Insurance Cases To Watch In 2014

Larry Golub was recently quoted in an article by Law360, Insurance Cases to Watch in 2014 (subscription required), detailing what is expects will be the biggest insurance cases decided in 2014.

Golub's comments pertained to Fluor Corp. v. Superior Court of Orange County. The California Supreme Court agreed to take up the case this year, reconsidering its 2003 ruling in Henkel Corp. v. Hartford.

The Henkel ruling limits the circumstances under which policyholders can transfer insurance rights without an insurer's permission, allowing transfers “only if a loss has already been reduced to a sum of money due under the policy as a result of a settlement or judgment.”

The Fluor case argues that when it ruled in Henkel, the court ignored an 1872 statute which allows companies to freely assign their rights under insurance policies following a loss.

Golub told Law360 that the court's ruling in Fluor could be key given that there have been an increasing number of mergers and acquisitions and that it would provide certainty for both insurers and policyholders.

“The supreme court will reconsider the issue in light of this 1872 statute and hopefully draw a bright line, so parties know which way to go,” he said.

 

California Supreme Court's Reconsideration of Henkel Decision Will Re-Assess Consent-to-Assignment Clauses

Larry Golub was quoted in a Dec. 18, 2012, Law360 article, Calif. High Court's 2nd Stab At Henkel Could Help M&A (subscription required) about the California Supreme Court's determination to reconsider its 2003 ruling in Henkel Corp. v. Hartford dealing with the transfer of insurance rights.

According to the article, the court agreed to grant a petition to review Fluor Corp.'s lawsuit against Hartford Accident and Indemnity Co. which could ultimately eliminate a barrier preventing the transfer of insurance rights during mergers, acquisitions, and corporate restructurings.

Golub told the publication that should Henkel be overturned, insurers would likely need to be more diligent about underwriting and really weigh what potential liabilities they might have to cover in the future.

"The consent-to-assignment clauses are intended to make sure they are underwriting the risks they intended to underwrite,” Golub said. “Insurers [would] need to probably be more careful in the risks they underwrite and to be more diligent when they're renewing policies.”

Golub also told Law360 that the Supreme Court may be taking up the Fluor case because it hasn't had the chance to consider the 1872 statute at the heart of Henkel. That California law purports to allow companies to assign their rights under insurance policies to successors after a loss, but has never been interpreted in the 140 years since it was enacted.

“It's hard to know how the Supreme Court will deal with that other than the fact that the whole panel appears to be interested in resolving this one way or the other,” he said.