Companies that owned the assets of an industrial blast machine can't seek coverage from the insurers who issued liability policies for previous owners of the machine, the Indiana Supreme Court ruled yesterday.

At issue in Travelers Casualty and Surety Co., et al. v. United States Filter Corp., et al., No. 49S02-0712-CV-596, is whether or not United States Filter Corp. and other companies that at one time held the assets of the Wheelabrator blast machine had the liability insurance coverage rights passed to them through the same corporate transactions that brought them the blast machine assets.

The trial court agreed with U.S. Filter and the other companies that the rights passed to the current holders of the assets, granting them summary judgment.

But the Supreme Court reversed the trial court and directed judgment for the insurers. Each of the insurance policies involved in this case contained a provision barring assignment of the policy without the insurer's consent. Even though the company holding the assets to the blast machine may have written an insurance agreement to transfer the policy, the insurers never consented to make the assignment valid, wrote Chief Justice Randall T. Shepard.

The asset holders of the blast machine argue that certain claims under the policies did transfer to them as choses in action despite consent-to-agreement provisions. Courts have often recognized an exception to the enforcement of consent-to-agreement clauses for assignments made after a loss has occurred, wrote the chief justice, because after a loss occurs, the indemnity policy is a vested claim against the insurer that can be freely assigned or sold like any other chose in action.

Under the occurrence-based comprehensive general liability policies, the question in the instant case is whether occurred - but not yet reported - losses form the basis of choses in action that would transfer the insurance policies.

The high court read the consent-to-assignment provisions in the policies to apply to coverage transfers of any scope "because it is hard to see a practical difference between the assignment of the entire policy and the assignment of a single claim," wrote the chief justice. A chose in action is only transferable in these circumstances if it is assigned at a moment when the policyholder could have brought its own action against the insurer for coverage; under the liability policies in this case, that moment doesn't happen until a claim is made against the insured. None of the parties in this case contend anyone knew of the alleged injuries from the silica exposure when the transactions took place transferring the blast machine's assets, wrote Chief Justice Shepard. As a result, the companies weren't entitled to coverage under their predecessors' insurance policies.