NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
PER CURIAM.
Plaintiff Haskell Properties, LLC appeals from the Law Division's order dismissing its complaint, which sought damages arising from defendants'/insurers' failure to provide coverage for the cleanup of a contaminated property plaintiff acquired in an asset sale approved by the bankruptcy court. According to plaintiff, that sale included the assignment of insurance policies issued by defendants. The Law Division dismissed the complaint because (1) the asset purchase agreement (APA) could not have included defendants' policies as they were not part of the bankrupt's estate; (2) the APA did not specifically refer to the insurance policies and therefore did not evince an intent to assign the policies; (3) any purported assignment was invalid because plaintiff did not secure the consent of any insurer, as the policies required, and insurance policies are personal and cannot be assigned absent consent; and (4) the claims arising from the property's clean-up had not yet ripened, such that the purported assignment constituted the transfer of a chose in action.2
On appeal, plaintiff advances two arguments: the court improperly dismissed its complaint because Section 541(a) of the Bankruptcy Code, 11 U.S.C.A. § 541(a), permitted the insurance policies issued by defendants to plaintiff's vendor to be transferred to plaintiff without defendants' consent; and, in the alternative, plaintiff was the successor in interest to its vendor's chose in action, which was freely assignable, and was therefore entitled to relief against defendants. Defendants contend the court properly dismissed plaintiff's complaint because the APA did not expressly refer to the assignment of any specific insurance policies or the prior landowner's rights thereunder, while expressly imposing on plaintiff liability for any environmental concerns, and because their policies' consent-to-assignment clauses barred the imposition upon them of any liability. In addition, they argue plaintiff could not pursue a claim arising from its vendor's chose in action because its claim was not reduced to a sum certain. Defendants also argue that, even if plaintiff's "implied assignment" theory was valid, since plaintiff's vendor had already sold other assets in California six months earlier, the purchaser of those assets would have acquired the insurance policies.
We have considered the parties' arguments in light of our review of the record and the applicable legal principles. We affirm the trial court's determination that the policies were not assignable, but reverse its decision regarding the assignment of the vendor's claims against defendants and remand for further proceedings.
The facts gleaned from plaintiff's complaint and the motion record can be summarized as follows. On October 18, 1996, plaintiff's vendor, General Ceramics, Inc. (the Seller), having previously purchased insurance from defendants that provided coverage for remediation of contaminated real property it owned in Haskell, notified defendants of environmental claims arising from that property's contamination.3 The Seller began to remediate the property before filing a petition for Chapter 11 relief in the United States Bankruptcy Court in March 1999.
While the Seller's petition was pending, it sold land it owned in California and the Haskell property to two different purchasers with the bankruptcy court's approval, in accordance with 11 U.S.C.A. § 363 (b) and (f). The Seller sold the California property to a third party in 1999 and, on June 28, 2000, entered into the APA with plaintiff that included the Haskell property. On July 20, 2000, the bankruptcy court authorized the sale to plaintiff "free and clear of all liens, claims, encumbrances and other interests."
The APA included the transfer to plaintiff 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 plaintiff nor the Seller ever sought or received consent to an assignment of any of defendants' policies, which contained consent-to-assignment clauses.
The APA also provided that plaintiff accepted possession of the property and "assume[s] and agree[s] 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, plaintiff 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 defendants, each of which refused to honor plaintiff's claims.
On July 11, 2013, plaintiff filed its complaint against defendants,4 claiming breach of contract, breach of duty of good faith and fair dealing, and breach of assignment. Plaintiff alleged there was substantial environmental contamination of the Haskell site, which was present before it acquired the property and about which defendants had been informed. In addition, plaintiff 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 "therefore acquired all contracts for insurance formerly owned by" the Seller. Additionally, plaintiff claimed defendants denied coverage and refused to recognize the assignment of claims.
Defendants moved to dismiss plaintiff's complaint for failure to state a claim upon which relief could be granted, R. 4:6-2(e), arguing that the Seller "did not assign any insurance policies to plaintiff"; that defendants never consented to the assignment of their polices, and the requirement for consent applied because "no chose in action existed"; that plaintiff's claim for breach of the covenant of good faith and fair dealing could not be maintained because no contract existed between plaintiff and defendants; and that a "claim for `breach of assignment' is not a viable cause of action and thus fails as a matter of law." Plaintiff opposed the motion, arguing that the motion was premature, that the assignment was valid, and that, even if it was not, "a valid assignment of the loss . . . occurred."5
The court considered counsels' oral arguments on September 19, 2014, and, on October 3, 2014, issued an order dismissing the complaint and a written decision expressing its reasons for doing so.
In its decision, the court reviewed the factual background of the subject transaction and plaintiff's claims. It also recited the considerations to be applied in deciding a motion to dismiss pursuant to Rule 4:6-2(e). The court first found the insurance policies could not be assigned because they were not a part of the Seller's bankruptcy estate. According to the decision, only "certain life insurance policies [can be] properly considered the property of a bankruptcy estate."6 (emphasis omitted). The court stated that, because the property could not "lawfully be assigned, even broad statements such as `all contracts' do not present sufficient evidence demonstrating an intent to assign, and must fail as a matter of law."
The trial court next found that, even if the insurance policies were part of the Seller's estate in bankruptcy and the APA contained an assignment of the policies, plaintiff's claim still failed because the APA's assignment provision was not enforceable absent defendants' consent to the assignment "and failure to plead this consent renders [p]laintiff's cause of action insufficient as a matter of law."
Turning to defendants' next contention, the court found that, although an insured can assign a claim against its insurer without consent, "the law does not recognize the assignment of an inchoate claim from a casualty insurance policy of a bankrupt debtor" unless the claim has "matur[ed] [to] the right to payment" at the time of the assignment. Finally, the court found that, because plaintiff's "claim for breach of an implied covenant [of good faith and fair dealing] must presuppose the existence of a binding contract, [and] no such contractual agreement exists[] and no other agreement [wa]s alleged which might support the existence of an implied covenant," the claim was unsustainable.
The court entered its order dismissing the complaint, and this appeal followed.
We review de novo the challenged order that dismissed plaintiff's complaint for failure to state a cause of action, applying the same legal standard as the trial court. See NL Indus., Inc. v. State, 442 N.J.Super. 403, 405 (App. Div. 2015). A motion to dismiss for failure to state a claim must be denied if "a cause of action is suggested' by the facts." Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989) (citation omitted). On a motion to dismiss pursuant to Rule 4:6-2(e), the court must treat all factual allegations as true, giving the plaintiff the benefit of "every reasonable inference of fact," and must carefully examine those allegations "to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement of claim." Ibid. After a thorough examination, should the court determine that such allegations fail to state a claim upon which relief can be granted, the court must dismiss the claim. Ibid.
We first address plaintiff's contention that the court erred in finding that the Seller's insurance policies did not become part of its bankruptcy estate. Defendants do not dispute plaintiff's contention, and we agree. "The Bankruptcy Code expressly contemplates the inclusion of debtor insurance policies in the bankruptcy estate." In re Fed.-Mogul Glob., Inc., 684 F.3d 355, 366 (3d Cir. 2012) (quoting In re Combustion Eng'g, Inc., 391 F.3d 190, 219 n.27 (3d Cir. 2004) (citing 11 U.S.C.A. § 541(c)(1))). It also "expressly includes `causes of action' as property interests included in the estate." Integrated Sols., Inc. v. Serv. Support Specialties, Inc., 124 F.3d 487, 491 (3d Cir. 1997). Accordingly, the trial court's conclusion to the contrary was wrong.
Having determined that the policies were part of the Seller's bankruptcy estate, we turn to the trial court's conclusion that they could not be assigned by the Seller without defendants' consent. Relying on 11 U.S.C.A. § 541(c)(1), plaintiff argues "the Bankruptcy Code effectively preempts any contractual provision that purports to limit or restrict the rights of the debtor to transfer or assign its interests in bankruptcy." Defendants claim that the Bankruptcy Code does not invalidate the consent-to-assignment clauses, preempt contractual rights, or invalidate prohibitions on assignment.
Plaintiff's reliance on Section 541 is misplaced. That section of the Bankruptcy Code defines property that is considered part of the debtor's estate. So, for example, if a debtor was a party to a lease that contained an anti-assignment clause, the provision would not be triggered as a matter of law by the lease's transfer to the bankruptcy estate. See 11 U.S.C.A. § 541(c)(1)(a) ("[A]n interest of the debtor in property becomes property of the estate . . . notwithstanding any provision in an agreement, transfer instrument, or applicable nonbankruptcy law . . . that restricts or conditions transfer of such interest by the debtor . . ."). "Section 541 effectively preempts any contractual provision that purports to limit or restrict the rights of a debtor to transfer or assigns [sic] its interests in bankruptcy." In re Combustion Eng'g, supra, 391 F.3d at 218 n.27 (citing 11 U.S.C.A. § 541(c)(1)). It does not govern transfers to third parties from the estate approved by the bankruptcy court under 11 U.S.C.A. § 363,7 as was the case here. There is no provision under Section 363 that "authorizes the trustee to sell property in violation of state law transfer restrictions." Integrated Sols., supra, 124 F.3d at 493.
As to sales made by the trustee,
unless federal bankruptcy law has specifically preempted a state law restriction imposed on property of the estate,8 the trustee's rights in the property are limited to only those rights that the debtor possessed pre-petition. . . . [T]he trustee does not have greater rights in the property of the estate than the debtor had before filing for bankruptcy. [Id. at 492-93 (invalidating a trustee's sale of a debtor's prejudgment tort claim in contravention of New Jersey law).]
In New Jersey, the law excuses an insurer's obligation to cover losses that occur after a policy is assigned in contravention of a consent-to-assignment clause. See Givaudan Fragrances Corp. v. Aetna Cas. & Sur. Co., 442 N.J.Super. 28, 36 (App. Div.), certif. granted, 223 N.J. 405 (2015). Therefore, if an insurer does not consent to the assignment of a policy, "[w]here the policy prohibits an assignment, an assignment without the insurer's consent invalidates it" unless the assignment occurs after the loss. Elat, Inc. v. Aetna Cas. & Sur. Co., 280 N.J.Super. 62, 66 (App. Div. 1995) (quoting Flint Frozen Foods, Inc. v. Firemen's Ins. Co., 12 N.J.Super. 396, 401, (Law Div. 1951), rev'd on other grounds, 8 N.J. 606 (1952)).
However, the Seller's claims for coverage under the policies relating to occurrences that happened before the transfer to plaintiff were freely assignable by the Seller, to the extent the policies were "occurrence policies." Those policies insure "the occurrence itself," and provide coverage "[o]nce the occurrence takes place . . . even though the claim may not be made for some time thereafter." Givaudan Fragrances, supra, 442 N.J. Super. at 36 (quoting Zuckerman v. Nat'l Union Fire Ins. Co., 100 N.J. 304, 310-11 (1985)). "[O]nce a loss occurs, an insured's claim under a policy may be assigned without the insurer's consent," because "the prohibition of assignments without the consent of the insurer [ceases]. Its liability [has] become fixed, and like any other chose in action [is] assignable regardless of the conditions of the policy in question," ibid. (second, third, and fourth alterations in original) (quoting Flint Frozen Foods, supra, 12 N.J. Super. at 400-01), including "a no-assignment provision." Elat, supra, 280 N.J. Super. at 66.
No-assignment [provisions within insurance policies] do not prevent the assignment after loss for the obvious reason that the clause by its own terms ordinarily prohibits merely the assignment of the policy, as distinguished from a claim arising thereunder, and the assignment before loss involves a transfer of a contractual relationship while the assignment after loss is the assignment of a right to a money claim.
[Id. at 67 (alteration in original)(citation omitted).]
As we explained in Givaudan Fragrances:
The purpose behind a no-assignment clause is to protect the insurer from having to provide coverage for a risk different from what the insurer had intended. A no-assignment clause guards an insurer against any unforeseen exposure that may result from the unauthorized assignment of a policy before a loss. Insurers provide policies of insurance to those individuals and entities that insurers have determined are acceptable risks. If an insured assigns the policy to a third party without the insurer's consent, the insured may cause the insurer to bear a risk the insurer never agreed to accept and never would have accepted.
But if there has been an assignment of the right to collect or to enforce the right to proceed under a policy after a loss has occurred, the insurer's risk is the same because the liability of the insurer becomes fixed at the time of the loss. Thereafter, the insurer's risk is not increased merely because there has been a change in the identity of the party to whom a claim is to be paid.
Moreover, once the insurer's liability has become fixed due to a loss, an assignment of rights to collect under an insurance policy is not a transfer of the actual policy but a transfer of the right to a claim of money. It is a transfer of a chose in action as opposed to a transfer of an actual policy. "[T]he insurer becomes absolutely a debtor to the assured for the amount of the actual loss, to the extent of the sum insured, and it may be transferred or assigned like any other debt."
[Givaudan Fragrances, supra, 442 N.J. Super. at 37-38 (alteration in original)(emphasis added) (citations omitted) (quoting Elat, supra, 280 N.J. Super. at 66).]
"Assignment of the right to collect or to enforce the right to proceed under a casualty or liability policy does not alter, in any meaningful way, the obligations the insurer accepted under the policy," as "[t]he assignment only changes the identity of the entity enforcing the insurer's obligation to insure the same risk." Elat, supra, 280 N.J. Super. at 67. Also, the fact that the amount of the claimed loss — i.e. the cost of remediation — is not fixed does not affect the assignment of the claim. See id. at 64-66. "By a valid and effective assignment, the title to [a] chose in action is vested in the assignee," "and the assignee may sue thereon in his own name." Russell v. Fred G. Pohl Co., 7 N.J. 32, 40 (1951); see also N.J.S.A. 2A:25-1; Lech v. State Farm Ins. Co., 335 N.J.Super. 254, 258 (App. Div. 2000); Levy v. Edmund Buick-Pontiac, Ltd., 270 N.J.Super. 563, 565-66 (Law Div. 1993).
Having determined that the Seller could have assigned its claims under the subject insurance policies as part of the APA, we turn to whether the APA contained an assignment of the rights under the policies.9 The APA did not mention specifically that the contracts it was transferring included the subject policies or the claims thereunder. Plaintiff argues further discovery was necessary to determine the parties' intention, if it was not clear that such an assignment was part of the APA. Defendants argue that the Seller did not assign any insurance policies to plaintiff and that language assigning the general right to all contracts was "imprecise" and "falls well short of reflecting the intent necessary to effectuate a valid assignment under New Jersey law."
We conclude from our review of plaintiff's complaint under the applicable standard that its allegations were sufficient to state a cause of action for damages arising out of any of the defendants' refusals to provide coverage for losses originating from occurrences that predated the APA. As alleged in paragraph sixteen of the amended complaint, the Seller transferred to plaintiff all of its rights under contracts "which are used or held for the use at the [Haskell] Site." In paragraphs twenty-one and twenty-six, plaintiff alleged that contamination existed at the property "prior to and since the sale of the property to [p]laintiff" and that the Seller notified its carriers of the contamination in 1996. Finally, in paragraph thirty-one, plaintiff alleges that "[t]the occurrences resulting in the environmental contamination occurred during the effective periods of the policies issued by the [d]efendants." We find that, taken together, these allegations sufficiently state the appropriate cause of action for breach of contract by a successor in interest.10
We part company with plaintiff, however, as to any claims for occurrences arising after the sale of the property that are unrelated to the contamination that existed prior to the sale. To allow such claims would violate the prohibition against assignment of the policies themselves by obligating defendants to provide plaintiff continuous coverage that it is not entitled to receive.
Accordingly, we affirm the trial court's dismissal of plaintiff's 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 which are unrelated to the pre-sale occurrences. We also affirm the dismissal of plaintiff's claim for breach of assignment, as it is subsumed by its breach of contract claim. We reverse the trial court's decisions as to plaintiff's 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 the Seller to plaintiff.
Affirmed in part; reversed in part and remanded for further proceedings. We do not retain jurisdiction.
