On July 8, 2022, the Wisconsin Court of Appeals in Pepsi-Cola Metropolitan Bottling Company, Inc. v. Wausau Employers Insurance Company, No. 2021AP635, brought a significant victory to policyholders on the issue of non-transferability clauses. Most general liability policies contain language that prevents the policyholder from assigning the policy without the consent of the insurer. These “anti-assignment” clauses generally prevent a company (“Old Co”) from assigning its insurance policies to another company (“New Co”) and thus exposing the insurer to a risk that the insurer may not had no chance of evaluating at the time of subscription. Disputes have arisen, however, when insurers have attempted to rely on non-assignability clauses to avoid covering risks that fall within the plain language of their policies.
In Pepsi-Metro, Employers Insurance Company of Wausau (“Wausau”) issued general liability insurance policies to Waukesha Foundry between 1963 and 1971. In a series of complex business transactions, Pepsi-Cola Metropolitan Bottling Company, Inc. (“Pepsi-Metro”) has been awarded insurance proceeds claims under the Waukesha Foundry policies. Pepsi-Metro eventually sought coverage under the policies for asbestos lawsuits brought against companies related to Waukesha Foundry. But Wausau denied any duty to defend or indemnify, arguing that the anti-assignment clause in its policies excluded coverage because Wausau never consented to the assignment of its policies to any of Waukesha Foundry’s successors.
The Circuit Court agreed with Wausau and ruled on summary judgment that the matter was controlled by an earlier decision of the Court of Appeals, Red Arrow Products Co., Inc. v. Wausau Employer Insurance2000 WI App 36, 233 Wis. 2d 114, 607 NW2d 294. But the Pepsi-Metro The Court disagreed with Wausau and the Circuit Court’s decision on Red Arrow. The Court held that the discussion in Red Arrow related to anti-assignment clauses were just dicta, and the issue was controlled by three Wisconsin Supreme Court cases dating back to the late 1800s: Dogge v. Northwestern Nat’l Ins. Co.49 Wisconsin 501, 5 NW 889 (1880), Alkan v. New Hampshire Ins. Co., 53 Wisconsin 136, 10 NW 91 (1881), and Max L. Bloom Co. v. US Case. Co., 191 Wisconsin 524, 210 NW 689 (1926).
Under the Dog In line with business, the execution of a non-transferability clause violates public order when a disaster has already occurred. Because the Pepsi-Metro The court found that a loss occurred when the underlying plaintiff was exposed to asbestos, the disposals in Pepsi-Metro were subsequent to the loss and were therefore not subject to Wausau’s consent. The Pepsi-Metro Court expressly rejected Wausau’s effort to distinguish the Dog series of cases because they were first party property policies and not liability policies.