In Givaudan Fragrances Corp. v. Aetna Cas. & Sur. Co., 2017 WL 429476 (N.J. Feb. 1, 2017), the New Jersey Supreme Court held that an anti-assignment clause in an insurance policy does not prevent the post-loss assignment of an insurance claim. Givaudan dealt with the issue of the assignment of claims under decades-old insurance policies. The case involved claims for costs incurred to remediate environmental contamination of soil and groundwater. The policies in question were issued between 1964 and 1986 and had been assigned to the plaintiff in 2010, long after they had expired, by the plaintiff’s predecessor corporations. The plaintiff acquired the rights under the policies through “a series of very complex corporate mergers, transfers, and re-formations . . . .” See Givaudan, 442 N.J. Super. 28, 32 (App. Div. 2016), aff’d, 2017 WL 429476.
The insurers who issued the policies refused to recognize the assignment of the policies to the plaintiff. The policies explicitly prohibited assignment without the consent of the insurers and such consent was never obtained. The plaintiff moved for summary judgment and the insurers cross-moved for summary judgment. The trial judge ruled in favor of the insurers, finding, among other things, that the assignment was not valid. In a decision that was the subject of a prior blog post, the Appellate Division reversed, noting that since at least the 1950s, New Jersey courts have held that an insured may assign a claim or potential claim under an occurrence-based policy after a loss occurs. See https://njinsuranceblog.com/court-upholds-post-loss-assignment-of-claims-under-decades-old-insurance-policies
On further appeal, the New Jersey Supreme Court affirmed the decision of the Appellate Division. The Court held that “once an insured loss has occurred, an anti-assignment clause in an occurrence policy may not provide a basis for an insurer’s declination of coverage based on the insured’s assignment of the right to invoke policy coverage for that loss.” 2017 WL 429476, *3. The reasoning behind this rule is that liability under an occurrence-based policy attaches once the occurrence takes place even though no claim has been asserted. Thus, the insurer becomes obligated to the insured on the date of the loss and that obligation may freely be assigned.
The Court was not deterred by the fact that determining liability for environmental contamination can be very difficult and imprecise:
The fact that the environmental claim will require time to sort out liability and damages resulting therefrom does not alter our conclusion. Other claims involving losses that have occurred, but which cannot be determined with precision, do not alter the conclusion that the assignment must be honored.
Id. at *15. The Court further held that “[w]here a valid post-loss claim assignment is made as to a given claim, an insurer has a duty to defend the assignee as the holder of that claim.” Id. at *17. Thus, an insurer owes the assignee both a duty to defend and a duty to indemnify it in connection with a covered loss.
The Court’s decision is not surprising. Although the New Jersey Supreme Court had not previously addressed the issue, the law in New Jersey upholding the post-loss assignment of claims dates back over 60 years. Moreover, as the Court observed, “the overwhelming majority of jurisdictions that have, over the decades, spoken on the issue” have reached the same conclusion. Id. at *10.
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