Time For A Change? California Revisits Henkel On Coverage For Contractually Acquired Liabilities

The California Supreme Court's unexpected decision earlier this year to accept review of Fluor Corp. v. Superior Court, 208 Cal. App. 4th 1506 (2012), rev. granted, has both policyholders and insurers speculating about whether the court will overturn its controversial decade-old decision in Henkel Corp. v. Hartford Accident & Indem. Co., 29 Cal. 4th 934 (2003). In Henkel, the courtdisapproved the transfer of insurance rights by operation of law in connection with a corporate transaction. Henkel held that where liability is acquired by contract, and not by operation of law, insurance coverage likewise does not transfer by operation of law. The policies in Henkel contained a "no assignment" clause, which prohibited the assignment of an "interest" under the policies without the consent of the insurer. Because Henkel had not obtained the insurer's consent, the court held under California law that the attempted contractual assignment was ineffective. Consequently, when Henkel was sued for injuries caused by defective products manufactured by the predecessor, it was not entitled to either a defense or indemnity with respect to such claims. Please click here to continue reading the article.

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Pennsylvania Appellate Court: Commercial Liability Insurance Covers Product Defects That Cause Damage to Property Not Manufactured By Policyholder

Reversing a lower court decision, the Superior Court of Pennsylvania ruled on December 3 that an umbrella liability insurer must cover a manufacturer's liabilities when homeowners sued for product defects that allegedly caused physical damage to their homes. Indalex Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, 2013 PA Super 311 (Dec. 3, 2013). The plaintiff homeowners alleged that defects in the policyholders' windows and doors caused leaks, mold and cracked walls in their homes. The trial court ruled that there was no covered occurrence, relying on Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A.2d 888 (Pa. 2006), where the Pennsylvania Supreme Court found that a commercial liability policy did not cover claims for faulty workmanship. But the Superior Court reversed—and in so doing, carved out an important exception from Kvaerner—finding coverage because the homeowners' suit did not merely allege that the doors and windows were defective but also that these defects had damaged their homes.

California Supreme Court Lets Stand Appellate Decision Allowing Insurers...