New Jersey Joins Majority of Courts Holding That Anti-Assignment Clauses Do Not Apply After a Loss

The New Jersey Supreme Court, joining the majority of courts, has ruled that an anti-assignment clause in an “occurrence” insurance policy did not bar the assignment of a post-loss claim even if the claim had not been reduced to a money judgment.

The Case

Givaudan Fragrances Corporation faced liability as a result of environmental contamination from a manufacturing site that a related corporate entity operated in a facility in Clifton, New Jersey, from the 1960s through 1990. It sought to obtain insurance coverage for those environmental claims from insurance companies that, it contended, had written primary, excess, or umbrella liability insurance policies for Givaudan Corporation during those years.

Givaudan Fragrances Corporation argued, among other things, that it was entitled to have the insurers provide it with coverage for that environmental liability by operation of an assignment of rights in its favor.

The insurers contended that they had insured Givaudan Corporation as their named insured, not Givaudan Fragrances Corporation. They also asserted that any assignment to Givaudan Fragrances Corporation was invalid because they had not consented to the assignment – and that their consent was required for a valid assignment according to the language of the insurance policies.

After coverage litigation ensued, a New Jersey trial court ruled in favor of the insurers.

An appellate court reversed, and the dispute reached the New Jersey Supreme Court.

The New Jersey Supreme Court’s Decision

The New Jersey Supreme Court affirmed the Appellate Court’s ruling.

In its decision, the court pointed out that the majority rule in the United States was that a provision that prohibited the assignment of an insurance policy, or that required an insurer’s consent to such an assignment, was void as applied to an assignment made after a loss covered by the policy had occurred.

The court added that the majority rule was an “exception to the general principle that parties to a contract may freely limit assignment of their contractual rights.”

It then adopted the majority position and ruled that an anti-assignment clause in an “occurrence” insurance policy was “not a barrier to the post-loss assignment of a claim.” The court reasoned that post-loss assignments do not further the purpose of the anti-assignment clause, which is to protect the insurer from increased liability, because the insurer’s risk cannot be increased by a change in the insured’s identity. The court noted that the assignment at issue was a post-loss claim assignment, not a post-loss policy assignment, and did not alter the insured’s obligation to indemnify a loss that already happened. The court explained that the loss was “no more, and no less, a result of” the assignment.

The court was not persuaded by the insurers’ contentions that it should not adopt that rule where claims stemmed from an environmental contamination, or where claims had not been reduced to judgment. The court found that post-loss assignment of environmental claims should not be treated any differently than any other chose in action.

As a result, the court held that an anti-assignment clause could not be applied to bar a post-loss assignment of a claim.

The case is Givaudan Fragrances Corp. v. Aetna Cas. & Sur. Co., 151 A.3d 576 (N.J. 2017).