Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Corporate Successor Entitled to Insurance Coverage

Author: Scarinci Hollenbeck, LLC

Date: May 2, 2017

Key Contacts

Back

Corporate Successor Entitled to Insurance Coverage Despite Anti-Assignment Clause

The Supreme Court of New Jersey recently confirmed that the corporate successor of an entity is entitled to insurance coverage despite the policies’ “no assignment” clauses because the loss occurred before the assignment was made. The insurance dispute in Givaudan Fragrances Corp. v. Aetna Casualty & Surety Co. et al. involved more than $500 million in insurance coverage.

NJ Supreme Court Rules Corporate Successor Entitled to Insurance Coverage
Photo courtesy of Stocksnap.io

Facts of the Case

Plaintiff Givaudan Fragrances Corporation (Fragrances) faces liability as a result of environmental contamination from a manufacturing site that its corporate predecessor, Givaudan Corporation, operated in Clifton, New Jersey. Fragrances specifically sought to obtain insurance coverage for the environmental claims related to discharges of hazardous substances that occurred during the pertinent policy periods running through January 1, 1986.

Fragrances maintained that the defendant insurance companies (defendants) wrote liability policies for Givaudan Corporation during those relevant years. The company further argued that it was entitled, either as an affiliate of Givaudan Corporation or by operation of an assignment of rights, to have the insurers provide it with coverage for that environmental liability. In response, the defendants argued that they insured Givaudan Corporation as their named insured and not Fragrances. They further maintained that their consent was required for a valid assignment according to the terms of the insurance policies.

The Appellate Division disagreed. It held that claims under a policy can be assigned without the insurer’s consent once a loss occurs, even if the policy contains an anti-assignment clause. “After the events giving rise to the insurer’s liability have occurred, the insurer’s risk cannot be increased by a change in the insured’s identity,” the appeals court explained. “Assignment clauses in insurance contracts apply only to assignments before the loss, and do not prevent an assignment after a loss.”

Court’s Decision

The Supreme Court of New Jersey affirmed the Appellate Division’s decision. “We hold 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 that right to invoke policy coverage for that loss,” the court’s opinion stated.

As explained by the court, the fundamental rationale supporting the -rule is that once a loss occurs, an assignment of the policyholder’s rights regarding that loss in no way materially increases the risk to the insurer. As the opinion explains:

An anti-assignment clause is not a barrier to the post-loss assignment of a claim. Post-loss assignments do not further the purpose of the anti-assignment clause, which is to protect the insurer from increased liability because the insurer’s risk cannot be increased by a change in the insured’s identity. 

The court noted, “The environmental contamination occurrence — and resultant loss — took place during the relevant policy periods. The assignment does not alter the insurers’ liability for indemnifying the underlying insured event.”

The New Jersey Supreme Court’s rule is on standard types of anti-assignment clauses and is consistent with its prior decisions as well as recent decisions from courts across the country. Although businesses should be careful to check the assignment-related language of their policies in advance of corporate transactions and act accordingly, they can perhaps feel somewhat more comfortable knowing that post-loss assignments may well be found valid, even without the prior consent of the insurer.

Do you have any questions? Would you like to discuss the matter further? If so, please contact me, Charles Yuen, at 201-806-3364.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
How to Dissolve a Corporation in New Jersey: A Step-by-Step Guide post image

How to Dissolve a Corporation in New Jersey: A Step-by-Step Guide

Closing your business can be a difficult and challenging task. For corporations, the process includes formal approval of the dissolution, winding up operations, resolving tax liabilities, and filing all required paperwork. Whether you need to understand how to dissolve a corporation in New York or New Jersey, it’s imperative to take all of the proper […]

Author: Christopher D. Warren

Link to post with title - "How to Dissolve a Corporation in New Jersey: A Step-by-Step Guide"
Gross Lease vs. Net Lease: Understanding the Key Differences post image

Gross Lease vs. Net Lease: Understanding the Key Differences

Commercial leases can take a variety of forms, which is often confusing for both landlords and tenants. Understanding the different types, especially the gross lease structure, is important when selecting the lease that best suits your needs. One key distinction between lease types is how rent is calculated and paid. This article addresses the two […]

Author: Robert L. Baker, Jr.

Link to post with title - "Gross Lease vs. Net Lease: Understanding the Key Differences"
What to Do If You Are Impacted by a Retailer Bankruptcy Part 2 post image

What to Do If You Are Impacted by a Retailer Bankruptcy Part 2

Over the past year, brick-and-mortar stores have closed their doors at a record pace. Fluctuating consumer preferences, the rise of online shopping platforms, and ongoing economic uncertainty continue to put pressure on the retail industry. When a retailer seeks bankruptcy protection, a myriad of other businesses are often impacted. Whether you are a supplier, customer, […]

Author: Brian D. Spector

Link to post with title - "What to Do If You Are Impacted by a Retailer Bankruptcy Part 2"
The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business post image

The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business

Since his inauguration two months ago, Donald Trump’s administration and the Congress it controls have indicated important upcoming policy changes. These changes will impact financial services policies and priorities. The changes will particularly affect cryptocurrency, as well as banking rules and regulations. Key Regulatory Changes in Cryptocurrency For example, in the burgeoning cryptocurrency business environment, […]

Author: Dan Brecher

Link to post with title - "The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business"
Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1 post image

Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1

The retail sector has experienced a wave of bankruptcy filings over the last year. Brick-and-mortar businesses in financial distress include big-name brands like Big Lots, Party City, The Container Store, and Vitamin Shoppe. When large retailers seek bankruptcy protection, they are not the only businesses impacted. Landlords can be particularly hard hit. While commercial landlords […]

Author: Brian D. Spector

Link to post with title - "Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!

Please select a category(s) below: