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.