Insurance Protection for Losses May Be Freely Assigned in Connection with a Corporate Sale or Reorganization

Environmental Litigation

On August 20, 2015, the California Supreme Court handed down its much anticipated decision in Fluor Corporation v. Superior Court (Hartford Accident & Indemnity Company). The court held that Insurance Code §520, a seldom cited provision of the Insurance Code dating back to 1935, bars an insurer from refusing to honor a policyholder’s assignment of policy coverage regarding injuries or damages that pre-date the assignment. In the process, the high court overruled its 2003 decision in Henkel Corp. v. Hartford Accident & Indemnity Co., 29 Cal.4th 934, which had held that when a liability policy contains a “consent-to-assignment” clause (a standard provision in pre-1985 policy forms), the policyholder may not assign its rights to policy benefits without the insurer’s consent until the claim against the insured is reduced to a judgment or settlement with the claimant.

 The decision, which deals with post-loss assignment of insurance benefits under general liability policies in the context of a corporate reorganization, has particular relevance to companies who acquire companies with existing environmental or other long-tail liabilities. Before the Fluor decision, it was often necessary to structure a transaction as a stock purchase and maintain the target company as a subsidiary of the acquiring company to obtain the benefit of the target company’s legacy coverage typically dating back many years to the time period when the environmental or other liabilities for the target company’s operation arose. In Fluor, the California Supreme Court expressly recognized that its decision will protect the ability of a policyholder “in the course of transferring assets and liabilities to another business entity in connection with a corporate sale or reorganization, to assign rights to claim defense and indemnification coverage provided by prior and existing insurance policies concerning the business’s previous conduct.”

 Greenberg Glusker represents policyholders in insurance recovery litigation against insurers.  For more information regarding our insurance coverage practice, please contact Jonathan B. Sokol at 310.201.7423 or JSokol@greenbergglusker.com.

 

CALIFORNIA SUPREME COURT EXPANDS AVAILABLE POLICY LIMITS TO COVER ENVIRONMENTAL CLAIMS

On August 9, 2012, the California Supreme Court handed down its much anticipated decision in State of California v. Continental Ins. Co. The California Supreme Court held that the “all sums” method of allocation applies in California and that an insured can horizontally stack all successively triggered policies in an environmental property damage case involving a single occurrence causing continuous and progressive contamination throughout multiple policy years.

Therefore, a liability insurer is obligated to pay all sums the insured become obligated to pay for property damage attributable to a contaminated site up to policy limits as long as some of the continuous property damage occurred while that particular insurer’s policy was on the loss.  An insurer cannot limit its liability to just the amount of loss that occurred during its particular policy period.  The Supreme Court also concluded that absent specific “anti-stacking” policy language, an insured is entitled to “stack” the consecutive policy limits of each successively triggered policy to recover the limits of all policies on the risk for the loss.

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Litigation Update – Fifth and Second Circuits Reverse Dismissal of Private Party Climate Change Lawsuits

Environmental Litigation

Twice in recent months, federal appeals courts have opened the door to climate change damage claims by private parties against companies that contribute to global warming.

On October 16, 2009, the Fifth Circuit Court of Appeals in Comer, et al. v. Murphy Oil USA, et al. held that residents and owners of lands and property along Mississippi Gulf Coast could assert damage claims from Hurricane Katrina against various oil, energy and chemical companies. The plaintiffs alleged the defendants’ operations caused the emission of greenhouse gases that contributed to global warming causing a rise in sea levels and added to the ferocity of Hurricane Katrina, which combined to destroy the plaintiffs’ property. The plaintiffs seek to recover damages based on claims for public and private nuisance, trespass and negligence. The trial court granted the defendants’ motion to dismiss the action, finding that the plaintiffs lacked standing to assert their claims and that their claims presented non-justiciable political questions. The appellate court reversed the trial court, which threw out plaintiffs’’ claims and upheld their right to proceed with their claims.
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