1. Corporate Succession and the
Successful Transfer of Insurance Rights
http://delvacca.acc.com
INSURING SUCCESS

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3. Overview
• Rights Of Successors Under Insurance Policies
Issued to Predecessors
• Acquiring Company's Rights To Insurance Under
Its Own Policies For Pre-Acquisition Liabilities
Caused By Subsidiaries
• The Rights of Multiple, Competing Policyholders
• Drafting Considerations
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4. Assignment Of Insurance Rights
• Two Basic Considerations
• Was transfer of insurance rights effective?
• By Operation of Law
• By Contract
• Was insurer consent to the transfer required?
• Insurance policies typically contain “Anti-Assignment” clauses
providing as follows:
• “Assignment of the interest under this policy shall not bind the
company until its consent is endorsed thereon”
• Transfer by operation of law
• Waiver/Estoppel
• Assignment Of Policy Rights After Loss
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5. Successorship Issues: General Principles
• After a merger or acquisition, the insurance assets of a
predecessor generally transfer, along with liabilities, to the
surviving corporation
• Depending on the nature of the transaction and the timing of
the loss, an “Anti-Assignment” clause should not bar the
transfer of insurance assets in connection with a merger or
acquisition
• A successor corporation is generally not entitled to insurance
under its own insurance policies for loss arising out of the
predecessor’s pre-acquisition activities
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6. Successorship Issues: Hypothetical
• In 1995 Y Corp acquires the assets of X Corp and then merges
into Z Corp in 2000
• In 2005, Z Corp is sued by John Doe for injuries caused by
exposure to an X Corp product in 1994 and by Jane Doe for
injuries caused by exposure to a Y Corp product in 1999
• To which insurance policies should Z Corp look to for a defense
and indemnification against the claims asserted by John and
Jane Doe?
X Corp
Y Corp
Acquires
Assets of X
Corp
Y Corp Merges
Into Z Corp
1995 2000
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7. Successorship Issues: Corporate Merger
• General Rule: surviving corporation in a
corporate merger succeeds to all the rights,
benefits and liabilities of the predecessor
corporation, including insurance assets
• No increase in the insurer’s risk
• “Anti-Assignment” clause not enforceable
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8. Successorship Issues: Stock Purchase
• Generally, the acquisition of another company’s
stock entitles the acquiring company to access
the acquired company’s assets, including
insurance assets
• Simply a change in ownership – no increase in
the insurer’s risk
• Without any increase in the insurer’s risk, “anti-
assignment” clauses are generally unenforceable
in the context of a stock purchase
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9. Successorship Issues: Asset Acquisition
• Most troublesome form of transaction
• Unlike mergers and stock transactions, insurance
assets do not necessarily transfer by operation of
law
• Northern Ins. Co. v. Allied Mut. Ins. Co.
• Henkel Corp. v. Lloyd’s of London
• The transfer of insurance rights typically
governed by the terms Asset Purchase
Agreement
• General Refractories Co. v. Am. Mut. Ins. Co.
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10. Enforceability of Anti-Assignment Clauses
• Majority Rule:
• For loss that occurs before the transfer, insurance rights
are treated as a chose in action and are generally
assignable notwithstanding an “Anti-Assignment” clause
• Liability need not be reduced to a money judgment; the
occurrence of the injury alone creates an assignable chose in
action
• Egger v. Gulf Ins. Co.
• Minority Rule:
• Chose in action does not arise until a liability is reduced
to a money judgment
• Henkel Corp. v. Lloyd’s of London
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11. Coverage For After-Acquired Subsidiaries
• General Liability Policies typically define the
“Named Insured” as including affilaiated
subsidiaries “hereafter acquired”
• Generally, however, courts have refused to
extend coverage under an acquiring company’s
policies for subsidiaries acquired after the
expiration of the policy period
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12. Competition Among Multiple Policyholders
• Arises where, after corporate transaction such as
a spin-off, formerly aligned parties are now
competing for the same insurance assets
• Courts hold generally that insurers may pay
competing policyholders on a first come, first
served basis until available insurance is
exhausted
• A few courts have held that an insurer may not
favor one policyholder over another
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13. Drafting Considerations
• Whenever liabilities are being acquired, irrespective
of the form of the transaction, careful consideration
should be given to any insurance for those liabilities
• Particular attention should be paid to any long-tail
liabilities (asbestos, products and environmental
liabilities) of the company to be acquired and its
legacy insurance
• Every attempt should be made to acquire any
insurance assets associated with any liabilities being
acquired
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14. Drafting Considerations: Suggested Language
[Seller] hereby conveys to [Buyer] to the fullest extent
permissible under the law and under the relevant insurance
policies any claim, chose in action, or other right [Seller]
may have to insurance coverage under past and present
insurance policies insuring [Seller] with respect to the
liabilities or losses described above and to the extent such
liabilities and losses are assumed by [Buyer]. Further, in
response to any reasonable request for cooperation, [Seller]
agrees to cooperate with [Buyer] in any attempts by [Buyer]
to pursue such claim, chose in action or right against
[Seller’s] insurers, including, if necessary, bringing suit with
[Buyer] against the insurers in [Seller’s] name but at
[Buyer’s] expense.
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15. Contact Information
Lee M. Epstein, Esq.
Shareholder, Flaster/Greenberg PC
215.279.9390
lee.epstein@flastergreenberg.com
Michael F. Rettig, Esq.
Executive Vice President, General Counsel, Avantor Performance
Materials
610.573.2702
michael.rettig@avantormaterials.com
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