In Givaudan Fragrances Corp. v. Aetna Cas. & Sur. Co., 2015 N.J. Super. LEXIS 131 (App. Div. Aug. 12, 2015), a New Jersey intermediate appellate court found that an insured could assign its rights to a third party under an occurrence policy, notwithstanding policy terms requiring insurer consent, once the loss has occurred and even if no claim was yet made. The court ruled the assignment was not a transfer of the actual policy, but a transfer of the right to collect money.
In Givaudan Fragrances, Givaudan Corporation obtained insurance policies from the defendant insurers for primary, umbrella and excess liability coverage, during the period from November 16, 1964 to January 1, 1986. In 1987 and 1988 Givaudan Corporation entered into several consent orders with the New Jersey Department of Environmental Protection (“DEP”) to remediate damage caused by manufacturing activities at its site in Clifton, New Jersey. These consent orders were binding not only on Givaudan Corporation, but also its successors and assigns. Through a series of mergers, transfers and re-formations in the 1990s, all of the assets and liabilities of the fragrance divisions of Givaudan Corporation were transferred to Givaudan Roure Fragrance Corporation, which was later renamed Givaudan Fragrances Corporation (“Givaudan Fragrances”). In the mid-2000s several suits were filed against Givaudan Fragrances for damages caused by discharges from the Clifton site.
Givaudan Fragrances claimed it was insured under the policies defendants had issued to Givaudan Corporation between 1964 and 1986. Defendants refused to recognize the assignment, contending that the policies required the insurers’ consent in order for the insured to assign the policy to a third person. The trial court found that the assignment was invalid, interpreting the policy language “to mean that only those affiliates that were created during a policy period could be an insured.” Id. at *8. The Appellate Division, exercising de novo review, reversed, holding that “once a loss occurs, an insured’s claim under a policy may be assigned without the insurer’s consent.” Id. at *10.
The Appellate Division recognized that “[i]nsurers provide policies of insurance to those individuals and entities that insurers have determined to be acceptable risks,” and that “[i]f an insured assigns the policy to a third party without the insurer’s consent, the insured may cause the insurer to bear a risk the insurer never agreed to accept and never would have accepted.” Id. at *12. While thus noting that the purpose of a policy’s no-assignment clause is to protect the insurer from having to provide coverage for a risk different than intended, the court found that not to be at issue here, stating that an “insurer’s risk is not increased merely because there has been a change in the identity of the party to whom a claim is to be paid.” Id. The court noted that under the occurrence policies here, “once the occurrence takes place, coverage attaches even though the claim may not be made for some time thereafter,” id. at *10, such that the insurers’ “obligation to provide coverage to the party deemed to be insured under the policies arose at the time of the loss.” Id. at *14. The court further noted that because here the insured assigned the policy to a third party after the loss occurred, “the insurer’s risk is the same because liability of the insurer becomes fixed at the time of the loss.” Id. at *11. The court stated that “[a]lthough the precise amount of defendants’ liability may not be known, defendants’ obligation to insure the risk in accordance with their respective policies was not altered by the assignment.” Id. at *15. Moreover, the court stated that “once the insurer’s liability has become fixed due to a loss, an assignment of rights to collect under an insurance policy is not a transfer of the actual policy but a transfer of the right to a claim of money.” Id. at *13.
Accordingly, the Appellate Division reversed the trial court, finding that Givaudan Fragrances could assert the rights to insurance coverage that had been assigned to it. The ruling should be viewed as limited, though to assignment of the right to payment of money under occurrence policies, after the loss, or occurrence, has already taken place.