early lawsuits to Hartford, which accepted the defense. Fluor Corporation subsequently went through a reverse spinoff under which a newly formed subsidiary, Fluor 2, took over the continuation of the company's EPC businesses. The original Fluor transferred all of its EPC-related assets and liabilities to Fluor-2, making Fluor-2 the parent of the EPC subsidiaries. The transaction did not except any insurance rights from the transfer of "any and all" assets.
In 2001, six months after the reverse spinoff, Fluor-2 notified Hartford of the transaction. For seven years, Hartford continued to defend Fluor-2 against claims triggered by occurrences during the terms of the original, expired policies issued to Fluor, and provided defend and indemnity for those claims.
The parties became embroiled in litigation in the mid-2000's on various issues. Hartford filed a second amended cross-complaint in 2009, presenting for the first time the argument that it had no obligations under the policies because it had never consented to the assignment of the policies to Fluor-2. The trial court granted summary judgment to Hartford based on Henkel and the appellate court affirmed.
Relying upon Insurance Code section 520 - a statute dating back to 1872, but never considered by the court in Henkel - the court overruled Henkel. Section 520 restricted an insurer's ability to limit an insured's right to transfer or assign a claim for coverage "after a loss has happened."
Henkel held that the consent-to-assignment clause was enforceable and precluded the insured's transfer of the right to invoke coverage without the insurer's consent after the coverage-triggering even had already occurred. Fluor-2 argued that when an assignment took place after a third party's exposure to asbestos, resulting in personal injury for which the insured may be liable, "a loss has happened" within the meaning of section 510. Accordingly, the insurer could not rely on a consent-to-assignment clause to avoid the effect of the assignment.
The Supreme Court agreed. The decision in Henkel, which considered the proper application of a consent-to-assignment clause under common law principles, could not survive in light of the controlling statutory provisions of section 520. Even where the dollar amount of the loss was unknown or undetermined and not yet established by a judgment or settlement, the requirement that the insurer consent to an assignment was invalid under the statute.
Whether the Fluor decision would cause the Hawaii Supreme Court to revisit the Del Monte decision seems unlikely. Del Monte was also based, in part, upon a statutory provision, Haw. Rev. Stat. 431:10-228 (a), which provides that "[a] policy may be assignable or not assignable, as provided by its terms."