Source: http://www.traderplanet.com, November 11, 2016
Travelers Casualty Surety Co. and Continental Casualty Co. are among several insurers asking the New Jersey Supreme Court to reverse a lower court ruling that could result in them covering as much as $500 million in environmental cleanup claims costs as part of a settlement agreement reached by Givaudan Fragrances Corp.
The insurers are appealing a unanimous Superior Court ruling, which said Givaudan Fragrances could seek insurance coverage that had been assigned to it in connection with claims related to environmental damage the company allegedly caused to the Passaic River and Newark Bay from the operation of the Givaudan Corp. facility in Clifton, New Jersey. At stake in the case is whether the court will allow insurance policies to be freely assigned to parties that were not in existence at the time the policy was issued.
In 2004, the Environmental Protection Agency notified Givaudan Fragrances it was potentially liable for hazardous discharges at the Clifton site. In 2005, two companies responding to a state Department of Environmental Protection action filed third-party claims against 300 entities including Givaudan Fragrances. The DEP filed suit against Givaudan Fragrances for damages at the site in 2006. Givaudan Fragrances said it was insured under the policies issued through 1986 to Givaudan Corp., the corporate predecessor to Givaudan Flavors Corp., of which Givaudan Fragrances is an affiliate. The insurers won at the trial court level and the Superior Court reversed it in August 2015, prompting the appeal to the Supreme Court.
Daren McNally, counsel for Travelers Casualty Surety, and Patrick Hofer, counsel for Continental Casualty, were among the lead attorneys for the insurers when oral argument in the case was heard Nov. 9.
A brief filed by the insurers said any contract involving a relationship of personal confidence cannot be assigned to a third party. The lower court ruling nullified this and created a new rule that would allow a policyholder to assign insurance policies to a new entity and without insurer consent, which the insurer brief said would be a violation of contract terms. In doing so, it misconstrues an assignment of all rights to insurance coverage, including coverage for prospective and uncertain liabilities as an assignment of an already-accrued claim for money due, which plainly it was not the insurers brief said.
The insurers argue the reason Givaudan lacks policies to cover liability is because the company and its corporate sisters wanted it that way. The company was established as a corporate landing pad for the environmental liabilities of the insured, and was set up specifically to have no insurance for those liabilities so it could claim losses to offset and avoid taxes, they claimed. Having benefited from that arrangement, it seeks to benefit again by asking the courts of New Jersey to upend New Jersey law and to approve a wholesale policy assignment resulting in a windfall recovery for liabilities it never intended would be insured, the brief said.
The response brief filed by Givaudan Fragrances said the lower court correctly applied precedent, which said insurers cannot avoid their coverage obligations just because the name of the party to whom they must make out their payment check has changed. The brief said more than 25 years ago, the insurers promised to provide liability coverage for injuries or damages caused by Givaudan Corp. The liabilities Givaudan Fragrances currently faces, the brief said, fall precisely within the terms of insurance policies sold by petitioners covering policy periods prior to 1986.
After the Superior Court ruling was made, the law firm of Kasowitz, Benson, Torres and Friedman representing Givaudan, said the ruling was a landmark victory for corporate policyholders, which protected an insured’s right to reorganize its business without risking the loss of historic insurance coverage. The ruling allowed Givaudan to continue to seek the $500 million in insurance coverage that had been assigned to it. Insurers refused to provide coverage, the company said, due to a corporate restructuring that had no impact on the risks faced by Givaudan Fragrances and instead only will have the effect of changing the name on the ultimate payment check from Givaudan Corp. to Givaudan Fragrances.