The APA included the transfer to Haskell Properties of “all of the rights of the Seller under all contracts, leases, commitments and other agreements which are used or held for use at, or relate to, the [Haskell property].” However, neither Haskell Properties nor General Ceramics ever sought or received consent to an assignment of any of the insurance policies that had been issued to General Ceramics, all of which contained consent-to-assignment clauses.

The APA also provided that Haskell Properties accepted possession of the property and “assume[d] and agree[d] to pay, honor and discharge any and all liabilities, obligations and commitments of Seller relating to or arising out of any Environmental Conditions … on, at, under or emanating from the [Haskell] Site.” In accordance with that obligation, in October 2000, Haskell Properties entered into an administrative consent order with the New Jersey Department of Environmental Protection to undertake the remediation of the property. It then began clean-up efforts and demanded coverage for its costs from the insurers that had issued policies to General Ceramics, each of which refused to honor Haskell Properties' claims.

Haskell Properties sued the insurers, claiming breach of contract, breach of duty of good faith and fair dealing, and breach of assignment. Haskell Properties alleged that there was substantial environmental contamination of the Haskell site that was present before it acquired the property and about which the insurers had been informed. In addition, Haskell Properties asserted it was the “successor in interest to 'all contracts, leases[,] commitments, and other agreements which are used or held for use at the [Haskell] Site'” under the APA and that, therefore, it “acquired all contracts for insurance formerly owned by” General Ceramics. Additionally, Haskell Properties claimed that the insurers had denied coverage and had refused to recognize the assignment of claims.

The insurers moved to dismiss, arguing that General Ceramics “did not assign any insurance policies to plaintiff”; that the insurers had never consented to the assignment of their polices; that Haskell Properties' claim for breach of the covenant of good faith and fair dealing could not be maintained because no contract existed between Haskell Properties and the insurers; and that a claim for “breach of assignment” was not a viable cause of action and thus failed as a matter of law.

The trial court dismissed the complaint filed against the insurers by Haskell Properties.

Among other things, the trial court found that the insurance policies that had been issued to General Ceramics could not be assigned because they were not a part of General Ceramics' bankruptcy estate. The trial court next found that, even if the insurance policies were part of General Ceramics' bankruptcy estate and the APA contained an assignment of the policies, Haskell Properties' claim still failed because the APA's assignment provision was not enforceable absent the insurers' consent to the assignment “and failure to plead this consent renders [p]laintiff's cause of action insufficient as a matter of law.”

Next, the trial court found that, although an insured could assign a claim against its insurer without consent, the law did “not recognize the assignment of an inchoate claim from a casualty insurance policy of a bankrupt debtor” unless the claim had “matur[ed][to] the right to payment” at the time of the assignment.

Haskell Properties appealed.

The Appellate Court's Decision

The New Jersey appellate court affirmed in part and reversed in part.

In its decision, the appellate court first ruled that the trial court had erred in finding that General Ceramics' insurance policies had not become part of its bankruptcy estate, observing that the federal Bankruptcy Code “expressly contemplates the inclusion of debtor insurance policies in the bankruptcy estate.”

Next, the appellate court explained that, under the Bankruptcy Code, the bankruptcy court could approve the sale of a debtor's assets subject to state law restrictions imposed on the property. In New Jersey, the appellate court continued, the law excused an insurer's obligation to cover losses that occurred after a policy was assigned in contravention of a consent-to-assignment clause. The appellate court said that in this case, however, General Ceramics' claims for coverage under the policies related to occurrences that happened before the transfer to Haskell Properties and, therefore, they were “freely assignable by” General Ceramics to the extent the policies were “occurrence policies” – even if the policies themselves were not assignable.

The appellate court next decided that the APA contained an assignment of General Ceramics' rights under the policies and that Haskell Properties had properly asserted a cause of action against the insurers for breach of contract by a successor in interest. It stated, however, that Haskell Properties could not assert claims against the insurers for occurrences arising after the sale of the property that were unrelated to the contamination that existed prior to the sale.

Accordingly, the appellate court affirmed the trial court's dismissal of Haskell Properties' complaint to the extent it claimed breaches of contract and of the covenant of good faith and fair dealing with respect to damages arising from contamination that occurred after July 20, 2000, if any, and that were unrelated to the pre-sale occurrences. It also affirmed the dismissal of Haskell Properties' claim for breach of assignment, finding that it was subsumed by its breach of contract claim. The appellate court reversed the trial court's decisions as to Haskell Properties' claims for breach of contract and of the covenant of good faith and fair dealing for failure to provide coverage for occurrences that predated the transfer from General Ceramics to Haskell Properties.

The case is Haskell Properties, LLC v. American Ins. Co. (N.J. Ct.App. Aug. 4, 2016). Attorneys involved include: Eric E. Tomaszewski argued the cause for appellant (Golub Isabel & Cervino, P.C., attorneys; Mr. Tomaszewski, of counsel; Joseph A. Ferriero, on the briefs); John Maloney argued the cause for respondent St. Paul Fire & Marine Insurance Company (Graham Curtin, PA, attorneys; Mr. Maloney and Stephen V. Gimigliano, on the brief); Michael E. Buckley argued the cause for respondents The American Insurance Company and Fireman's Fund Insurance Company (Rivkin Radler LLP, attorneys, join in the brief of respondent St. Paul Fire & Marine Insurance Company); Evan S. Neadel argued the cause for respondent First State Insurance Company (Becker Meisel, LLC, Wayne S. Karbal (Karbal, Cohen, Economou, Silk & Dunne, LLC), of the Illinois bar, admitted pro hac vice, and Gerald E. Ziebell (Karbal, Cohen, Economou, Silk & Dunne, LLC), of the Illinois bar, admitted pro hac vice, attorneys, join in the brief of respondent St. Paul Fire & Marine Insurance Company); Christopher P. Ferragamo (Jackson & Campbell, P.C.) of the District of Columbia bar, admitted pro hac vice, argued the cause for respondent Great American Insurance Company f/k/a American National Fire Insurance Company (DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis, Lehrer & Flaum, P.C., and Mr. Ferragamo, attorneys, join in the brief of respondent St. Paul Fire & Marine Insurance Company).