In the matter of Givaudan Fragrances Corp. v. Aetna Casualty & Surety Company, et al., the New Jersey Supreme Court adopted the majority rule by holding that an insured's assignment of rights under a policy of insurance after the occurrence of an insured loss does not preclude coverage.
On February 1, New Jersey's Supreme Court adopted what is considered the "overwhelming" majority rule that an insured assigning rights to coverage after an insured loss has occurred does not trigger the preclusive effect of the occurrence based policy's anti-assignment clause. The Court affirmed the Appellate Division's decision that followed the public policy adopted around the country "voiding restrictions on post-loss claim assignments" and observing a critical distinction between the assignment of a contractual right in the policy pre-loss, compared to the assignment of a monetary right post-loss.
The underlying loss concerned the plaintiff's environmental liability at its Clifton, New Jersey, site where it operated a manufacturing facility from the 1960s through the 1990s. The plaintiff's claim for coverage came on the heels of actions taken by the New Jersey Department of Environmental Protection (NJDEP) and the Environmental Protection Agency (EPA) which resulted in environmental claims for discharges that took place during the relevant policy periods through 1986. The defendant insurers, disclaiming coverage, contended that they had issued policies to the named insured "Givaudan Corporation" and not the plaintiff, Givaudan Fragrances Corporation; as such, the assignment to Givaudan Fragrances Corporation, through a series of mergers and corporate changes, was invalid.
Relying on two New Jersey cases (Flint Frozen Foods, Inc. v. Firemen's Insurance Co. of Newark, 12 N.J. Super. 396 (Law Div. 1951) and Elat, Inc. v. Aetna Casualty & Surety Co., 280 N.J. Super. 62 (App. Div. 1995), rev d on other grounds, 8 N.J. 606 (1952) illustrating the distinction between a transfer of contractual rights versus a transfer of a money claim, the Court held:
[The distinction] is related to the purpose behind a no-assignment clause in a casualty or liability policy which 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. Thus, the purpose behind the no-assignment clause is not inhibited by allowing claim, as opposed to policy, assignments.
The Supreme Court also found that to permit an insurer to avoid its obligation once a contractually agreed to risk had been fixed based on a post-loss assignment would constitute an impermissible windfall. Further, the Court discussed that "New Jersey  recognizes choses in action as personal property and disfavors any attempt to restrict alienation of that property."
Comment: Counsel should keep in mind that the Court cautioned, moving forward, "the rule voiding restrictions on post-loss assignments is relatively straightforward in the context of first-party insurance," yet with regard to third-party insurance, determining the precise moment of a loss may present difficulties to determine the validity of a challenged assignment.
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Jennifer R. Williams