LANDMARK CALIFORNIA SUPREME COURT DECISION EXPANDS CIRCUMSTANCES UNDER WHICH POLICYHOLDERS MAY ASSIGN POLICY RIGHTS UNDER THIRD PARTY LIABILITY POLICIES WITHOUT INSURER CONSENT

Third party liability insurance policies often contain “consent to assignment” clauses which purport to bar insureds from assigning policies without insurer consent. In the case of Henkel Corp. v. Hartford Accident & Indemnity Co. , 29 Cal. 4th 934 (2003), the California Supreme Court determined, under the specific facts of that case, that such clauses barred the insured from assigning policy rights without the insurer’s consent until there exists a “chose in action” against the insured, which occurs when the claims against the insured have “been reduced to a sum of money due or to become due under the policy. ” In Fluor Corporation v. Superior Court of Orange County, the California Supreme Court granted review to consider whether Section 520 of the California Insurance Code—an 1872 provision which bars an insurer, “after a loss has happened,” from refusing to honor an insured’s assignment of the right to invoke the insurance policy’s coverage for such a loss—mandated reversal of the Henkel decision. In Fluor, a result of a reverse spinoff, the insurance rights of a corporate insured has been assigned to another entity without the insurer’s consent. Prior to the assignment, the insurer had been defending the insured from ongoing asbestos-related litigation.