By Scot Kersgaard
The California Supreme Court ruled this month that “consent to consignment” clauses which seek to prohibit insureds from assigning policies without insurer consent cannot always be enforced.
In the case under review, Fluor Corp. v. Superior Court of California, the Court ruled that
Hartford Accident and Indemnity Company had to pay the claim even though assignment had been made without the insurer’s consent and before a dollar amount of loss had been established.
The case hinged on California Insurance Code 520, which was enacted in 1872, and which bars an insurer from refusing to honor an assignment after a covered loss has occurred.
Prior judicial findings, most notably Henkel Corp. v. Hartford, found that assignment without consent could be made only once a dollar amount of award had been determined.
The newest case takes it one step further.
From the ruling:
“Insurance Code section 520 applies to third party liability insurance. Under that provision, after personal injury (or property damage) resulting in loss occurs within the time limits of the policy, an insurer is precluded from refusing to honor an insured’s assignment of the right to invoke defense or indemnification coverage regarding that loss. This result obtains even without consent by the insurer—and even though the dollar amount of the loss remains unknown or undetermined until established later by a judgment or approved settlement.”
