Insurance Considerations When Entering Corporate Transactions: Will You Still Be Able To Access Historical Insurance Assets After The Closing?

3have adopted the Insurer Position and held that an anti-assignment condition precluded the policyholder from transferring its insurance rights without the insurer’s consent, including its liability insurance rights for bodily injury that had already happened prior to, but was not discovered until after, the transfer in question. As a result, the insurers in Henkel and these other cases were able to avoid paying substantial amounts in coverage to the Successor Insured to which the policyholder had attempted to assign coverage. Based on Henkel and similar decisions, insurers are now more aggressively relying on antiassignment conditions in their policies as a basis for denying coverage where the entity seeking coverage is a successor to the policyholder, whether by way of merger, stock sale, dissolution, or asset sale. 4 From the Successor Insured’s perspective, this insurer effort arguably threatens to undermine the efficiency of corporate transactions while benefiting the insurers alone. On this view, insurers are seeking enormous windfalls through the virtual elimination of their coverage obligations pursuant to historical policies, for which they collected substantial premiums, by way of a corporate transaction or other subsequent circumstances having nothing to do with the scope of the risk insured under the policies. According to these Successor Insureds, courts should reject the Henkel decision and remain committed to the position that anti-assignment conditions do not preclude the transfer of liability insurance rights for losses that took place prior to the transfer in question. As discussed in more detail below, this position provides that, whether the corporate transaction resulting in the transfer of rights to coverage was a merger, stock sale, dissolution, or asset sale, the insurer’s consent is not required to transfer such insurance rights even where the injury or damage at issue did not manifest until years after the transaction. 5