On July 8, 2022, the Wisconsin Court of Appeals in Pepsi-Cola Metropolitan Bottling Company, Inc. v. Employers Insurance Company of Wausau, No. 2021AP635, delivered a significant victory for policyholders on the issue of anti-assignment clauses. Most general liability policies contain language that precludes the policyholder from assigning the policy without the insurer’s consent. These “anti-assignment” clauses generally prevent a company (“Old Co”) from assigning its insurance policies to a different company (“New Co”) and thereby exposing the insurer to a risk that the insurer had no chance to evaluate at the time of underwriting. Disputes have arisen, however, when insurers attempt to rely on anti-assignment clauses to avoid coverage for risks that fall within the clear language of their policies.
In Pepsi-Metro, Employers Insurance Company of Wausau (“Wausau”) issued general liability policies to Waukesha Foundry between 1963 and 1971. Through a series of complicated corporate transactions, Pepsi-Cola Metropolitan Bottling Company, Inc. (“Pepsi-Metro”) was assigned claims to insurance proceeds under the Waukesha Foundry policies. Pepsi-Metro eventually sought coverage under the policies for asbestos lawsuits brought against companies with ties to Waukesha Foundry. But Wausau denied any duty to defend or indemnify, arguing that the anti-assignment clause in its policies precluded 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 held on Summary Judgment that the issue was controlled by a prior Court of Appeals decision, Red Arrow Products Co., Inc. v. Employers Insurance of Wausau, 2000 WI App 36, 233 Wis. 2d 114, 607 N.W.2d 294. But the Pepsi-Metro Court disagreed with both Wausau and the Circuit Court’s reliance on Red Arrow. The Court held that the discussion in Red Arrow related to anti-assignment clauses was merely 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 Wis. 501, 5 N.W. 889 (1880), Alkan v. New Hampshire Ins. Co., 53 Wis. 136, 10 N.W. 91 (1881), and Max L. Bloom Co. v. U.S. Cas. Co., 191 Wis. 524, 210 N.W. 689 (1926).
Under the Dogge line of cases, enforcement of an anti-assignment clause violates public policy when a loss has already occurred. Because the Pepsi-Metro Court found that a loss occurred when the underlying plaintiff was exposed to asbestos, the assignments in Pepsi-Metro were post loss and therefore not subject to Wausau’s consent. The Pepsi-Metro Court expressly rejected Wausau’s effort to distinguish the Dogge line of cases because they involved first-party property policies, and not third-party liability policies.