Publications

(Article from Insurance Law Alert, April 2016)

For more information, please visit the Insurance Law Alert Resource Center.

A South Carolina court rejected a successor entity’s attempt to obtain insurance coverage issued to a predecessor company, finding that the insurer did not consent to the assignment and that limited exceptions to the consent requirement did not apply.  PCS Nitrogen, Inc. v. Continental Casualty Co., C.A. No. 11-CP-10-387 (S.C. Ct. Common Pleas Mar. 23, 2016).

PCS Nitrogen sought coverage for environmental contamination claims under liability policies issued to Columbia Nitrogen Corporation (“CNC”).  Insurers had issued primary and umbrella policies to CNC, which expressly provided that “[a]ssignment of interest under this policy shall not bind [the insurer] until its consent is endorsed hereon.”  Through a series of acquisitions, asset purchases and mergers, PCS Nitrogen became the “successor-by-merger” to some (but not all) of the original assets and liabilities of CNC.  PCS Nitrogen argued that it received a valid assignment of CNC’s policies as part of one of the corporate transactions which purported to transfer CNC’s insurance rights and benefits.  PCS Nitrogen further argued that insurer consent was not required because under South Carolina law, anti-assignment clauses do not apply to post-loss assignments.  The court disagreed and ruled in favor of the insurers.

The court ruled that CNC’s insurance policies were never assigned to PCS Nitrogen.  In so ruling, the court  noted that the transaction documents purported only to transfer “benefits and proceeds” rather than the policies themselves, and that in any event, any such transfer was contingent on insurer consent.  The court rejected PCS Nitrogen’s post-loss assignment argument, explaining that South Carolina strictly limits assignments without consent to cases where a chose in action (i.e., a current obligation to pay a sum of money) exists.  The court held that a chose in action did not exist here because there had been no judgment or settlement against CNC.  Finally, the court also rejected the argument that PCS Nitrogen was entitled to CNC’s insurance rights as a corporate successor, finding no factual support for that assertion.