Title: Henkel Corp. v. Hartford Accident & Indemnity Co.

State: california

Issuer: California Supreme Court

Document:

1 
Filed 2/3/03 
 
 
IN THE SUPREME COURT OF CALIFORNIA 
 
 
HENKEL CORPORATION, 
) 
 
 
) 
 
Plaintiff and Appellant, 
) 
 
 
) 
S098242 
 
v. 
) 
 
 
) 
Ct.App. 2/3 B134742 
HARTFORD ACCIDENT  
) 
AND INDEMNITY COMPANY et al., 
) 
Los Angeles County 
 
 
) 
Super. Ct. No. 155209 
 
Defendants and Respondents. ) 
 
___________________________________ ) 
 
 
Through a series of agreements, plaintiff Henkel Corporation (Henkel) 
acquired the metallic chemical product line of Amchem Products, Inc. (Amchem 
No. 1),1 and assumed all related liabilities.  The question here is whether Henkel 
also acquired the benefits of the insurance policies issued by defendants to 
Amchem No. 1 to cover lawsuits based on injuries sustained during the policy 
period. 
Finding no specific language in the agreements assigning policies or policy 
benefits to Henkel or its predecessor, and no document in which defendant 
insurers consented to any assignment, the trial court entered summary judgment 
for defendants.  The Court of Appeal reversed.  It reasoned that in the absence of 
                                             
 
1  
Following the lead of the Court of Appeal, we distinguish between the two 
corporations named Amchem Products, Inc., by referring to the Pennsylvania 
corporation as Amchem No. 1 and the Delaware corporation as Amchem No. 2.   
 
 
2 
explicit language disclaiming any assignment, the right to insurance benefits 
passed to Henkel as a matter of law without need for consent from the insurers. 
We conclude that under the circumstances of this case any assignment of 
benefits does require the consent of the insurers, and therefore reverse the 
judgment of the Court of Appeal. 
I.  SUMMARY OF THE CORPORATE TRANSACTIONS 
Amchem No. 1, a Pennsylvania corporation, had two distinct product lines:  
agricultural chemicals and metallic chemicals.  The metallic chemicals, which help 
paint adhere to metal, were sold to car and airplane manufacturers, including 
Lockheed.  Defendants insured both of Amchem No. 1’s product lines.   
In 1977, Union Carbide Corporation acquired Amchem No. 1 by stock 
purchase and merger.  In 1979, Amchem No. 1, now a Union Carbide subsidiary, 
created a new corporation, also known as Amchem Products, Inc., but a Delaware 
corporation (Amchem No. 2).  By resolution of its board of directors, Amchem 
No. 1 transferred “all of its right, title and interest . . . in and to its domestic assets 
utilized in its metalworking business” to Amchem No 2.2  The board of directors 
of newly created Amchem No. 2 accepted the transfer from Amchem No. 1 of the 
“assets, liabilities and goodwill utilized in its metalworking chemical activities.”  
This transaction was a contract:  the resolution of Amchem No. 1’s board of 
directors was an offer (see Dow v. River Farms Co. (1952) 110 Cal.App.2d 403; 
Hoge v. Lava Cap Gold Mining Corp. (1942) 55 Cal.App.2d 176) and the 
resolution of Amchem No. 2’s board of directors explicitly accepted that offer.  
                                             
 
2  
At the same time, Amchem No. 1 changed its name to Union Carbide 
Agricultural Products Company, Inc., reflecting that its product line was now 
limited to agricultural products.  For convenience, we will continue to refer to the 
company as Amchem No. 1. 
3 
Although the 1979 contract referred to “assets” and “liabilities,” it did not specify 
what assets were transferred to Amchem No. 2, or what liabilities were assumed. 
After the 1979 contract, Amchem No. 1 (agricultural products) and Amchem 
No. 2 (metallic chemicals) were separate subsidiaries of Union Carbide.  In 1980, 
however, Union Carbide sold all of the stock of Amchem No. 2 to plaintiff 
Henkel.  By acquiring the stock of Amchem No. 2, Henkel acquired all of its 
assets and liabilities.  After Henkel purchased Amchem No. 2, these two 
corporations merged.  In 1986, Union Carbide sold Amchem No. 1 to Rhone 
Poulenc, Inc.; these two companies merged in 1992.  Thus, it is undisputed that 
Henkel has succeeded to all of the rights and obligations of Amchem No. 2, and 
Rhone Poulenc (now known as Aventis CropScience USA, Inc.) has succeeded to 
all of the rights and obligations of Amchem No. 1. 
II.  BACKGROUND OF THIS LITIGATION 
In 1989, current and former Lockheed employees filed suit against Henkel 
and “Amchem Products, Inc.,” without distinguishing between Amchem No. 1 (in 
1989 a Rhone Poulenc subsidiary) and Amchem No. 2 (which by 1989 had 
merged into Henkel).  The suit alleged injuries arising from exposure to metallic 
chemicals during the period between 1959 and 1976.  Henkel tendered its defense 
to defendant insurers, whose policies had insured Amchem No. 1 during portions 
of this period, and to Henkel’s own insurers.  All refused coverage.  
In 1992, the Lockheed plaintiffs served their complaint on Rhone Poulenc, 
named as “Amchem Products, Inc.”  Rhone Poulenc moved to quash service.  The 
Lockheed plaintiffs stipulated to the trial court’s granting Rhone Poulenc’s motion 
to quash.  The stipulation states that the Lockheed plaintiffs “have been presented 
with documents establishing that Henkel Corporation is answerable for the 
liabilities of Amchem Products, Inc. alleged in the Lockheed Consolidated Cases.  
4 
Accordingly, plaintiffs have no interest in asserting their claims against [Rhone 
Poulenc].”   
In 1995, Henkel settled its suit with the Lockheed plaintiffs for $7.65 million.  
Defendants3 refused to contribute to the settlement.  Henkel then filed this action 
for declaratory relief against defendants and Henkel’s own insurers.  Defendants 
had Rhone Poulenc added as a necessary party.   
In 1998, plaintiff Henkel, defendants, and Rhone Poulenc each filed motions 
for summary judgment.  Because defendants had issued their insurance policies to 
Amchem No. 1—which no longer existed as an independent entity—the trial 
court’s first concern was to decide which party represented Amchem No. 1.  The 
trial court ruled that Rhone Poulenc, not Henkel, was the corporate successor of 
Amchem No. 1 and was therefore the entity entitled to the protection of the 
liability policies defendant insurers had issued to Amchem No. 1. 
Amchem No. 2 had assumed all the liabilities of Amchem No. 1 relating to 
the metallic chemical product line.  Plaintiff Henkel then purchased all the stock of 
Amchem No. 2, which made Henkel responsible for all Amchem No. 2’s 
liabilities, including those inherited from Amchem No. 1.  Henkel therefore 
argued in the trial court that even though it was not the corporate successor to 
Amchem No. 1, because it was responsible for Amchem No. 1’s liabilities relating 
to metallic chemicals as a matter of law, it should be entitled to the benefits of 
Amchem No. 1’s liability insurance. 
The trial court rejected Henkel’s argument.  It found Henkel responsible for 
Amchem No. 1’s torts, not as a matter of law, but because Henkel had voluntarily 
                                             
 
3 
“Defendants” refers to those Amchem No. 1 insurers who are parties to this 
appeal.  The term does not include the Henkel insurers that were defendants in the 
trial court but are not parties to this appeal. 
5 
assumed that liability.  The trial court also rejected Henkel’s contention that the 
1979 contract, under which Amchem No. 2 acquired the assets and liabilities of 
Amchem No. 1’s metallic chemical business, assigned to Amchem No. 2 the 
benefits of insurance coverage for those liabilities.  Moreover, the court ruled that 
any such assignment would be void without defendant insurers’ consent.  The trial 
court therefore entered summary judgment against Henkel. 
The Court of Appeal reversed.  Quoting Northern Ins. Co. of New York v. 
Allied Mut. Ins. (9th Cir. 1992) 955 F.2d 1353, 1357 (Northern Insurance), it held:  
The “ ‘right to indemnity followed the liability rather than the policy itself.  As a 
result, even though the parties did not assign [the predecessor’s insurance] policy 
in the agreement, the right to indemnity under the policy transferred to [the 
successor corporation] by operation of law.’ ”  (Italics omitted.)  We granted 
petitions for review by Rhone Poulenc and defendants. 
III.  HENKEL’S LIABILITY FOR INJURIES CAUSED BY AMCHEM NO. 1 ARISES 
FROM CONTRACT AND WAS NOT IMPOSED BY OPERATION OF LAW 
Plaintiff Henkel here renews the argument made in the trial court that when it 
bought the metallic chemical product business (Amchem No. 2) from Union 
Carbide in 1980 it incurred liability as a matter of law for injuries caused by those 
products when they were being manufactured and distributed by Amchem No. 1.  
Because liability was imposed upon it as a matter of law, Henkel argues it should 
receive the benefits of Amchem No. 1’s liability polices as a matter of law.  (See 
Northern Insurance, supra, 955 F.2d at p. 1357.)  Defendant insurers contend that 
the Ninth Circuit’s 1992 decision in Northern Insurance was wrong, and that later 
California cases show that under California law product line tort liability does not 
include any right to the insurance coverage for the tort.  (See General Accident 
Ins. Co. v. Superior Court (1997) 55 Cal.App.4th 1444 (General Accident); 
6 
Quemetco Inc. v. Pacific Automobile Ins. Co. (1994) 24 Cal.App.4th 494, 499-501 
(Quemetco).)  We need not resolve this conflict, because the record shows that 
Henkel’s liability was not imposed involuntarily by law but assumed voluntarily 
by contract. 
Henkel’s argument why it should be entitled to Amchem No. 1’s insurance 
protection as a matter of law depends on a showing that Henkel’s tort liability was 
imposed upon it by law.  Henkel has failed to make that showing.  As we explain, 
there are three situations in which a buyer of corporate assets may be liable for the 
torts of its predecessor, notwithstanding the purchaser’s failure to assume liability 
by contract, but Henkel does not show that this case falls within any of these 
categories. 
First, the buyer of corporate assets may be liable as a corporate successor if 
“[1] the transaction amounts to a consolidation or merger of the two corporations, 
[2] the purchasing corporation is a mere continuation of the seller, or [3] the 
transfer of assets to the purchaser is for the fraudulent purpose of escaping liability 
for the seller’s debts.”  (Ray v. Alad Corp. (1977) 19 Cal.3d 22, 28; Beatrice Co. v. 
State Bd. of Equalization (1993) 6 Cal.4th 767, 778.)  None of these circumstances 
is present here:  Amchem No. 2 did not acquire Amchem No. 1’s metallic 
chemical business by consolidation or merger.  Amchem No. 2 was not a “mere 
continuation” of Amchem No. 1, because that doctrine does not apply “when 
recourse to the debtor corporation is available and the two corporations have 
separate identities.”  (Beatrice Company v. State Board of Equalization, supra, 6 
Cal.4th at p. 778.)  And there is no evidence that Amchem No. 1 sold its metallic 
chemical business to Amchem No. 2 to defraud its creditors. 
Second, a company that acquires another company’s product line may be 
liable for injuries caused by its predecessor’s defective products, if certain 
conditions are met.  One condition is “the virtual destruction of the plaintiff’s 
7 
remedies against the original manufacturer caused by the successor’s acquisition 
of the business.”  (Ray v. Alad Corp., supra, 19 Cal.3d at p. 31.)  That condition is 
not met here, because Amchem No. 1 continued to exist after its 1979 sale of the 
metallic chemical business to Amchem No. 2.  Rhone Poulenc, as the 1986 
corporate successor of Amchem No. 1, can respond in damages to any product 
defects suit based on toxic exposure occurring before the 1979 creation of 
Amchem No. 2.  Moreover, even if Amchem No. 1 had dissolved after it 
transferred its metallic chemical operation to Amchem No. 2, it could still be sued 
to permit a plaintiff to assert a claim against Amchem No. 1’s liability policies.  
(Penasquitos, Inc. v. Superior Court (1991) 53 Cal.3d 1180.)  And there are no 
grounds for claiming that Amchem No. 1 was destroyed by the 1979 sale of its 
metallic chemical business to Amchem No. 2.  (See Chaknova v. Wilbur-Ellis Co. 
(1999) 69 Cal.App.4th 962, 971.) 
Third, some statutes, notably the Comprehensive Environmental Response, 
Compensation, and Liability Act (42 U.S.C. § 9601 et seq.) (CERCLA), impose 
liability upon successor corporations without regard to contract.  (SmithKline 
Beecham Corp. v. Rohm and Haas Co. (3d Cir. 1996) 89 F.3d 154, 163.)  No such 
statute applies to this case. 
Thus, Henkel, the buyer of Amchem No. 2, is not liable by operation of law 
for injuries caused by defective products marketed by Amchem No. 1.  Amchem 
No. 2, however, assumed by contract the liabilities of Amchem No. 1 relating to 
the metallic chemical business.  When Henkel later bought all the stock of 
Amchem No. 2, that transaction did not change the status of Amchem No. 2 as a 
legal entity, so Amchem No. 2 continued to be responsible for those liabilities.  
The later merger of Henkel and Amchem No. 2 left Henkel, as the surviving 
corporation, responsible for the liabilities of Amchem No. 2, and through it those 
of Amchem No. 1 relating to the metallic chemical product line. 
8 
Amchem No. 2 also acquired the assets of Amchem No. 1 relating to the 
metallic chemical business, and it continued to own those assets after Henkel 
acquired all of Amchem No. 2’s stock.  (See National American Ins. Co. v. 
Jamison Agency, Inc. (8th Cir. 1974) 501 F.2d 1125, 1127.)  Henkel later acquired 
the assets of Amchem No. 2 by merger.  Henkel’s rights to any insurance policy 
benefits, therefore, are those of Amchem No. 2, and depend on the terms of the 
1979 contract by which Amchem No. 2 acquired the assets of Amchem No. 1. 
Three Court of Appeal decisions, although distinguishable from the case here 
on other grounds, confirm that the rights of a successor corporation in a case such 
as this depend upon contract.  Oliver Machinery Co. v. United States Fid. & Guar. 
Co. (1986) 187 Cal.App.3d 1510 (Oliver) involved the reverse situation in which 
the distributor for a predecessor sought to take advantage of its successor’s 
insurance policy.  The Court of Appeal in that case rejected the argument that the 
insurance policy should be construed to make coverage coextensive with liability 
under Ray v. Alad Corp., supra, 19 Cal.3d 22; applying established principles for 
construing insurance policies, it concluded that the policy did not cover the 
distributor’s claim.  Quemetco, supra, 24 Cal.App.4th 494, which involved 
liability under CERCLA, relied on Oliver to hold that the right of a successor 
company to the benefits of its predecessor’s policy likewise turned on the 
interpretation of the contract.  Similarly, General Accident, supra, 55 Cal.App.4th 
at page 1454, which involved product-line liability under Ray v. Alad Corp., 
supra, 19 Cal.3d 22, agreed that the successor’s right to its predecessor’s 
insurance policy depended on contract. 
Plaintiff Henkel questions here whether the Court of Appeal decisions in 
Quemetco and General Accident were correct insofar as they refused to allow a 
successor to claim rights under its predecessor’s liability policies even though 
liability had been imposed on the successor not through contract, but by operation 
9 
of law.  We perceive no conflict, however, in authority or principle over the rule 
that when liability is assumed by contract, the successor’s rights are defined and 
limited by that contract. 
IV.  ANY ASSIGNMENT OF THE BENEFITS AT ISSUE IS INEFFECTIVE BECAUSE 
THE INSURERS DID NOT CONSENT 
Whether or not Amchem No. 1 assigned any benefits under the liability 
policies to Amchem No. 2, any such assignment would be invalid because it 
lacked the insurer’s consent.  Analysis of this issue must begin with the language 
of the policies themselves, and in this case there is no dispute that each of the 
policies contained clauses providing that there could be no “[a]ssignment of 
interest under this policy” without the insurer’s consent endorsed on the policy.  
Such clauses are generally valid and enforceable.  (See Bergson v. Builders’ Ins. 
Co. (1869) 38 Cal. 541, 545; Greco v. Oregon Mut. Fire Ins. Co. (1961) 191 
Cal.App.2d 674, 682.)   
Plaintiff Henkel does not claim that any insurer has executed a consent to 
assignment, but argues on two grounds that under the circumstances here an 
assignment does not require insurer consent.  The first ground, that coverage 
should follow liability when the liability is transferred by operation of law, fails 
because, as we explained earlier, Henkel did not acquire the liabilities of Amchem 
No. 1 by operation of law, but assumed those liabilities by contract.  Henkel’s 
second ground for arguing that insurer consent is not required is that under an 
occurrence-based liability policy (see Montrose Chemical Corp. v. Admiral Ins. 
Co. (1995) 10 Cal.4th 645, 689), policy benefits can be assigned without consent 
once the event giving rise to liability has occurred. 
“It is established that a provision in a contract or a rule of law against 
assignment does not preclude the assignment of money due or to become due 
under the contract [citations] or of money damages for the breach of the contract.”  
10 
(Trubowitch v. Riverbank Canning Co. (1947) 30 Cal.2d 335, 339-340.)  Cases 
and commentators have applied this principle to the assignment of benefits under 
an insurance policy.  (See Westoil Terminals Co. v. Harbor Ins. Co. (1999) 73 
Cal.App.4th 634, 641; Quemetco, supra, 24 Cal.App.4th at p. 502; Greco v. 
Oregon Mut. Fire Ins. Co., supra, 191 Cal.App.2d at p. 682; Croskey et al., Cal. 
Practice Guide:  Insurance Litigation (The Rutter Group 2002) ¶ 7.431, p. 7A-
114.)  But even if we apply the principle to liability policies, it does not bar 
defendants from enforcing their restrictions on assignment in the case here. 
In 1979, when Amchem No. 2 assumed the liabilities of Amchem No. 1, the 
duty of defendant insurers to defend and indemnify Amchem No. 1 from the 
claims of the Lockheed plaintiffs had not become an assignable chose in action.  
Those claims had not been reduced to a sum of money due or to become due under 
the policy.  Defendants had not breached any duty to defend or indemnify 
Amchem No. 1, so Amchem No. 1 could not assign any cause of action for breach 
of such duty.  (Compare Comunale v. Traders & General Ins. Co. (1958) 50 
Cal.2d 645, 661-662, which upholds a assignment for wrongful failure to settle a 
claim.)  Consequently, Amchem No. 1 could not assign the right to defense and 
indemnity against such claims without the insurers’ consent. 
Nonetheless, Henkel contends we should permit assignment of claims such as 
those brought by the Lockheed plaintiffs without insurer consent, because the 
assignment would not place an additional risk (or burden) on the insurer that it did 
not bargain to assume.  According to Henkel, in this case there is no additional 
risk because the injury occurred before the assignment and the assignment does 
not affect either liability or policy limits.  (Northern Insurance, supra, 925 F.2d at 
p. 1358.)  Even assuming enforcement of the no consent clause requires a showing 
of additional burden or risk on the insurer, Henkel cannot prevail.  An additional 
burden may arise whenever the predecessor corporation still exists or can be 
11 
revived (see Penasquitos, Inc. v. Superior Court, supra, 53 Cal.3d 1180), because 
of the ubiquitous potential for disputes over the existence and scope of the 
assignment.  If both assignor and assignee were to claim the right to defense, the 
insurer might effectively be forced to undertake the burden of defending both 
parties.  In view of the potential for such increased burdens, it is reasonable to 
uphold the insurer’s contractual right to accept or reject an assignment. 
Recognizing this problem, Henkel argues that under the peculiar facts of this 
case the insurers face no such dual burden.  Henkel points out that when the 
Lockheed plaintiffs’ lawsuit against Rhone Poulenc was dismissed, Henkel, the 
buyer of Amchem No. 2, was the only remaining entity facing potential liability 
for toxic injuries to Lockheed employees caused by the metallic chemical products 
of Amchem No. 1. 
Nevertheless, if the Lockheed plaintiffs had refused to dismiss their suit 
against Rhone Poulenc, defendants would have faced the dilemma whether to 
defend Rhone Poulenc, Henkel, or both.  The Lockheed plaintiffs’ decision to 
proceed only against Henkel, the buyer of Amchem No. 2, and not against both 
Henkel and Rhone Poulenc, should not affect Henkel’s right, if any, to the 
coverage benefits of Amchem No. 1’s liability insurance policies.  Those rights 
arise from and were fixed by contract —the 1979 contract by which Amchem No. 
2 acquired the metallic chemical business from Amchem No. 1, the 1980 contract 
in which Henkel acquired the metallic chemical business by purchasing Amchem 
No. 2, and the insurance policies, including their “no assignment” provisions — 
and those rights do not rise or fall on the tactical decisions of tort plaintiffs. 
In sum, Henkel does not demonstrate entitlement to the benefits of the 
liability policies at issue.  This case is not analogous to those circumstances under 
which an assignment without the insurer’s consent has been upheld:  (1) when at 
the time of the assignment the benefit has been reduced to a claim for money due 
12 
or to become due, or (2) when at the time of the assignment the insurer  
has breached a duty to the insured, and the assignment is of a cause of action to 
recover damages for that breach.  The assignment in this case does not fall within 
either category. 
 
V.  HENKEL HAS NOT SHOWN THAT IT IS ENTITLED TO REIMBURSEMENT 
BECAUSE IT DEFENDED AND SETTLED A CLAIM AGAINST AMCHEM NO. I 
Plaintiff Henkel argues that even if it did not acquire the insurance benefits at 
issue here by assignment, it is nevertheless entitled to reimbursement of defense 
and settlement costs connected to the Lockheed litigation.  Henkel claims that 
having defended and settled the Lockheed case on behalf of “Amchem Products, 
Inc.,” it is entitled to the protection of the Amchem Products’ insurance coverage 
retained by Union Carbide.  Henkel’s argument confuses Amchem No. 1 and 
Amchem No. 2.  As the corporate successor of Amchem No. 2, Henkel could 
defend and settle on behalf of that entity, but such action would entitle it only to 
the policy benefits acquired by Amchem No. 2.  Henkel is not the corporate 
successor to Amchem No. 1, and therefore had no right to settle or defend a suit 
against Amchem No. 1 without the latter’s consent. 
DISPOSITION 
The judgment of the Court of Appeal is reversed. 
 
 
 
 
 
 
 
KENNARD, J. 
WE CONCUR: 
GEORGE, C. J. 
BAXTER, J. 
WERDEGAR, J. 
BROWN, J. 
13 
ORTEGA, J.*    
                                             
 
* 
Associate Justice of the Court of Appeal, Second Appellate District, 
Division One, assigned by the Chief Justice pursuant to article VI, section 6 of the 
California Constitution. 
 
 
1
 
 
 
 
 
 
 
 
DISSENTING OPINION BY MORENO, J. 
 
I dissent.  The majority’s decision is contrary to well-settled law and 
provides an unfair windfall to insurers.  The majority’s holding allows an insurer 
to avoid its obligations on hosts of existing claims by refusing to consent to an 
assignment of policy benefits if the insured business has been sold.  That is not the 
law.  Instead, the rule is that the right to recover under a policy after a loss has 
occurred is an asset assignable separate from the policy itself.  After a loss, the 
policy benefits can be assigned without insurer consent, the no-assignment clause 
notwithstanding.  (Greco v. Oregon Mut. Fire Ins. Co. (1961) 191 Cal.App.2d 
674, 682-684 (Greco).) 
I. 
 
“While the general rule regards liability and indemnity policies as non-
assignable personal contracts, assignment is valid following occurrence of the loss 
insured against and is then regarded as chose in action rather than transfer of 
actual policy.”  (2 Couch on Insurance (3d ed. 1997) § 34:25, p. 34-21.)  This rule 
has been long-recognized by courts of this state.  Over 40 years ago, the Court of 
Appeal in Greco stated that “it is settled that the right to recover . . . after loss has 
occurred is assignable without [insurance] company consent.”  (Greco, supra, 191 
Cal.App.2d at p. 682, citing Comunale v. Traders & General Ins. Co. (1958) 50 
Cal.2d 654, 661-662 [“it is well settled that [a no-assignment clause] does not 
preclude the transfer of a cause of action for damages for breach of a contract”].)  
 
2
The holding in Greco was reaffirmed more recently by the Court of Appeal in 
Westoil Terminals Co. v. Harbor Ins. Co. (1999) 73 Cal.App.4th 634, 641 
(Westoil), which stated that Greco “allows for an exception to that rule [that an 
insurer must consent to assignment] where a loss has already occurred.”  (See also 
University of Judaism v. Transamerica Ins. Co. (1976) 61 Cal.App.3d 937, 942.) 
 
In addition, courts of other states have agreed that an insured can assign the 
right to recover for pretransfer injuries without the insurer’s consent, 
notwithstanding a no-assignment clause.  (See, e.g., Imperial Enterprises, Inc. v. 
Fireman’s Fund Ins. Co. (5th Cir. 1976) 535 F.2d 287, 293 [“the no-assignment 
clause should not be applied ritualistically and mechanically to forfeit coverage in 
these circumstances”]; Ocean Accident & Guar. Corp. v. Southwestern B. Tel. Co. 
(8th Cir. 1939) 100 F.2d 441, 444-445; B.S.B. Diversified Co. v. American 
Motorists Ins. (W.D.Wash. 1996) 947 F.Supp. 1476, 1479 [“Even with an anti-
assignment clause in an insurance policy, Washington law recognizes an 
assignment of coverage for an event or activities preceding assignment”]; Gopher 
Oil  v. American Hardware (Minn.Ct.App. 1999) 588 N.W.2d 756, 763 [“[w]hen 
events giving rise to an insurer’s liability have already occurred, the insurer’s risk 
is not increased by a change in the insured’s identity”].)   
The majority narrows this long-standing rule permitting assignment after 
the occurrence of a loss by stating that assignment is only valid when a claim 
against the policy has been “reduced to a sum of money due or to become due 
under the policy.”  (Maj. opn., ante, at p. 10.)  The majority concludes that the 
policy benefits at issue here “had not become an assignable chose in action” at the 
time of the transfer of the metallic chemicals business from Amchem No. 1 to 
Amchem No. 2, and therefore the right to recover under the policy could not be 
assigned without the consent of the insurers.  (Maj. opn., ante, at p. 10.)   
 
3
It is unclear from what source the majority’s novel conclusion is derived.  
The majority cites the Court of Appeal decisions in Westoil, supra, 73 Cal.App.4th 
at page 642, and Greco, supra, 191 Cal.App.2d at page 682, for the proposition 
that benefits under an insurance policy can be assigned notwithstanding a 
contractual provision barring the assignment of such benefits.   Yet the majority 
ignores the actual rule articulated in these cases, that an insured can assign policy 
benefits once the loss insured against has occurred.   
The majority’s abandonment of the general rule that “assignment is valid 
following occurrence of the loss insured against and is then regarded as chose in 
action rather than transfer of actual policy” seems predicated on a misconception 
of when a party has a “chose in action.”  (2 Couch on Insurance, supra, at p. 34-
21.)  The majority equates a chose in action with a claim that has been reduced to 
a sum of money due or to become due.  Under the majority’s view, it seems that a 
party must file a claim, and this claim must result in a legal finding of liability, for 
a chose in action to lie.   
A chose in action, however, is not necessarily a claim that has been reduced 
to a sum of money; it is much broader.  In California, a chose in action, also 
known as a “thing in action,” is statutorily defined as “a right to recover money or 
other personal property by a judicial proceeding.” (Civ. Code, § 953.)  (See 
Black’s Law Dict. (7th ed. 1999) p. 234 [defining “chose in action” as “[t]he right 
to bring an action to recover a debt, money, or thing”].)  A claim need not have 
been filed, or a judicial determination made, for there to be a chose in action.  
Instead, only a right to recover need exist.  (See, e.g., Krusi v. S.J. Amoroso 
Construction Co., Inc. (2000) 81 Cal.App.4th 995, 1003 [equating a chose in 
action with a right to bring a lawsuit].)  
As explained below, under the policies at issue in this case, a chose in 
action is established on the date of the injury, which is when the loss occurs.  
 
4
Therefore, the policy benefits become assignable without the consent of the 
insurer on the date of the injury, not, as the majority contends, when a claim for 
this injury has been reduced to a sum of money due or to become due.  
II. 
The insurance contracts at issue in this case are occurrence-based contracts.  
In Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645 
(Montrose), we held that for occurrence-based insurance contracts, “coverage is 
triggered by damage or injury occurring during the policy period.”  (Id. at p. 669.)  
After coverage is triggered, the insurer owes a duty of defense and indemnification 
under the policy upon the assertion of such claims.  It does not matter whether or 
not the claims are actually asserted during the policy period.  So long as the 
injury-causing event has occurred during the policy period, coverage is triggered, 
and a loss has occurred. 
 
In continuous injury cases, such as here, the insured’s actions result in 
claims of continuing or progressively deteriorating bodily injury or property 
damage.  As we said in Montrose, “bodily injury and property damage which is 
continuous or progressively deteriorating throughout several policy periods is 
potentially covered by all policies in effect during those periods.”  (Montrose, 
supra, 10 Cal.4th at p. 689.)  As we later explained in Aerojet-General Corp. v. 
Transport Indemnity Co. (1997) 17 Cal.4th 38, 57 (Aerojet), “[i]n other words, if 
specified harm is caused by an included occurrence and results, at least in part, 
within the policy period, it perdures to all points of time at which some such harm 
results thereafter.”   
In the present case, the claims under the policy are based on injuries to the 
Lockheed plaintiffs arising from exposure to metallic chemicals during the period 
between 1959 and 1976.  During this period, defendant insurers received 
premiums to insure against injuries caused by Amchem’s metallic chemical 
 
5
business.  Under our holding in Montrose, and reaffirmed in Aerojet, since the 
injuries occurred during the policy period, coverage for these injuries is triggered, 
and the loss insured against has occurred.  (Montrose, supra, 10 Cal.4th at p. 669.) 
Given this settled law, is unclear how the majority’s understanding that the 
policy benefits are assignable only after they are reduced to a monetary sum can 
be reconciled with Montrose.  (Montrose, supra, 10 Cal.4th at p. 669.)  The 
majority mentions Montrose only once, in characterizing Henkel’s argument.  (See 
maj. opn., ante, at p. 9.)  In determining that the policy benefits at issue in this 
case were not assignable because the claims had not been reduced to a monetary 
sum, the majority makes no mention of this controlling case.  Yet Montrose makes 
clear that an insurer’s coverage liability under an occurrence-based policy is 
determined as of the date of the claimant’s loss or injury, irrespective of when the 
claim is asserted and reduced to a monetary sum.  (Montrose, at p. 669.)  This rule 
is especially important in a continuous injury case, because often a claim for such 
an injury will not be filed until the policy period that was in effect at the time of 
the injury has ended.  
 
If the majority’s conclusion is applied beyond the assignment context, an 
insurer could avoid its obligations even if the policy benefits had not been 
transferred to another party.  For example, suppose an insurer covered Company A 
from 1990 until 2000.  In 1998, Plaintiff is injured by Company A.  In 2001, 
Plaintiff sues Company A to recover for her injury (and the suit is brought within 
the relevant statute of limitations period).  The insurer can argue that Plaintiff’s 
injury was not covered by the policy, since the claim was not reduced to a 
monetary sum, and therefore, according to the majority, the right to recover under 
the policy did not exist until after the policy had expired.     
Clearly, this result would contravene the purpose of an occurrence-based 
policy.  For these policies, coverage is established on the date of the event causing 
 
6
the injury.  (Montrose, supra, 10 Cal.4th at p. 669.)  Therefore, when the injury-
causing event occurs during the policy period, the loss has occurred, a chose in 
action is established, and the right to recover under that policy is assignable 
without insurer consent.  (Greco, supra, 191 Cal.App.2d at p. 682.)  
III. 
The rule permitting assignment of the right to recover for injuries occurring 
prior to the transfer is consistent with the purpose of a no-assignment clause.  In 
interpreting an insurance contract, courts “read[] the policy’s ‘language in context 
with regard to its intended function in the policy.’ ”  (Galanty v. Paul Revere Live 
Ins. Co. (2000) 23 Cal.4th 368, 374, citing Bank of the West v. Superior Court 
(1992) 2 Cal.4th 1254, 1264-1265.)  “The purpose of a no assignment clause is to 
protect the insurer from increased liability, and after events giving rise to the 
insurer’s liability have occurred, the insurer’s risk cannot be increased by a change 
in the insured’s identity.”  (3 Couch on Insurance (3d ed. 1995) § 35:7; id. (2002 
supp.) § 35:7, p. 2.)  Thus, allowing assignment of pretransfer benefits neither 
increases the insurer’s risk nor alters the insurer’s defense burden. 
The risk insured against does not increase because the insurer’s duty to 
defend and indemnify relates to an injury or damage which was suffered by the 
claimant prior to the assignment of benefits to a successor corporation.  As the 
court stated in Northern Ins. Co. of New York  v. Allied Mut. Ins. (9th Cir. 1992) 
955 F.2d 1353, 1358 (Northern Insurance): “[T]he rationale for honoring ‘no 
assignment’ clauses vanishes when liability arises from presale activity.  
[Citation.]  Insurers take account of the nature of the insured when issuing a 
policy.  Risk characteristics of the insured determine whether the insurers will 
provide coverage, and at what rate.  An assignment could alter drastically the 
insurer’s exposure depending on the nature of the new insured.  ‘No assignment’ 
clauses protect against any such unforeseen increase in risk.  When the loss occurs 
 
7
before the transfer, however, the characteristics of the successor are of little 
importance:  regardless of any transfer the insurer still covers only the risk it 
evaluated when it wrote the policy.”  (See also Westoil, supra, 73 Cal.App.4th at 
p. 642 [finding that where the loss occurred during the policy period and the 
assignment occurred after the loss, “any transfer of the policies . . . did not in any 
fashion increase the risk to respondents”].)   
 
In addition, the assignment of the right to recover for an injury occurring 
prior to the transfer does not necessarily change the nature of the burden on the 
insurer.  As the Northern Insurance court stated: “The nature of the risk, rather 
than the particular characteristics of the defendant, will have the greater effect on 
defense costs.  The extent and character of the defense will turn on the nature of 
the product itself and the attributes of the firm that manufactured the product.  
Aspects of the successor firm could affect the defense, but the shape of the defense 
will be determined largely by the characteristics of the risk originally insured.  
Admittedly, defense costs could balloon if the successor firm failed to cooperate in 
the defense.  Inasmuch as the successor firm was not a party to the original policy, 
the risk of noncooperation arguably increases.  Yet, the insurer is protected against 
this risk because it is freed of its defense obligation if the successor firm does not 
fulfill its duty to aid in the defense.”  (Northern Insurance, supra, 955 F.2d at p. 
1358.) 
 
The majority argues that the insurer may face an additional burden if the 
predecessor corporation still exists or can be revived, because an assignment of the 
right to recover for a presale injury could obligate the insurer to defend both the 
predecessor and the successor.  (See maj. opn., ante, at p. 10.)  This is not the case.  
If a predecessor corporation assigns its insurance policy rights to a successor 
corporation, the insurer’s legal obligations would run only to the successor.  (See 
Westoil, supra, 73 Cal.App.4th at p. 642.)  In addition, if there is any dispute about 
 
8
whether or not the right to recover under a policy was assigned to the successor, it 
can be resolved through a request for declaratory relief, which can be made before 
the insurance company fulfils any defense obligations.  Once the issue of 
assignment is determined, the insurer’s obligations will be clear and the insurer 
will not be forced to defend both parties.  Thus, an assignment of the right to 
recover for presale occurrences imposes no new contractual burden on an insurer; 
the insurer need only defend a single party, the assignee, and only with respect to a 
risk that it has already agreed, and been paid, to cover. 
IV. 
The majority’s holding allows insurers to secure a unfair windfall.  The 
Lockheed plaintiffs alleged that their injuries were caused by exposure to metallic 
chemicals manufactured by Amchem and occurred during the time in which the 
policies issued by defendant insurers were in effect.  The insurers in this case had 
received premiums to insure against these types of injuries.  Yet under the 
majority’s holding, the insurers will owe no coverage to any party for a risk they 
promised to insure against and for which they were paid an agreed premium. 
Moreover, the majority’s conclusion could restrict corporate restructuring, 
reorganization, merger, or sale.  If an insurance policy contains a no-assignment 
clause, an insured is barred from assigning the benefits of presale insurance 
coverage unless a claim has been reduced to a monetary sum, or unless the insurer 
had breached a duty at the time of assignment.  Under the majority’s decision, a 
predecessor company cannot assign the right to recover for presale injuries that 
have occurred, but for which no claim has yet been brought, without the consent 
of the insurer.  Yet under our prior case law, liability for presale injuries that have 
occurred, but for which no claim has been brought, can be transferred to the 
successor company.  (Ray v. Alad Corp. (1977) 19 Cal.3d 22, 28.)  Even if a 
successor corporation does not expressly assume the liabilities of its predecessor 
 
9
by contract, as in this case, the successor corporation is still subject to the risk of 
being sued for the pretransfer torts of a predecessor.  This is because liability can, 
in some cases, be imposed on the successor company as a matter of law, even in 
the face of a contractual provision excluding the assumption of liability for presale 
torts.  (See Ray, supra, 19 Cal.3d at p. 31.)   
A successor company would not be inclined to assume this risk of liability 
for the torts of a predecessor without also receiving the benefits of the 
predecessor’s insurance coverage for presale occurrences.  It is highly unlikely 
that a successor company would be able to obtain insurance coverage for injuries 
that have already occurred before the successor’s acquisition of the business.  
Therefore, the only realistic way in which a successor corporation can obtain 
insurance coverage for the torts of its predecessor is if the predecessor is able to 
assign its insurance coverage benefits to the successor.  The majority’s decision, 
however, allows insurance companies the ability to veto this necessary assignment 
of benefits by inserting a no-assignment clause into the insurance policy.  Such a 
rule will have the effect of inhibiting corporate reorganization or sale. 
V. 
Mergers, sales, and corporate restructurings are commonplace.  They 
should not, in themselves, serve to destroy an insured’s rights to coverage for 
activities that occurred prior to the merger, sale, or other transaction.  Yet this is 
what the majority concludes.  By allowing insurers to veto the assignment of 
benefits for which coverage has been triggered, but for which a claim has not yet 
been brought, insurers can retain the premiums paid by the insured while escaping 
their coverage obligations.   
An insurance contract is often an asymmetrical relationship:  an insured 
will have fully performed, paying premiums to the insurer, long before the insurer 
is called on to perform at all.  It makes no sense to say that any part of the 
 
10
insurer’s obligation is destroyed by transactions that have nothing to do with the 
insured-against events or the insurer’s obligations.  If the injuries for which a 
claim is brought occur during the policy period, the insurer is obliged to cover the 
injury, and the insured has a right to recover benefits from the insurer.  Any 
subsequent transfer of this right to recover has no effect on the insurer’s 
contractual obligations.  An insurer should not be able to evade these 
responsibilities by inserting a no-assignment clause into the insurance contract.  
Unlike the majority, I adhere to the rule, recognized by courts of this and other 
states, that an insured can assign the right to recover for injuries occurring prior to 
the transfer without obtaining the consent of the insurer.  Therefore, I dissent. 
 
 
 
 
 
 
 
 
MORENO, J. 
 
 
1
See next page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion Henkel Corporation v. Hartford Accident & Indemnity Company 
__________________________________________________________________________________ 
 
Unpublished Opinion 
Original Appeal 
Original Proceeding 
Review Granted XXX 88 Cal.App.4th 876 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S098242 
Date Filed: February 3, 2003 
__________________________________________________________________________________ 
 
Court: Superior 
County: Los Angeles 
Judge: S. James Otero 
 
__________________________________________________________________________________ 
 
Attorneys for Appellant: 
 
Bergman, Wedner & Dacey, Bergman & Dacey, Gregory M. Bergman and Robert M. Mason III for 
Plaintiff and Appellant. 
 
Brobeck, Phleger & Harrison, Thomas M. Peterson and Brett M. Schuman for Western Mac Arthur 
Company as Amicus Curiae on behalf of Plaintiff and Appellant. 
 
Wiley, Rein & Fielding, Laura A. Foggan, John C. Yang; Sinnott, Dito, Moura & Puebla and Randy M. 
Marmor for Insurance Environmental Litigation Association as Amicus Curiae on behalf of Plaintiff and 
Appellant. 
 
 
__________________________________________________________________________________ 
 
Attorneys for Respondent: 
 
Mendes & Mount and Charles Carluccio for Defendant and Respondent Lloyd’s of London. 
 
Kelley Drye & Warren, Cynthia S. Papsdorf, Laurie DeYoung, William C. Heck and Sarah L. Reid for 
Defendant and Respondent Rhone-Poulenc, Inc. 
 
Hogan & Hartson, Robert E. Postawko and Patrick F. Hofer for Defendant and Respondent Hartford 
Accident and Indemnity Company. 
 
Berman & Aiwasian and Alan S. Berman for Defendant and Respondent Century Indemnity Company. 
 
Hancock Rothert & Bunshoft, Paul J. Killion and Mikel A. Glavinovich for London Market Insurers as 
Amicus Curiae on behalf of Defendants and Respondents. 
 
 
2
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
Robert M. Mason III 
Bergman & Dacey 
10880 Wilshire Boulevard, #900 
Los Angeles, CA  90024 
(310) 470-6110 
 
William C. Heck 
Kelley Drye & Warren 
101 Park Avenue 
New York, New York  10178 
(212) 808-7800 
 
Patrick F. Hofer 
Hogan & Hartson 
55 13th Street N.W. 
Washington, D.C.  20004 
(202) 637-5600