In Fluor Corp. v. Sup. Ct. of Orange County, et al., No. G045579 (Cal. Ct. App. Aug. 30, 2012), the Fourth District Appellate Court held Insurance Code section 520 (stating that an agreement not to transfer the claim of the insured against the insurer after a loss has happened is void if made before the loss), does not apply to liability insurance policies, and thus has no impact on the California Supreme Court’s analysis in Henkel Corp. v. Hartford Accident & Indemnity Co. 29 Cal.4th 934 (2003) (holding that except in certain situations consent-to-assignment clauses prohibit the assignment of rights under a policy to an independent company without the consent of the insurer).
FACTS & HOLDING
Fluor Corporation (Fluor-2) is the second of two corporations named “Fluor Corporation” and was incorporated in 2000 as the result of a corporate restructuring transaction. The preexisting Fluor Corporation (Fluor-1) was created in 1924. In the reverse spin-off, Fluor-1 transferred many of its services to Fluor-2. Fluor-1 retained other various operations and renamed itself “Massey Energy Company.” The two became independent companies with neither having an interest in the other.
Between 1971 and 1986, Hartford Accident & Indemnity Company (Hartford) provided comprehensive liability insurance coverage to Fluor-1 through 11 different policies. These policies were invoked when various Fluor entities were sued for injuries arising out of asbestos-containing materials at sites where it allegedly did business. Hartford participated in the defense of these lawsuits and paid defense and indemnity costs, including a defense of both Fluor Corporations.
In 2006, Fluor-2 initiated an action against Hartford to resolve various coverage disputes. Hartford cross-complained, alleging that only Fluor-1 was a named insured under the Hartford policies and each contained a consent-to-assignment provision prohibiting any assignment of any interest under the policy without Hartford’s written consent. Hartford claimed that neither Fluor ever sought nor obtained Hartford‘s consent.
Fluor-2 filed a motion for summary adjudication, alleging that the consent-to-assignment clauses were void under an 1872 statute, since recodified as Insurance Code section 520, which permitted assignments, with or without insurer consent, after the relevant “loss” occurred, and claiming the relevant “losses” occurred at least 15 years before the corporate restructuring. The lower court denied this motion, and the appellate court denied Fluor-2’s petition for writ of mandate. Thereafter, the Supreme Court granted Flour-2’s petition for review, and ordered the appellate court to vacate the order denying the writ of mandate, and to issue an order to show cause why Flour-2’s motion for summary adjudication should not be granted, which resulted in the instant decision.
On remand, the appellate court considered whether Insurance Code section 520 was in conflict with the California Supreme Court decision in Henkel Corp. v. Hartford Accident & Indemnity Co., 29 Cal.4th 934 (2003) (Henkel). In Henkel, the California Supreme Court enforced an identical consent-to-assignment clause under a very similar fact pattern. Fluor-2 argued the court should disregard Henkel because the Supreme Court did not consider or mention section 520 in the Henkel decision.
The appellate court disagreed, finding that Henkel applied, as the facts here were nearly identical to those in Henkel. The appellate court noted that statutes must be interpreted in the context in which they were adopted, and recognized that at the time the statute was first enacted in 1872, liability insurance did not exist as a concept. Further, the 1872 Legislature drew no bright lines and made no controlling pronouncements about liability insurance, or about how “loss” in the context of such policies is to be defined. Therefore, Insurance Code section 520 was not enacted with liability insurance policies in mind, and does not abrogate the holding of Henkel.