Disagreeing with Hawaii Supreme Court, South Carolina Holds Post-Lost Assignment Valid

    The South Carolina Supreme Court held that a post-loss assignment of rights under the policy was valid even though consent of the insurer was not requested. PCS Nitrogen, Inc. v. Cont’l Cas. Co., 2022 S.C. LEIXS 54 (S.C. April 13, 2022).

    In 1966, Columbia Nitrogen Corporation (Old CNC) began operating a fertilizer manufacture site. The insurers issued primary and excess liability policies to Old CNC with policy periods ranging form 1966 to 1985. The policies included an anti-assignment clause which read,”Assignment of interest under this policy shall not bind the company until its consent is endorsed hereon.”

    Old CNC ceased all fertilizer production at the site in 1972 and sold the site in 1985. In 1986, Old CNC sold assets related to its fertiliser production business to CNC Corp. (New CNC). New CNC assumed some of Old CNC’s liability, including those related to Old CNC’s fertilizer production business. Old CNC dissolved. In 1997, New CNC became PCS Nitrogen (PCS) through mergers. 

    In 2005, Ashley II of Charleston, LLC, then owner of the site, filed a declaratory judgment action against PCS alleging PCS was liable under CERCLA for environmental remediation at the site. Ashley II alleged Old CNC contaminated the site and that PCS was liable for remediation. The federal district court found PCS liable under CERCLA.

    In this case, PCS sought a declaration that the insurers were obligated to provide coverage for its defense costs and environmental liabilities stemming from the CERCLA litigation. PCS contended that the insurers’ consent to the assignment was not required because the assignment took place after the loss occurred. The circuit court granted summary judgment to the insurers, ruling the assignment was unenforceable as a matter of law because Old CNC did not secure the insurers’ consent. The circuit court ruled that the assigment was not a post-loss assignment because, at the time of the assignment, no judgment had been entered against Old CNC. 

    On appeal, the Supreme Court noted that the majority rule was that such a provision did not bar an assignment made after a loss. The insurers relied upon decisions from Oregon and Hawaii (Del Monte Fresh Produce (Hawaii), Inc. v. Fireman’s Fund Ins. Co., 117 Haw. 357 (2007). The South Carolina court refused to follow Hawaii and Oregon, and adopted the post-loss exception. Insurer consent was not required for an assignment of liability insurance coverage rights made after a loss. 

    The court next considered when the loss occurred and whether it was post-assignment. Again, the court followed the majority of jurisdictional and held the “loss” in the context of the post-loss exception, was synonymous with the “occurrence.” In this case, the loss occurred before Old CNC executed the assignment in 1986.

    The court also agreed with PCS’s public policy argument that relieving the insurers of their contractual duty to provide coverage would give the insurers a windfall.