Fluor Corp.v. Superior Court

(Insurer's Right to Invoke Consent to Assignment Provision Limited by Insurance Code Section 520)

In Fluor Corp. v. Superior Court, 61 Cal. 4th 1175 (August 20, 2015) the California Supreme Court considered the effect of Insurance Code section 520 on its prior decision in Henkel Corp. v. Hartford Accident & Indemnity Co., 29 Cal. 4th 934 (2003) regarding consent to assignment provisions (“non-assignment”). The Court summarized its decision in Henkel as:

[W]hen a liability insurance policy contains a consent-to-assignment clause an insured may not assign its right to invoke coverage under the policy without the insurer's consent until there exists a “chose in action” against the insured, which we found in Henkel occurs only when the claims against the insured have “been reduced to a sum of money due or to become due under the policy.”

The Court reversed the Court of Appeal's decision, finding that Section 520 does operate to limit an insurer's ability to enforce consent to assignment clause “after a loss has happened,” disapproving of Henkel to the extent it is inconsistent.

The “original” Fluor Corporation “performed engineering, procurement, and construction (EPC) operations through various corporate entities and subsidiaries.” Hartford Accident & Indemnity Company (“Hartford”) issued 11 commercial general liability policies to Fluor, for the period from approximately 1971 to 1986. Beginning in the mid-1980s, various Fluor entities were named as defendants in personal injury lawsuits, alleging exposure to asbestos. Fluor tendered these suits to Hartford and its other insurers, who accepted the defense.

During the 1980s, Fluor acquired A.T. Massey Coal Company, a mining business. In 2000, Fluor decided to restructure in a “reverse spinoff”: Fluor incorporated a newly formed subsidiary (“Fluor-2”), which retained the name “Fluor Corporation” and received from Fluor all EPC-related assets and liabilities, while the original Fluor changed its name to Massey Energy Company, which retained A.T. Massey's coal mining and related business. Of note, the Distribution Agreement governing this restructuring provided:

[T]he original Fluorshall transfer, assign and convey any and all rights and/or obligations it may have to [Fluor-2] with respect to . . . all Parent Assets and Parent Liabilities except for certain listed assetsvarious specified investments, accounts, and intellectual property rights. (Italics added.) The agreement did not except any insurance rights from this otherwise...