Corporate deal lawyers had for many decades designed corporate acquisitions and divestitures on the long-held foundation that historical rights to insurance proceeds were freely assignable, and that the rights to the proceeds of liability insurance could freely follow the liabilities. The design of those deals was called into question in 2003 in Henkel Corp. v. Hartford Accident & Indemnity Co., 29 Cal. 4th 934 (Cal. 2003), which severely impeded companies involved in such transactions by enforcing consent-to-assign clauses even though policy periods had expired and the right to insurance already had accrued. In 2015, California reversed course and restored the ability of corporations to freely assign the rights available under insurance policies after a loss. Fluor Corp. v. Superior Court, 61 Cal. 4th 1175 (Cal. 2015).
Mitigation of Risk and Transfer of Insurance Rights in a Corporate Restructuring. The reversal to return to the majority rule in California will have a pro-business impact, given the current pace of mergers and acquisitions. Such activity, essential to the efficient functioning of a modern economy, depends on the ability to assign insurance assets, or the ability to assign the inchoate “chose in action” (the as-yet undeveloped potential claim) under a liability insurance policy.
