Keller Foundations, Inc. v. Wausau Underwriters Insurance
2010 U.S. App. LEXIS 23838
| 5th Cir. | 2010Background
- Keller Foundations and Suncoast Post-Tension acquired assets from Old Suncoast; Excluded Assets included all insurance policies.
- Purchase agreement required New Suncoast to assume all Assumed Obligations, while Seller retained Retained Obligations, including specified suits.
- Old Suncoast held a Wausau general liability policy with a non-assignment clause; no request to transfer coverage to New Suncoast was made.
- Post-acquisition lawsuits were filed for pre- and post-purchase defects; Keller Companies defended, and sought coverage, defense costs, and indemnity from Wausau.
- Magistrate granted partial summary for Keller; district court later granted some relief to Keller; Wausau appealed and the matter proceeded in federal court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Wausau policy was transferrable as a chose in action. | Keller contends transfer via asset sale conveyed coverage. | Wausau's non-assignment clause bars transfer absent consent. | No valid transfer without Wausau consent. |
| Whether post-loss transfer of insurance coverage can be valid despite a non-assignment clause. | Post-loss assignments should be allowed to preserve coverage for pre-loss liabilities. | Non-assignment clause prohibits post-loss transfer that would increase insurer's liability. | Texas would enforce the non-assignment clause; post-loss transfer invalid. |
| Whether the transfer can occur as a 'chose in action' or via operation of law notwithstanding the clause. | Coverage could transfer as a right to proceeds or by operation of law. | Non-assignment clause blocks transfer; operation-of-law transfer not recognized. | Transfer cannot occur; non-assignment clause prevents transfer. |
| Whether Texas law would reject Northern Insurance Co. of New York v. Allied Mutual Insurance Co. under these contract-based circumstances. | Texas would follow Northern Insurance rule that coverage follows liability even with contract-based transfer. | Texas would reject Northern Insurance where liability is contracted to be assumed and policy excluded from transfer. | Texas would reject Northern Insurance rule; contract controls; policy not transferred. |
Key Cases Cited
- Conoco, Inc. v. Republic Insurance Co., 819 F.2d 120 (5th Cir. 1987) (anti-assignment clause bars post-loss assignment to enforce proceeds)
- Tex. Pac. Indem. Co. v. Atl. Richfield Co., 846 S.W.2d 580 (Tex.App.—Houston [14th Dist.] 1993) (no-assignment clause enforced for post-loss assignment)
- Texas Farmers Ins. Co. v. Gerdes, 880 S.W.2d 215 (Tex.App.—Fort Worth 1994) (non-assignment clauses consistently enforced; post-loss binding rights not transferred)
- Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691 (Tex. 1994) (no prejudice requirement for some contract-based breach clauses; no prejudice shown here)
- Texas Pacific Indem. Co. v. Atl. Richfield Co., 846 S.W.2d 580 (Tex.App.—Houston [14th Dist.] 1993) (endorses enforcement of anti-assignment clauses; post-loss transfer invalid)
- Pilkington N. Am., Inc. v. Travelers Cas. & Sur. Co., 112 Ohio St.3d 482, 861 N.E.2d 121 (Ohio 2006) (limits of indemnity following liability; contract controls when liability assumed)
- Gen. Accident Ins. Co. of Am. v. Superior Court, 55 Cal.App.4th 1444, 64 Cal.Rptr.2d 781 (Cal. App. 1997) (successor liability cannot retrofit contractual insurance relationship)
- Henkel Corp. v. Hartford Accident & Indem. Co., 29 Cal.4th 934 (Cal. 2003) (contractual rights of successor limited by contract)
- Del Monte Fresh Produce (Haw.), Inc. v. Fireman's Fund Ins. Co., 183 P.3d 734 (Haw. 2007) (insurance policies subject to ordinary contract interpretation)
- Unigard Ins. Co. v. Leven, 983 P.2d 1155 (Wash. App. 1999) (limits extending Northern Insurance rule to non-successors)
- Northwest Ins. Co. v. Allied Mut. Ins. Co., 955 F.2d 1353 (9th Cir. 1992) (Northern Insurance rule applied in California context)