Page 9 - Litigation

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Litigation | MONDAY, DECEMBER 14, 2015 | S9

insurance companies’ consent to assign the Court reversed Henkel, finding that poli-
‘Fluor’ is a welcome return to a pro-business rule in this area, and
policies—clauses that had been interpreted cyholders freely could assign their liability
to apply to pre-loss assignments in order to one that will enhance the ability to conduct useful corporate insurance policies for IBNR losses under
prevent a drastic change in the risk insured.
California law without regard to consent-to-
In 1980, Henkel acquired a metallic transactions.
assign clauses contained in their policies.
chemical product line of Amchem Products Fluor had performed engineering, procure-
(Amchem) and assumed all related liabilities. ment, and construction (EPC) operations stating the contrary. The court rejected this In the years following Henkel, commen-
In 1989, former employees iled suit against since 1971 for various corporate entities at argument as well, finding that the claims tators, insurance experts, and other courts
Henkel, alleging injuries arising from expo- sites where asbestos allegedly was used. The brought by plaintiffs in the underlying per- virtually uniformly criticized the California
sure to metallic chemicals during the period company had purchased occurrence-based sonal injury suit “had not been reduced to a Supreme Court’s departure from the majority

between 1959 and 1976. Henkel tendered suit liability policies from 1971-1986 from Hartford sum of money due or to become due under rule regarding assignment of insurance rights.
to the insurance companies that insured Accident & Indemnity Company (Hartford). the policy.” Id. at 944.
See, e.g., 1 Stempel on Insurance Contracts,
Amchem between 1959 and 1976, but they Since the mid-1980s, Fluor has been named Third, Henkel argued that the court should §3.15D, pp. 3-118.1 through 3-127 (exten-
refused coverage.
as a defendant in numerous lawsuits alleging permit assignment of the policies for the IBNR sively critiquing Henkel in six respects and
In denying coverage, the insurance com- liability caused by exposure to asbestos, and claims of the former employees because the concluding that the case “may become an
panies argued that each of the policies in Hartford defended and indemniied Fluor in assignment would not place additional risk outlier decision apart from the mainstream”).
question contained a clause providing that connection with these actions.
on the insurance company beyond that Indeed, the California Supreme Court later
there could be no “[a]ssignment of interest In 2000, Fluor undertook a corporate for which it already had bargained. Henkel acknowledged in Fluor that Henkel “has not
Henkel
under this policy” without the insurance restructuring and tax-free stock distribu- explained that there would be no additional been well received.” Since was decided
company’s consent endorsed on the policy. tion known as a “reverse spinoff.” As part risk to the insurance company because the in 2003, only one other state court has fol-
29 Cal. 4th at 943. Henkel countered by irst of this restructuring, Fluor transferred its IBNR loss already had occurred before the lowed its reasoning, and that decision has
arguing that it acquired the beneits of the EPC operations, assets and liabilities to a assignment, and the assignment did not affect not been followed by any other jurisdiction.
insurance policies by operation of law along new company (also called Fluor). Even after either liability or policy limits. Id. at 945. The See Travelers Cas. & Sur. Co. v. United States
with Amchem’s liabilities. The court rejected Fluor notiied Hartford of this restructuring, court rejected this argument as well, noting Filter, 895 N.E.2d 1172 (Ind. 2008) (declining
this argument, inding instead that Henkel had Hartford continued to defend and indemnify “the ubiquitous potential for disputes over to enforce a post-loss assignment of rights
acquired Amchem’s liabilities by contract, “new Fluor” for approximately seven years in the existence and scope of the assignment.” to invoke coverage under third-party liability
not by operation of law. Id. at 944.
connection with the asbestos suits. In 2008, The court feared that an insurance company coverage concerning “occurred but not yet

Second, Henkel argued that an insurance however, Hartford sought a declaration that would be dragged into a inger-pointing battle reported losses” and rejecting the majority
company’s consent to assign is not required it had no duties under the policies to defend where two or more companies would blame rule allowing post-loss assignment, inding
under an occurrence-based liability policy or indemnify new Fluor for the asbestos suits the other for a given IBNR loss and expect cov- instead that in order to qualify for assignment,
once the event giving rise to liability already because the policies had consent-to-assign erage for that loss under the same insurance “the loss must be identiiable with some preci-
has occurred. Henkel reasoned that courts clauses and Hartford never consented to the policy. The court stated that this scenario sion” and “must be ixed, not speculative”).
consistently had allowed an assignment of assignment of the policies to new Fluor, a fac- thus subjected the insurance company to The Recent Decision in ‘Fluor’ Reversed
money due in spite of anti-assignment clauses
tual situation similar to Henkel. » Page S11
“increased burdens” if not increased risk. Id.
‘Henkel’. In Fluor, the California Supreme