United States: Cal. Ins. Code 520 Prohibits Insurers From Relying On Anti-Assignment Provision After Loss Has Occurred

Last Updated: August 26 2015
Article by Kathryn Ashton

In an August 20, 2015 opinion, the California Supreme Court overruled its prior decision in Henkel Corp. v. Hartford Accident & Indemnity Co. (2003) 29 Cal.4th 934 and found that under California Insurance Code section 520, an insurer may not refuse to honor the insured's assignment of policy coverage based on an anti-assignment provision where the personal injury or property damage resulting in a loss occurred during the policy period.  See Fluor Corp. v. Superior Court of Orange County (Hartford Accid. & Indem. Co.) __ Cal.4th __ (August 20, 2015, Slip Opinion ("Slip Op.")).

Discussion of the Fluor Decision

In 2003, the California Supreme Court issued the Henkel decision, which held that a consent-to-assignment provision in a third-party liability policy could be enforced by an insurer to refuse to honor an insured's assignment of policy coverage, after a loss occurred, unless such loss had already "been reduced to a sum of money due or to become due under the policy."  (Slip Op., at 1-2, emphasis omitted, quoting Henkel, 29 Cal.4th at 944.)  In rendering the Henkel decision, the court did not consider California Insurance Code section 520 ("Section 520"), which states:  "An agreement not to transfer the claim of the insured against the insurer after a loss has happened, is void if made before the loss except as otherwise provided in Article 2 of Chapter 1 of Part 2 of Division 2 of this code."  (Slip Op., at 1-2, 16, 25; see also Slip Op., at 10-15)

In Fluor, a restructured insured argued that under Section 520, when an assignment of coverage rights takes place after a third-party's exposure to asbestos, which results in personal injury for which the insured may be potentially liable, the insurer cannot thereafter rely on a consent-to-assignment clause in a liability insurance policy to avoid the effect of the assignment because "a loss has happened" within the meaning of that statute.  (Slip Op., at 2)  The California Supreme Court agreed with this construction.


Beginning in 1971, Hartford Accident & Indemnity Co. ("Hartford") became one of numerous insurers of Fluor Corporation, which performed engineering, procurement, and construction operations through various corporate entities and subsidiaries.  (Slip Op., at 3-4)  Hartford issued 11 CGL policies to Fluor Corporation from mid-1971 to mid-1986.  (Id.)  Each policy issued by Hartford contained a consent-to-assignment clause stating:  "Assignment of interest under this policy shall not bind the Company until its consent is endorsed thereon."  (Slip Op., at 4)

Beginning in the mid-1980s and continuing to the present, various Fluor Corporation entities were named as defendants in lawsuits alleging liability arising from exposure to asbestos in the years preceding the policy assignment at issue.  At present, about 2,500 such suits are pending in California and elsewhere.  The suits were tendered to Hartford, which defended and indemnified the actions for over 25 years.  (Id.)

Also during the mid-1980s, Fluor Corporation acquired a mining business, A.T. Massey Coal Company, which became a subsidiary of Fluor Corporation.  In 2000, Fluor Corporation conducted a corporate restructuring known as a "reverse spinoff," which resulted in a newly formed subsidiary which retained the name Fluor Corporation (referred to by the court as "Fluor 2").  The original Fluor Corporation changed its name to Massey Energy Company and retained A.T. Massey's coal mining and related businesses.  (Slip Op., at 5.)  About six months after the reverse spinoff, Fluor 2 notified Hartford of the restructuring.  (Slip Op., at 5-6.)

After the reverse spinoff, Hartford continued for the next seven years to defend Fluor 2 against claims triggered by occurrences during the terms of the original Fluor Corporation's CGL policies and raised no objection based on the reverse spinoff.  (Slip Op., at 7)  Hartford also continued to collect from Fluor 2 nearly $5 million in "retrospective premiums."  (Id. at 7-8)

When other coverage issues arose, Fluor 2 filed a declaratory relief action in 2006, prompting a cross-complaint from Hartford in mid-2009, which for the first time raised the issue that Fluor Corporation's failure to obtain consent from Hartford to assign coverage rights to Fluor 2 barred recovery of such rights under the consent-to-assign provision.  (Slip Op., at 8)

Ultimately, the issue made its way to the California Supreme Court, which granted review to decide the impact of Section 520 on its prior decision in Henkel.

Decision by the Court

As an initial matter, the court held that Section 520 applies not only to first-party insurance policies but also to third-party liability policies.  (See Slip Op., at 19-24)

The court next construed the meaning of the phrase "after a loss has happened," as used in Section 520, which the court held was ambiguous when used in the context of liability policies because the meanings offered by both Fluor 2 and Hartford were reasonable.  For its part, Fluor 2 argued that "after a loss has happened," means that after a third-party's exposure, the insured could assign, without the consent of its insurer, any rights to coverage under its liability policies for personal injuries that occurred during the policy period.  (Slip Op., at 26)  Hartford, on the other hand, argued that "after a loss has happened," refers not to the event leading up to the underlying bodily injury, but instead to the period after the insured has incurred a direct loss by virtue of a judgment or a final settlement.  (Id.)

After an extensive examination of the legislative history of Section 520 and both out-of-state and California decisions (see Slip Op., at 27-53), the California Supreme Court agreed with Fluor 2:

In view of the history described above, and consistently with the California cases touching on the subject ... we conclude that the phrase "after a loss has happened" in section 520 should be interpreted as referring to a loss sustained by a third party that is covered by the insured's policy, and for which the insured may be liable.  We conclude that the statutory phrase does not contemplate that there need have been a money judgment or approved settlement before such a claim concerning that loss may be assigned without the insurer's consent.

(Slip Op., at 52, citations omitted)  In justifying this conclusion, the court reasoned:  "Because any such new business entity typically will assume both the assets and the liabilities of the prior business entity, the new business entity will understandably expect to obtain the rights to claim defense and indemnification coverage for such liabilities triggered during the policy period.  If the insurer were able to prevent its insured from assigning rights to assert such claims unless first reduced to a money judgment or approved settlement, it would effectively exert precisely the type of unjust and oppressive pressure on the insured that the early decisions, California Code Commissioners, and Legislature sought to foreclose."  (Id., at 53)

In support of its decision, the court rejected other arguments raised by Hartford, including an argument that interpreting "loss" in Section 520 as not requiring a judgment or approved settlement will conflict with Cal. Insurance Code section 108.  (See Slip Op., at 53-54)  In rejecting this argument, the court acknowledged that "an insurer's obligation to actually 'cut a check' and transfer funds in performance of its duty to indemnify does not arise until there is a judgment or approved settlement for a sum of money due."  (Slip Op., at 54, emphasis in original, citing Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 659 fn.9)  The court went on to hold that "[t]here is no indication from section 108 or section 520, or other related contemporaneous statutes proposed by the California Code Commissioners and enacted by the 1935 California Legislature, that anyone understood the term 'loss' as used in section 520 to have the meaning that Hartford proposes now ...."  (Slip Op., at 54, emphasis in original)

The court also went on to find that not only is the Henkel decision inconsistent with Section 520 but that it "has not been well received" and should not be applied simply on the basis of stare decisis.  (See Slip Op., at 55-56, 58-59 & fn.52).

The court confirmed in its ruling that under Section 520, "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."  (Slip Op., at 59)  "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."  (Id.)

In sum, insurers may no longer rely on the Henkel decision as support for their right to assert a consent-to-assignment provision as a means for barring the transfer of coverage rights with respect to losses that have occurred during the policy period but have not yet been reduced to a final judgment or an agreed-upon settlement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.