(Article from Insurance Law Alert, July/August 2018)
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The Delaware Supreme Court ruled that Texas law governs an asbestos-related coverage dispute and that an anti-assignment clause precludes coverage for the losses at issue. Travelers Indem. Co. v. CNH Indus. Am., LLC, 2018 WL 3434562 (Del. July 16, 2018).
Tenneco, a Texas-based oil and gas company, acquired J.I. Case, a Wisconsin corporation. After the acquisition, Tenneco added Case to its insurance policies, which were part of a program that covered Tenneco and its wholly-owned subsidiaries located in various states. Thereafter, Case assigned certain assets and liabilities to CNH Industrial America, a Delaware company with its principal place of business in Wisconsin. CNH sued Travelers and other insurers for defense and indemnity for asbestos-related claims against it, claiming that insurance coverage was part of the assignment.
A Delaware superior court concluded that Wisconsin law governed the dispute, based largely on the insured’s principal place of business. The court held that because Case, rather than Tenneco, was the relevant party, Wisconsin had the most significant relationship to the parties and the dispute. Applying Wisconsin law, the court held that the policies were validly assigned to CNH, notwithstanding Travelers’ lack of consent. The Delaware Supreme Court reversed.
The Delaware Supreme Court ruled that when an insurance program covers risks across jurisdictions, the choice of law analysis should focus on the place of contracting, negotiation and performance of the contracts, as well as the location of the business of the parties involved. Applying these factors, the court held that Texas law governed the dispute because Tenneco (not Case) contracted with Travelers and because the contracts were negotiated and managed in Texas. In so ruling, the court noted that applying the law of the locations of each Tenneco subsidiary or claim would result in inconsistency and unpredictability in contract interpretation.
The Delaware Supreme Court also rejected CNH’s assertion that applying Texas law violated Delaware public policy, stating that unlike in Texas, “[t]here is no established Delaware law that anti-assignment provisions in insurance contracts are against public policy.”