Wisconsin intermediate appellate court held that the carrier’s consent in an anti-assignment policy does not apply to an assignment of coverage for pre-closing losses.
M&A Stories
September 27, 2022
Introduction
When purchasing a business, acquiring the seller’s general liability insurance policy is often part of the deal. However, these policies typically have an anti-assignment provision that requires the carrier’s consent for any policy assignment.
Summary
In a recent case in Wisconsin, an intermediate appellate court ruled that the carrier’s consent requirement for policy assignment does not apply to coverage for pre-closing losses, such as asbestos claims. This decision aligns with the majority of state jurisdictions.
Details
The Case: The case involved the acquisition of two foundry companies, including their liability insurance policies from 1963 to 1971. The buyer was later sued by a claimant with mesothelioma, who alleged that the foundry’s pump products caused their asbestos-related injury. The buyer argued that the original seller’s insurance policies covered the loss.
The Carrier’s Argument: The insurance carrier denied coverage, citing the anti-assignment clause in the policies that prohibited assignment without their consent. The buyer filed a lawsuit against the carrier in a Wisconsin state court, but the trial court sided with the carrier.
The Appellate Court’s Decision: The buyer appealed to an intermediate appellate court, which ruled in favor of the buyer. The court determined that the anti-assignment clause aimed to exclude the carrier from covering risks associated with the buyer’s post-closing operations, as the carrier had not been able to assess the buyer’s underwriting. However, in this case, the loss occurred before the asset sale and policy assignment. Denying the assignment of policy benefits for a pre-closing loss would go against public policy. Consequently, the court held that the anti-assignment clause did not apply to pre-closing losses.
See Pepsi-Cola Metropolitan Bottling Company, Inc. v. Employers Insurance Company Of Wausau, Appeal No. 2021AP635, Court of Appeals of Wisconsin, District II, (July 8, 2022).
Conclusion
The Wisconsin intermediate appellate court’s ruling supports the prevailing stance in most state jurisdictions, allowing buyers to obtain coverage for pre-closing losses, even if the carrier did not give consent to the policy assignment.
By John McCauley: I write about recent legal problems of buyer and sellers of small businesses.
Email: jmccauley@mk-law.com
Profile: http://www.martindale.com/John-B-McCauley/176725-lawyer.htm
Telephone: 714 273-6291
Check out my book: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles
Legal Disclaimer
The blogs on this website are provided as a resource for general information for the public. The information on these web pages is not intended to serve as legal advice or as a guarantee, warranty or prediction regarding the outcome of any particular legal matter. The information on these web pages is subject to change at any time and may be incomplete and/or may contain errors. You should not rely on these pages without first consulting a qualified attorney.
Recent Comments