Buyers Beware! California Confounds Corporate Policyholders

Are you a corporate
risk manager or
corporate counsel for
a company with any connection
to California? Might
your company buy or sell
another entity in California?
If so, you should “beware” of the California
Supreme Court’s recent decision in Henkel
Corporation v. Hartford Accident & Indemnity Co., et al.,
129 Cal. Rptr. 2d 828 (Cal. 2003). Henkel represents
an extreme departure from California law with
respect to insurance rights for pre-transaction liabilities.
Under Henkel, insurance companies will argue
that bought and paid for occurrence-based liability
insurance may be eliminated by common changes
in corporate form even without any change in risk.