May 25, 2023Client Alert

Wisconsin Supreme Court Affirms Longstanding Law Regarding the Limited Enforceability of Anti-Assignment Clauses in Insurance Contracts

On May 24, 2023, the Wisconsin Supreme Court in Pepsi-Cola Metropolitan Bottling Company, Inc. v. Employers Insurance Company of Wausau, Case No. 2021AP000635 upheld longstanding Wisconsin law regarding the limited enforceability of anti-assignment clauses in insurance contracts. Although the Court’s opinion upheld longstanding Wisconsin law, it took a rather unusual route to get there.  The Court issued a PER CURIAM opinion affirming the decision of the Court of Appeals below because no three justices could reach agreement to either affirm, reverse, or affirm in part and reverse in part the Court of Appeals’ decision.  Neither Justice Hagedorn nor Justice Ziegler participated in the decision.

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 Court of Appeals rejected Wausau’s argument, holding that 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.

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