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