The California Court Of Appeal Says Nice Try To Attempt To Overturn The California Supreme Court's Henkel Decision Based On An 1872 Statute

On August 30, 2012, Division Three of the California Court of Appeal for the Fourth District put to rest a new argument devised by policyholders to attack the California Supreme Court's seminal consent-to-assignment ruling in Henkel Corp. v. Hartford Acc. & Indem. Co., 29 Cal.4th 934 (2003). See Fluor Corp. v. Superior Court (Slip Opn. dated Aug. 30, 2012) (Fourth Dist. No. G045579)

The Fluor case involved the same consent-to-assignment clause at issue in Henkel: "Assignment of interest under this policy shall not bind the Company until its consent is endorsed hereon." (See Henkel, supra, 29 Cal.4th at 943.) Upholding the plain meaning of that provision, the California Supreme Court held that consent-to-assignment clauses are generally valid and enforceable until the time that claims had been "reduced to a sum of money due or to become due under the policy." (Henkel, supra, 29 Cal.4th at 944.)

Henkel controlled the outcome in Fluor, which also involved an attempted assignment without the consent of the insurer. But the policyholder argued that the Henkel court had missed an important statute. Fluor had unearthed an obscure Insurance Code provision enacted in 1872, which stated: "An agreement not to transfer the claim of the insured against the insurer after a loss has happened, is void if made before the loss . . . " (Ins. Code, § 520.) The statute had never been discussed by the Supreme Court in Henkel or in any of the briefing in that case. Fluor called the statute a "controlling pronouncement of the law." On that basis, it argued that Henkel was wrongly decided and should be effectively disregarded.

The Fourth District didn't buy the argument for several reasons. First, it noted that Henkel was binding authority on California appellate courts: "We have neither the power nor the inclination to reverse Henkel." (See Auto Equity Sales, Inc. v. Superior Court, 57 Cal.2d 450, 455 (1962); Gwartz v. Superior Court, 71 Cal.App.4th 480, 481 (1999) ["Stare decisis and all that stuff"].) (Slip Opn. p. 8.)

Second, it noted that Insurance Code Section 520 is

one of the more obscure provisions of the California codes. No court has ever relied on it, and it has been cited only once, in passing, in Gillis v. Sun Ins. Office, Ltd. (1965) 238 Cal.App.2d 408, a first party property insurance case involving an assignment of coverage after portions of the insured property (a water side restaurant) were damaged in a violent windstorm. The statute is...