New Jersey Court Finds Insurance Transfer Valid
Time 2 Minute Read

On April 13, 2018, the Superior Court of New Jersey, Appellate Division, affirmed a trial court decision finding that a bill of sale intended to include the transfer of insurance rights and finding that such transfer did not violate an anti-assignment clause. Cooper Industries, LLC, Plaintiff-Respondent, v. Columbia Casualty Company And One Beacon America Insurance Company, Defendants-Appellants, and Employers Insurance Of Wausau, Allstate Insurance Company, Lexington Insurance Company And Westchester Fire Insurance Company, 2018 WL 1770260,(N.J. Super. A.D., 2018).  In May 1986, Cooper Industries merged several entities and transferred assets to a “new” McGraw-Edison Company through a bill of sale.  Eighteen years later, on November 30, 2004, Cooper Industries merged the new McGraw-Edison company into itself.  In 2009, the Environmental Protection Agency determined that Cooper Industries was responsible for generating and disposing of hazardous substances due to McGraw-Edison’s actions taken years earlier.  Cooper Industries sought coverage under the commercial general liability policies McGraw-Edison had in place at the time of the environmental and pollution-related occurrences.

In arguing that coverage did not exist, the insurers argued that (1) the bill of sale was silent as to the transfer of insurance rights, and thus no insurance rights were transferred; and (2) even if such a transfer had occurred, the transfer of insurance rights violated the anti-assignment clauses contained in the CGL policies. Rejecting the insurers’ contentions, the New Jersey Superior Court held that extrinsic evidence put forth by Cooper Industries demonstrated that the parties who effectuated the bill of sale believed they were also transferring insurance rights.  The court also stated that a post-loss assignment of insurance rights is not impermissible under an anti-assignment clause.  Since the alleged pollution and environmental harms occurred prior to the bill of sale, the court found the assignment permissible.  Thus, the insurers were obligated to provide coverage to Cooper Industries.

This decision highlights the importance of specifying which insurance assets, if any, should be transferred when companies undergo mergers or other types of corporate reorganization. It is important for policyholders to remember that insurance rights can be separate from the insurance policies themselves.  Finally, this decision serves as another example of courts refusing to bar the assignment of rights under an insurance contract where a loss has already occurred.

  • Partner

    Larry Bracken has 38 years of experience litigating insurance coverage, class action and commercial cases in federal and state courts throughout the United States. Pro bono representation of clients in habeas corpus, prisoner ...


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