In a stunning development, the California Supreme Court recently overruled its prior decision of Henkel Corp. v. Hartford Accident & Indemnity Co., 29 Cal.4th 934 (Cal. 2003). For over a decade insurers have relied on Henkel to argue that the assignment of insurance rights without the insurer’s consent was invalid, even with respect to assignments that post-dated an insured loss. In advancing that argument, insurers rely on a standard form “consent to assignment” provision that provides as follows: “Assignment of interest under this policy shall not bind the Company until its consent is endorsed hereon.”
With the decision in Fluor Corporation v. Hartford Accident & Indemnity Co., Case No. S205889, 2015 WL 4938295 (Cal. August 20, 2015), the wicked witch that was Henkel is now dead. In a unanimous decision, the Fluor Court ruled that Henkel is contrary to Section 520 of California’s Insurance Code. Under Section 520, after an insured loss has occurred, an insured is permitted to assign its rights under an insurance policy without its insurer’s consent. The California Supreme Court failed to consider the ramifications of Section 520 when it rendered its earlier ruling in Henkel.
In holding that Section 520 applies to third party as well as first party claims, the Fluor Court reasoned as follows:
Under [Section 520], after personal injury (or property damage) resulting in loss occurs within the time limits of the policy, an insurer is precluded from refusing to honor an insured’s assignment of the right to invoke defense or indemnification coverage regarding that loss. This result obtains even without consent by the insurer — and even though the dollar amount of the loss remains unknown or undetermined until established later by a judgment or approved settlement. Our contrary conclusion announced in Henkel Corp. v. Hartford Accident & Indemnity Co., supra, 29 Cal.4th 934, is overruled to the extent it conflicts with this controlling statute and this opinion’s analysis.
2015 WL 4938295, at *29.
Beyond relying on Section 520, the Fluor Court also acknowledged that “virtually all” decisions from other courts around the country were “at odds” with the key holding in Henkel and that Henkel fared no better in scholarly publications.
The Fluor decision underscores the importance of insureds remaining resolute in the face of seemingly insurmountable odds. Despite the insurer friendly decision in Henkel, the insured found a yellow brick road to coverage and, along the way, laid a wicked witch to rest.
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Tagged: CA Supreme Court, California Supreme Court, consent to assignment, Fluor Corporation v. Hartford Accident & Indemnity Co., Henkel, Henkel Corp. v. Hartford Accident & Indemnity Co., insurance rights, insured