Insurance Considerations When Entering Corporate Transactions: Will You Still Be Able To Access Historical Insurance Assets After The Closing?

Sunday, June 1, 2008 - 01:00
John T. Waldron III

Companies that are considering engaging in any form of corporate or other transaction - such as a merger, asset sale, stock sale, corporate dissolution, or conversion to limited liability company or partnership - need to analyze carefully whether that transaction may affect their ability to access their historical insurance rights. While many transactional documents explicitly address the impact of the transaction on insurance policies in effect at the time of the closing, the transactional documents often fail to address the fate of the historical insurance assets (i.e., insurance policies that have already expired). Even when the transactional documents are clear that the historical insurance rights are to be transferred as part of the transaction, the transacting parties need to be aware of arguments that the insurers will bring to bear in their attempts to use the transaction as an opportunity to avoid their coverage obligations. Specifically, insurers routinely argue that so-called "anti-assignment" or "consent to assignment" conditions1in their insurance policies relieve them of coverage obligations when an assignment of insurance rights has taken place without their consent.

This dispute has become particularly pronounced in cases in which the insurers have been asked to provide coverage for asbestos, silica, environmental, or other delayed-manifestation claims in which the bodily injury or property damage began to take place prior to, but did not manifest until after, the transaction in question. In such disputes, insurers often contend that anti-assignment conditions preclude the policyholder from transferring its insurance rights to a third party without the insurers' consent, even where the transaction provides that the third party will assume the liabilities to which the insurance assets related (hereinafter, the "Insurer Position"). In response, the entity to which the insurance rights have been assigned (the "Successor Insured") typically asserts that anti-assignment conditions cannot be used by insurers to avoid providing coverage for occurrences that already took place prior to the transfer, because the occurrences gave the assigning policyholder "choses in action" under the policies that were freely transferable, with or without the insurers' consent (hereinafter, the "Successor Insured Position").2

Courts have resolved this dispute in different ways. A number of courts have adopted the Successor Insured Position that, while an insurer cannot be required to insure a third party for new occurrences that relate solely to the third party's conduct after the transfer in question, a policyholder is free to assign or otherwise transfer its insurance rights relating to occurrences that began prior to the transfer without having to obtain the insurer's consent. On the other hand, other courts, including most notably the California Supreme Court in Henkel Corp. v. Hartford Accident & Indem. Co. ,3have adopted the Insurer Position and held that an anti-assignment condition precluded the policyholder from transferring its insurance rights without the insurer's consent, including its liability insurance rights for bodily injury that had already happened prior to, but was not discovered until after, the transfer in question. As a result, the insurers in Henkel and these other cases were able to avoid paying substantial amounts in coverage to the Successor Insured to which the policyholder had attempted to assign coverage. Based on Henkel and similar decisions, insurers are now more aggressively relying on anti-assignment conditions in their policies as a basis for denying coverage where the entity seeking coverage is a successor to the policyholder, whether by way of merger, stock sale, dissolution, or asset sale.4

From the Successor Insured's perspective, this insurer effort arguably threatens to undermine the efficiency of corporate transactions while benefiting the insurers alone. On this view, insurers are seeking enormous windfalls through the virtual elimination of their coverage obligations pursuant to historical policies, for which they collected substantial premiums, by way of a corporate transaction or other subsequent circumstances having nothing to do with the scope of the risk insured under the policies. According to these Successor Insureds, courts should reject the Henkel decision and remain committed to the position that anti-assignment conditions do not preclude the transfer of liability insurance rights for losses that took place prior to the transfer in question. As discussed in more detail below, this position provides that, whether the corporate transaction resulting in the transfer of rights to coverage was a merger, stock sale, dissolution, or asset sale, the insurer's consent is not required to transfer such insurance rights even where the injury or damage at issue did not manifest until years after the transaction.5

I. Merger

All fifty states have adopted some form of merger statute.6Merger statutes generally provide that the surviving corporation, upon the effective date of the merger: (i) assumes all of the rights, privileges, powers, and immunities of the non-surviving corporation (provided they are not inconsistent with the articles of incorporation of the surviving corporation and that if the merger is with a foreign corporation they are not inconsistent with any limitation in the domestic jurisdiction), and (ii) is subject to and assumes the prior duties and liabilities of the non-surviving corporation.7

Consistent with such merger statutes, courts have held that a merger results in the transfer of the non-surviving corporation's rights and obligations under its insurance policies to the surviving corporation by operation of law.8Further, such a transfer does not violate any non-assignment provision in such policies.9

II. Stock Sale

The conveyance of all of a corporation's stock generally transfers ownership of the corporate entity as a whole, with the corporation generally retaining all of its assets unless certain assets are expressly excluded from the transaction.10Hence, because the sale of a policyholder's stock alone ordinarily does not involve an "assignment" of insurance policies, an insurer's consent typically would not be required.11

III. Dissolution Of Corporate Policyholder

When a corporate policyholder is dissolved and its assets transferred to a third party (typically its shareholder(s)), insurers frequently contend that this transfer of insurance assets requires their consent under the "Assignment" conditions in their policies. Successor Insureds will ordinarily be able to refute the insurers' position, relying on two principal grounds.

First , in cases involving the transfer of insurance rights in the context of a corporate dissolution, courts have held that an anti-assignment condition does not apply to the transfer of insurance assets relating to pre-transfer losses, even where those losses are ongoing, but not discovered until after the transfer.12

Second , certain dissolutions arguably constitute "de facto" mergers for which an insurer's consent is not required in order to transfer insurance assets. Courts addressing dissolutions have concluded that, where a company purchases all of the stock of another company and then subsequently dissolves its new subsidiary, transferring all of the subsidiary's assets and liabilities to it, a "de facto" merger may have occurred.13

IV. Asset Sale

Bolstered by the Henkel decision, insurers are now asserting more aggressively that the anti-assignment conditions in their policies preclude the transfer of historical insurance rights without their consent. Specifically, even though a purchaser may have intended to obtain all of the assets, including historical insurance rights, of a seller, insurers contend that their anti-assignment conditions operate to block the transfer of insurance rights and to defeat the purchaser's and seller's intent. This conclusion, and the Henkel decision upon which it rests, is currently the subject of substantial coverage litigation.

A. Cases Addressing Whether the Transfer of Insurance Rights for Coverage for Pre-Transfer Events Requires an Insurer's Consent

A number of courts addressing the issue have held that anti-assignment conditions do not preclude a transferee from obtaining coverage under the transferor's policies for the liabilities arising out of pre-transfer events. These courts have reasoned that, because the event causing the liability already took place prior to the transfer, the transfer of the insurance rights relating to this liability does not materially increase the risk to the insurer.14

Similarly, courts applying New York law have found that rights to insurance may be assigned without the insurer's consent where the event from which the liability arises took place prior to the assignment.15

In addition, courts in other jurisdictions that have considered the issue agree that insurance benefits may be transferred without the insurer's consent despite the presence of an anti-assignment condition, where the injury or damage in question took place prior to the transfer.16

B. Cases Specifically Involving Injury or Damage Not Discovered Until After the Transfer

A number of courts, including cases decided under New York and Illinois law, have held that anti-assignment conditions do not preclude the transfer of liability insurance rights relating to bodily injuries that took place prior to, but were not discovered until after, the transfer.17

Beyond New York and Illinois, a number of courts in other jurisdictions have also held that anti-assignment conditions do not bar the transfer of liability insurance rights relating to losses that took place prior to, but were not discovered until after, the transfer.18

In the context of asbestos-related bankruptcy plans, several courts have confirmed that insurance rights of a debtor-policyholder may be transferred to a trust to fund the payment not only of pending asbestos claims, but also of future asbestos claims not yet asserted, despite the objections of the debtor's insurers based on the anti-assignment conditions in their policies.19

C. Potential Insurer Responses

Insurers often proffer a series of arguments to support their position that insurance rights may not be transferred in the face of an anti-assignment provision without their consent, including the following arguments. Specifically, insurers frequently argue:

1. That a policyholder has not suffered a "loss" under the policy until the insurer has breached its duty to defend or indemnify, and therefore that no "loss" could have taken place prior to the execution of the asset purchase agreement where the bodily injury or property damage was not discovered until after that time;

2. That insurance rights can only be transferred "by operation of law";

3. That various cases should be read to support the conclusion that the anti-assignment conditions apply to the transfer of historical insurance assets;

4. That the decisions in Henkel and related cases represent the better reasoned view.

Policyholders and Successor Insureds will want to tailor their replies to these insurer arguments depending on the factual circumstances surrounding the asset sale in question.

V. Conclusion

After successfully defeating their coverage obligations in Henkel , insurers have been more aggressively raising the anti-assignment condition to attack policyholders' claims for insurance coverage for latent bodily injury and property damage, such as environmental, asbestos, silica, and other delayed-manifestation claims. To counter these arguments by insurers, Successor Insureds may rely on decisional law holding that anti-assignment conditions do not preclude the transfer of insurance rights relating to bodily injury or property damage that took place prior to the transfer. These cases may successfully undermine insurers' arguments, concluding that a policyholder may transfer to a third party its liability insurance rights without its insurers' consent, whether the corporate transaction in which the insurance rights were transferred was a merger, stock sale, dissolution, or asset sale, even where the injury or damage at issue did not manifest until years after the transaction. 1 These anti-assignment conditions often purport to provide that the insurance policy, or interests thereunder, may not be assigned without the insurer's consent . See, e.g., I Miller's Standard Insurance Policies Annotated , at 421.4 (2006) ("Assignment of interest under this policy shall not bind the [insurer] until its consent is endorsed hereon.").

2 The use of the terms "Successor Insured" and "Successor Insured Position" is a simplification and is not intended to suggest that all insureds will or should have the same position in a dispute over the transfer of insurance rights in a corporate transaction. Ultimately, resolution of such issues will turn on the unique circumstances and facts of each case and hence the discussion in this Article is necessarily general. The specific language of the transactional documents and the insurance policies should be consulted as such language may affect the transfer of insurance rights.

3 62 P.3d 69 (Cal. 2003).

4 For more detailed discussion regarding this issue, see John T. Waldron and Andrew R. Stanton, Assignment of Liability Insurance Rights for Latent Injury and Damage Claims, Connecticut Insurance Law Journal, vol. 14.2 (forthcoming Summer 2008).

5 This article focuses on the question of an insured's continuing right to its historical insurance coverage, notwithstanding changes in corporate structures and other transactions; it does not address the competing interests of multiple potential insureds with respect to the same policies, which can present different considerations (such as, for example, policyholders that intended to retain their insurance rights and not transfer them in the corporate transaction at issue). This article also does not focus in detail on the related issue of whether and under what circumstances historical liabilities and related rights to insurance coverage may be transferred to a Successor Insured by "operation of law."

6See Jonathan R. Macey, Macey on Corporation Law § 9.01[B], at 9-16 (2003).

7Id.; see Del. Code Ann., tit. 8 § 259 (a)(2002) (emphasis added); Heit v. Tenneco, Inc., 319 F. Supp. 884, 887 (D. Del. 1970) ("[Section] 259 [of the General Corporation Law of the State of Delaware] provides that when a merger becomes effective all assets of the merged corporation, including causes of action which might exist on its behalf, pass by operation of law to the surviving company.") ; cf. Texaco Refining & Mktg., Inc. v. Delaware River Basin Comm'n, 824 F. Supp. 500, 507 (D. Del. 1993) ("A statutory merger . . . results in a combination of the two corporations with the surviving corporation attaining the property, rights, and privileges of the absorbed corporation, as well as retaining its own property, rights, and privileges.").

8Brunswick Corp. v. St. Paul Fire & Marine Ins. Co., 509 F. Supp. 750, 752-753 (E.D. Pa. 1981) ("under [Delaware, Maryland and Pennsylvania] corporation law, the surviving corporation in a merger is vested with all rights and benefits under a liability insurance policy formerly due the merged corporation.") ; see also Texaco A/s, S.A. v. Commercial Ins. Co., No. 90 Civ. 2722, 1995 WL 628997, at *6 (S.D.N.Y. 1995) (holding under New York law that surviving corporations of mergers were named insureds under liability policies issued to merged entities since "the risk contemplated by the insurers is not substantially altered by requiring them to provide coverage for the pre-acquisition activities of the merged corporation"), vacated on other grounds, 160 F.3d 124 (2d Cir. 1998); Aetna Life & Cas. v. United Pac. Reliance Ins. Co., 580 P.2d 230 (Utah 1978) ("logical conclusion is that the surviving corporation . . . simply stands in the same position as that occupied by the merged corporation . . . prior to the merger"); Paxton & Vierling Steel Co. v. Great Am. Ins. Co., 497 F. Supp. 573, 578 (D. Neb. 1980) (holding that it is "logical, reasonable and, most importantly, fair" that insurance rights transfer from merging corporation to surviving corporation by operation of law); Chatham Corp. v. Argonaut Ins. Co., 70 Misc. 2d 1028, 334 N.Y.S.2d 959 (Sup. Ct. 1972) (observing that the non-surviving corporation's insurance policy "automatically vested in plaintiff as the surviving corporation by virtue of the provisions of . . . the Business Corporation Law"); Knoll Pharm. Co. v. Auto. Ins. Co., 167 F. Supp. 2d 1004, 1010 (N.D. Ill. 2001) (applying Illinois law, "once a merger is established, the successor corporation takes on the obligations and liabilities under the insurance policies").

9See, e.g., Imperial Enterprises, Inc. v. Fireman's Fund Ins. Co., 535 F.2d 287, 292-93 (5th Cir. 1976) ("Thus, it is our conclusion that the no-assignment clause should not be applied ritualistically and mechanically to forfeit coverage in these circumstances"); Knoll Pharm., 167 F. Supp.2d at 1011 n.7 (finding no increased risk associated with the statutory merger since the insurers were only liable on those claims against the surviving corporation that arose out of the covered acts of the insured corporation and refusing to enforce no-assignment clause); Texaco, 1995 WL 628997, at *6 (successors by merger entitled to access coverage issued to merged entities "notwithstanding the no-assignment clause, because the transfer of substantially all the assets of the corporation results in the transfer of liability as well, irrespective of any agreement otherwise"); Paxton, 497 F. Supp. at 581-82 ("It seems well recognized that a provision limiting assignment in an insurance policy simply does not apply to a transfer occurring by operation of law.").

10See, e.g., Terrific Promotions, Inc. v. Dollar Tree Stores, Inc., 947 F. Supp. 1243, 1248 (N.D. Ill. 1996); SCA Disposal Servs. of New England, Inc. v. Central Nat'l Ins. Co., No. 900393C, 1994 WL 879687, at *4 (Mass. Super. Apr. 12, 1994) (holding that the company whose stock was purchased retained its insurance rights).

11See, e.g., Knoll Pharm. Co. v. Automobile Ins. Co., 167 F. Supp. 2d 1004 (N.D. Ill. 2001) (holding that a company whose stock is being sold need not obtain the consent of its insurers to retain its insurance rights).

12 See, e.g., Sharon Steel Corp. v. Aetna Casualty & Surety Co., 931 P.2d 127 (Utah 1997) (holding that all of policyholder's insurance assets had transferred to a liquidating trust created at the time of policyholder's dissolution, despite anti-assignment condition in insurance policies); see also Paxton & Vierling Steel Co. v. Great Am. Ins. Co., 497 F. Supp. 573, 580 (D. Neb. 1980) (noting that, with respect to whether an anti-assignment condition applies, the difference between a transfer of assets upon corporate dissolution and a transfer based on a merger is not material, as the inquiry in both cases is focused on whether the insurer's risk has been materially increased).

13See, e.g., Arnold Graphics Industries, Inc. v. Independent Agent Center, Inc., 775 F.2d 38, 42 (2d Cir. 1985) (holding that there had been a "de facto" merger between a parent and its subsidiary where, some time after purchasing all of the subsidiary's stock, the assets and liabilities of the subsidiary were transferred to the parent and the subsidiary dissolved); see also Hoche Prods. v. Jayark Films Corp ., 256 F. Supp. 291, 295-96 (S.D.N.Y. 1966) (finding de facto merger where (1) company purchased all of the stock of third party, (2) third party then assigned all of its assets to the company, and (3) third party later dissolved).

14See, e.g., Elat, Inc. v. Aetna Cas. & Sur. Co ., 654 A.2d 503, 505-06 (N.J. Super. Ct. App. Div. 1995) (rejecting the insurer's reliance on an anti-assignment condition where the assignment took place after the property damage at issue had occurred, stating: "[T]he purpose behind a no-assignment clause in a casualty or liability policy . . . is to protect the insurer from insuring a different risk than intended. Assignment of the right to collect or to enforce the right to proceed under a casualty or liability policy does not alter, in any meaningful way, the obligations the insurer accepted under the policy. The assignment only changes the identity of the entity enforcing the insurer's obligation to insure the same risk."); Lain v. Metropolitan Life Ins. Co., 58 N.E.2d 587, 588 (Ill. 1945) ("The general rule, supported by a great wealth of authority, is that general stipulations in policies, prohibiting assignment thereof except with the insurer's consent, or upon giving some notice, or like conditions, have universally been held to apply only to assignments before loss, and, accordingly, not to prevent an assignment after loss, of the claim or interest of the insured in the insurance money then due in respect to the loss.").

15See, e.g., Holt v. Fidelity Phoenix Fire Ins. Co., 273 A.D. 166, 168 (N.Y. App. Div. 1948) (noting that, once a fire occurred, the named insured had an accrued claim under its fire insurance policy that it could have assigned to a third party); Bronx Entertainment v. St. Paul's Mercury Ins. Co., 265 F. Supp. 2d 359, 363 (S.D.N.Y. 2003) (following Holt, and stating that, even though the policy at issue contained an anti-assignment condition, the assignee of insurance rights could maintain an action against the insurer for the named insured's pre-assignment business interruption damages); see also Texaco A/S, S.A. v. Commercial Ins. Co., No. 90 Civ. 2722, 1995 WL 628997, at *6 (S.D.N.Y. Oct. 26, 1995) ("[T]he rationale for respecting the no-assignment clause does not apply when liability arises from pre-sale activity - no-assignment clauses are designed to protect insurers from unforeseen increases in risk. When the loss occurs before the transfer, any increase in risk due to the successor's characteristics is irrelevant." (emphasis added; citations omitted)), vacated on other grounds, 160 F.3d 124 (2d Cir. 1998); Employers Ins. of Wausau v. Duplan Corp., No. 94 Civ. 3143(CSH), 1999 WL 777976, at *32 (S.D.N.Y. Oct. 20, 1999) (confirming that an entity that is not a named insured may invoke rights under an insurance policy "when the party seeking coverage (1) is the surviving corporation in a merger with the insured; (2) is legally regarded as the corporate successor of the insured through purchase or transfer of the insured's assets; or (3) has been assigned the insured's rights in the policy") (emphasis added).

16 See, e.g., Nat'l Am. Ins. Co. v. Jamison Agency, Inc., 501 F.2d 1125, 1128, 1130 (8th Cir. 1974) (holding that transfer of all assets to sole shareholder upon dissolution of corporation effectively transferred insurance coverage for pre-dissolution losses); Ocean Accident & Guar. Corp. v. Southwestern Bell Tel. Co., 100 F.2d 441, 443, 447 (8th Cir. 1939) (rejecting insurer's reliance on anti-assignment condition and holding that assignment of "[a]ll other property rights and assets of whatsoever nature and description" transferred to succeeding corporation the right to insurance coverage for injuries occurring before the date of conveyance); B.S.B. Diversified Co. v. Am. Motorists Ins. Co., 947 F. Supp. 1476, 1479 (W.D. Wash. 1996) ("The purpose of a no-assignment clause in an insurance contract is to protect the insurer from increased liability. After the events giving rise to the insurer's liability have occurred, the insurer's risk cannot be increased by a change in the insured's identity."); Int'l Rediscount Corp. v. Hartford Accident & Indem. Co., 425 F. Supp. 669, 672-73 (D. Del. 1977) (agreeing with the "numerous other courts over the years" that have held that anti-assignment conditions do not apply to the transfer of insurance rights providing coverage for pre-transfer losses, stating that "it would be a mere act of caprice or bad faith for [the insurer] to take advantage of the stipulation that the transfers were subject to its consent"); Egger v. Gulf Ins. Co., 903 A.2d 1219 (Pa. 2006) (assignment of rights to coverage as part of litigation settlement valid where loss pre-dated assignment); Conrad Bros. v. John Deere Ins. Co ., 640 N.W.2d 231, 237 (Iowa 2001) (holding that anti-assignment condition was inapplicable to transfer of chose in action for coverage for loss occurring prior to transfer, and noting that, "even if the [anti-assignment] provision had specifically prohibited post-loss assignments, it would most likely be in contravention of public policy and the general purpose of indemnity contracts"); Massachusetts Elec. Co. v. Commercial Union Ins., No. 9900467B, 2005 WL 3489658, at *2 (Mass. Super. Ct. Oct. 18, 2005) (recognizing that the general rule is that anti-assignment clauses do not prevent the transfer of insurance rights for pre-transfer losses); P.R. Mallory & Co. v. Am. States Ins. Co., No. 54C01-0005-CP-00156, 2004 WL 1737489, at *8 (Ind. Cir. Ct. July 29, 2004) (noting that the loss at issue took place before the transfer of insurance rights); Aetna Cas. & Sur. Co. v. Valley Nat'l Bank, 485 P.2d 837, 839 (Ariz. App. 1971) ("[T]his [anti-assignment] rule is based upon the right of the insurer to choose its insured so as to know its risks. Therefore, it is not applicable when an assignment is made by an insured after the liability-causing event has occurred." (citing several cases)); 3 Couch on Insurance 3d, § 35:7 (1997) (noting that "the great majority of courts adhere to the rule that general stipulations in policies prohibiting assignments thereof except with the consent of the insurer apply only to assignments before loss, and do not prevent an assignment after loss").

17Tenneco Chemicals, Inc. v. Employers Mut. Liab. Ins. Co., No. 76 Civ. 809, 1977 U.S. Dist. LEXIS 16759, at *7-8 (S.D.N.Y. Mar. 23, 1977) ("Such [anti-assignment] clauses do not apply to an assignment of an insurance claim after the loss has occurred. This is so even if the insurance contract reads to the contrary, because the assignment of an accrued insurance claim is the same as assigning a chose in action, and contractual limitations on such assignments are contrary to the public policy of New York.") ; see also Citicorp Indus. Credit, Inc. v. Federal Ins. Co., 672 F. Supp. 1105, 1105-07 (N.D. Ill. 1987) (anti-assignment condition did not preclude plaintiff, which acquired policyholder's contract rights through foreclosure, from recovering under policyholder's indemnity policy where losses took place prior to, but were not discovered until after, transfer of insurance rights); Snellman v. A.B. Dick Co., No. 81C3048, 1987 WL 8619 (N.D. Ill. Mar. 24, 1987) (successor may recover under contract for damages suffered, but not discovered, by its predecessor prior to the transfer of predecessor's rights under the contract to the successor); see generally American Nat'l Fire Ins. Co. v. Harold Abrams, P.C., No. 99 C 5807, 2002 U.S. Dist. LEXIS 2577 (N.D. Ill. Feb. 19, 2002) ("'In the "occurrence" policy, the peril insured is the "occurrence" itself. Once the occurrence takes place, coverage attaches even though the claim may not be made for some time thereafter. [Whereas] in the "claims made" policy, it is the making of the claim which is the event and peril being insured . . . .'") (quoting National Union Fire Ins. Co. v. Bauman, No. 90 C 0340, 1991 U.S. Dist. LEXIS 18668, at *5 (N.D. Ill. Jan. 2, 1992)).

18Gopher Oil Co. v. American Hardware Mut. Ins. Co., 588 N.W.2d 756, 763-64 (Minn. App. 1999) ("The purpose of a non-assignment clause is to protect the insurer from an increase to the risk it has agreed to insure. But when events giving rise to an insurer's liability have already occurred, the insurer's risk is not increased by a change in the insured's identity."); see also Total Waste Management Corp. v. Commercial Union Insurance Co., 857 F. Supp. 140, 153 (D.N.H. 1994) ("Some of the damage or loss caused by [the policyholder] to [the third party]'s property allegedly occurred during the term of [the insurer]'s policy and prior to [the policyholder]'s transfer of assets. [The insurer]'s risk is therefore no greater than when the policy 'covers only the risk it evaluated when it wrote the policy.' If [the plaintiff] is found to be the corporate successor to [the policyholder], [the insurer]'s liability on the insurance contract to [the policyholder] would be limited to the terms and date of the policy.") (quoting Northern Insurance Co. v. Allied Mutual Ins. Co., 955 F.2d 1353, 1358 (9th Cir. 1992)); see also Wolkerstorfer Co. v. Bituminous Cas. Co., No. C0-93-12712, slip op. at 8-11 (Minn. 10th Dist. May 19, 1994) (transfer of assets from partnership to corporation transferred rights to liability coverage for environmental damage that had taken place prior to the transfer but which was not discovered until years after the transfer); Sharon Steel Corp. v. Aetna Casualty & Surety Co., 931 P.2d 127 (Utah 1997) (insurer's consent was not needed to transfer insurance rights covering liability for ongoing, but undiscovered, property damage from policyholder to liquidating trust as part of policyholder's dissolution).

19See In re ACandS, Inc., 311 B.R. 36, 41 (Bankr. D. Del. 2004) ("'[B]ecause an insured's right to proceeds vests at the time of the loss giving rise to the insured's liability, restrictions on an insured's right to assign its proceeds are generally void.'" (quoting Continental Cas. Co. v. Diversified Indus., Inc., 884 F. Supp. 937, 946 (E.D. Pa. 1995))); see also In re Combustion Eng'g, Inc., No. 03-10495(JKF), Transcript of Bench Opinion, at 145-46 (D. Del. July 31, 2003) (confirming bankruptcy plan that assigned insurance proceeds to trust over the objections of debtor's insurers based on anti-assignment conditions, stating that "[a]ssignment of a right to receive proceeds does not change any risk that was insured against."), vacated on other grounds, 391 F.3d 190, 219 (3d Cir. 2004).

John T. Waldron III is a Partner in the Pittsburgh office of Kirkpatrick & Lockhart Preston Gates Ellis, a law firm that regularly represents policyholders in insurance coverage disputes, including policy holders in environmental, asbestos, silica and other toxic-tort-related insurance disputes. The views expressed herein are those of the author and not necessarily those of any clients of the law firm. Please see our website at for footnotes accompanying this article.

Please email the author at with questions about this article.