Fluor Corporation v. Super. Ct.
61 Cal. 4th 1175
| Cal. | 2015Background
- Fluor Corporation (pre-2000) held occurrence-based CGL policies (1971–1986) issued by Hartford containing a consent-to-assignment clause: “Assignment of interest under this policy shall not bind the Company until its consent is endorsed hereon.”
- In 2000 Fluor completed a reverse spinoff: the original Fluor became Massey Energy and transferred EPC assets and liabilities to a newly formed Fluor-2, which continued the EPC business and claimed the insurance rights.
- Asbestos personal-injury suits premised on exposures during the policy periods had been litigated and defended by Hartford for years; after the spinoff Hartford continued defending and charging retrospective premiums for a time.
- Hartford later asserted the Distribution Agreement’s transfer of insurance rights was an unconsented assignment barred by the consent-to-assignment clause and sought declaratory relief denying coverage for Fluor-2.
- Fluor-2 argued Ins. Code § 520 (originally Civ. Code § 2599) voids pre-loss agreements to prohibit postloss assignment and thus the assignment of rights to invoke coverage for past occurrences was effective without insurer consent.
- The California Supreme Court granted review to resolve whether § 520 applies to third‑party liability insurance, how to construe “after a loss has happened,” and whether Henkel v. Hartford (2003) remains good law.
Issues
| Issue | Plaintiff's Argument (Fluor-2) | Defendant's Argument (Hartford) | Held |
|---|---|---|---|
| Does Ins. Code § 520 apply to third‑party liability (occurrence) policies? | § 520 is a general rule enacted into the Insurance Code; its history and later amendments show it covers all classes of insurance, including liability. | § 520 flows from an 1872 statute enacted before liability insurance existed and should be read to apply only to first‑party policies. | § 520 applies to third‑party liability insurance; the Legislature intended it as a general rule covering all classes (1947 amendments confirm). |
| What does “after a loss has happened” mean in § 520 for liability policies? | A loss occurs when the covered occurrence (e.g., bodily injury from asbestos exposure) happens during the policy period; assignment after that occurrence is permitted without insurer consent even if damages aren’t liquidated. | “Loss” means an established liability (judgment or settlement); assignment should be allowed only after the claim is reduced to a sum due (aligns with Henkel). | “After a loss has happened” refers to the covered occurrence/injury during the policy period; § 520 allows postloss assignment without requiring a prior judgment or settlement. |
| Does Henkel v. Hartford remain controlling on consent‑to‑assignment clauses? | N/A (Henkel held insurer’s consent required until claim reduced to money due). | Henkel governs and precludes assignment until a chose in action reduced to a sum is established. | Henkel is overruled to the extent inconsistent with § 520; statutory text and history control and mandate the postloss assignment rule. |
Key Cases Cited
- Henkel Corp. v. Hartford Accident & Indem. Co., 29 Cal.4th 934 (2003) (previously held consent‑to‑assignment enforceable until claim reduced to money due; here overruled insofar as inconsistent with § 520)
- Montrose Chemical Corp. v. Admiral Ins. Co., 10 Cal.4th 645 (1995) (adopted occurrence‑trigger rules for duty to defend/indemnify in long‑tail injury cases)
- Ocean Accident & Guarantee Corp. v. Southwestern Bell Tel. Co., 100 F.2d 441 (8th Cir. 1939) (leading pre‑§520 authority holding postloss assignment of liability coverage is assignable without insurer consent and loss accrues at occurrence)
- Maryland Casualty Co. v. Omaha Elec. Light & Power Co., 157 F. 514 (8th Cir. 1907) (early federal decision supporting postloss assignability of liability claims despite consent clause)
- Bergson v. Builders' Ins. Co., 38 Cal. 541 (1869) (early California case distinguishing assignment of policy pre‑loss from assignment of claim post‑loss; doubted enforceability of postloss veto)