California Supreme Court Issues Fluor Decision, Reverses Henkel Anti-Assignment Rule

Today the California Supreme Court issued its decision in Fluor Corporation v. Superior Court. In a unanimous decision, authored by the Chief Justice, the Court rejected the enforceability of “consent to assignment” clauses as a bar to coverage when the loss pre-dates the assignment, based on California Insurance Code section 520, and overruled its prior decision in Henkel Corp. v. Hartford Acc. & Indem. Co. (2003) 29 Cal.4th 934.

The 63-page decision reviewed the legislative history behind the 1872 insurance code section, as well as historical and current case law on the post-loss assignability issue nationally. The Court’s reasoning is summed up in the following lines at p. 51: “It is undisputed that an insured may not transfer the policy itself to another without the insurer’s consent, and in this sense all parties agree. But the “post-loss exception” to the general rule restricting assignability, recognized in the many cases discussed earlier and codified in section 520, is itself a venerable rule that arose from experience in the world of commerce. The rule has been acknowledged as contributing to the efficiency of business by minimizing transaction costs and facilitating economic activity and wealth enhancement.” The Court concluded: “Under [Insurance Code section 520], after personal injury (or property damage) resulting in loss occurs within the time limits of the policy, an insurer is precluded from refusing to honor an insured’s assignment of the right to invoke defense or indemnification coverage regarding that loss. This result obtains even without consent by the insurer — and even though the dollar amount of the loss remains unknown or undetermined until established later by a judgment or approved settlement.” (p.59)

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

Proudly powered by WordPress