Successor Liability:
Liability and Coverage Implications†
Diane L. Polscer
Thomas A. Gordon
I.
Introduction
With the
expansion of legal remedies against corporations for the actions of purchased
companies has come the increased attempt to gain insurance coverage for the
actions by the predecessor corporations.
Although the insurance agreement is universally considered a contract,
and interpreted as a contract, there has been a significant movement by courts
to impose additional coverage responsibilities for insurers of predecessor
corporations, when the successor corporation is sued.
Courts in
many states have determined that an insurance policy issued to a predecessor
corporation provides coverage to a successor corporation when the successor
corporation is sued based upon actions by the predecessor company. This has created a number of problems unique
to this situation. Some courts have
recognized these problems and attempted to resolve them, while others have
not. This article focuses on the
circumstances under which courts have found insurance coverage for successor
corporations. It will also address
certain legal issues that have received little or no discussion by the courts,
but which affect insurance and successor liability.
II.
In
general, a company that purchases another company is not responsible for the
liabilities of the purchased company, but there are several exceptions to this
rule.
Based
upon judicial decisions in almost every state, a successor is responsible for
the liabilities of its predecessor under any of the following circumstances: an
express assignment of liability; an express or de facto merger; a determination
that the successor is a mere continuation or reincarnation of the predecessor;
or a fraudulent attempt to avoid liability.[1] When two companies merge in conformance with
state statutes, then by statute, the successor company will also be liable for
debts of the predecessor.[2]
Some
courts also recognize successor liability in the products liability context,
known as “the product line exception.”[3] A minority of states has adopted this
rule. The product line exception is
applied when the successor corporation purchases substantially all of the
assets of the predecessor corporation, the products liability arises from the
predecessor’s product line, the predecessor company ceases to exist so that
there is no remedy against the predecessor, and the successor uses the goodwill
of the predecessor. There are variations
on the required elements depending upon the jurisdiction. A few have also adopted the continuity test
as an expansion of the mere continuation exception. Under the continuity test, the entirety of
the circumstances is analyzed to determine whether the successor is liable,
rather than specific requirements related to ownership and management.[4]
III.
Courts in
several jurisdictions have found that insurance can be transferred from a
predecessor to a successor by contract or as a matter of law.
Some
jurisdictions focus solely on the terms of the contract or agreement between
the corporations in the underlying transaction.
They do not consider the underlying tort as a source for insurance
coverage, but rather focus on the arrangement between the predecessor and
successor companies, and whether such arrangement is effective under the
insurance agreement.
Courts
have taken differing approaches in applying the contract approach. Most first look at whether there was an
intention in the underlying transaction for the policies to be
transferred. Then, even if there was
such an intention, courts determine whether the insurance policy at issue
allows such a transfer under the circumstances. In most cases, the right to
insurance coverage is not expressed in the transaction between the
corporations. Without such express
terms, there is a split of authority as to whether the insurance policy is
transferred.[5]
When
there is such an expression, courts will often follow it. In Koppers
Industries, Inc. v. North River Insurance Co,[6] the
court found that because the asset agreement specified that the policies did
not transfer to the successor corporation, this expression should be
followed. The court in Koppers also considered the fact that
the predecessor corporation still existed and should maintain its right to the
insurance coverage. In Knoll Pharmaceutical, Inc. v. Automobile
Insurance Co.,[7]
the court found that the policies were not transferred by the asset purchase
agreement to another entity and, therefore, remained with the named insured for
that transaction. The court later found
that the policies transferred to a third corporation as a matter of law.
The
In
response to cases imposing successor liability in product line liability cases,
the
The
second part of the analysis under the contractual transfer theory concerns the
“no assignment” clause in the insurance policy.
By its terms, this clause bars the transfer of a policy without the
insurer’s consent. Courts have avoided
this restriction by finding that the right to recover under a policy after a
loss has occurred is an asset assignable separate from the policy and that
after a loss, the policy can be assigned without insurer consent, the
assignment clause notwithstanding.[13] There is a split of authority regarding this
rule; however, the weight of authority remains against applying the
anti-assignment clause to situations in which the loss at issue precedes the
assignment.[14] In Egger,
the insured and the claimant agreed, prior to a jury verdict that the claimant
would accept an assignment of the rights under the policy in exchange for an
agreement not to enforce an excess judgment.
The court found that although the agreement to assign the policy was
made prior to the verdict, it was not an actual “assignment” until after the
verdict, and was therefore a valid assignment of the right to recover under the
policy.
In
situations in which there is an actual merger in conformance with corporate
forms, such as was discussed in Federal Insurance Co. v. Purex Industries, Inc.,[15] a “no
assignment” clause in CGL and excess liability insurance policies did not bar
transfer of policies issued to insured where assets were purchased by a wholly
owned subsidiary and then absorbed into another corporation by statutory merger. Since the rationale for the no assignment
clause – preventing a risk increase to insurers – is not present in the merger
context, and courts find no assignment clauses inapplicable to mergers in
compliance with statutory requirements.[16]
If the no
assignment clause applies to pre-loss transfers but not post-loss transfers, a
court must define what the “loss” is.
The court in Red Arrow, was
confronted with a claim of environmental liability, but applied the
anti-assignment clause to prevent transfer of the policy without the insurer’s
consent and did not discuss the timing of the loss. However, the Quemetco court noted that the loss did not occur until after the
transfer because the liability for the environmental cleanup was not assessed
until after then.[17] In contrast to Red Arrow and Quemetco,
the majority view, as illustrated by B.S.B.
Diversified Co. v. American Motorists Insurance Co.,[18]
appears to be that “[a]fter the events giving rise to the insurer’s liability
have occurred, the insurer’s risk cannot be increased by a change in the
insured’s identity.”[19]
Courts
have also allowed the transfer of insurance coverage where the liability for
the actions of the predecessor has transferred to the successor as a matter of
law. The most common rationale under
this theory is that the insurance policy follows the liability.
The majority of jurisdictions addressing the issue have found that the
liability insurance policies of a merged corporation may transfer by operation
of law to the surviving corporation.[20]
In finding that the surviving corporation’s rights to liability
insurance had vested by virtue of the merger statute, the Brunswick court
rejected the insurer’s reliance on a clause in the policy prohibiting
assignment absent the insurer’s consent.[21]
The federal court noted that a “no-assignment” clause should not be
applied in the absence of increased risk to the insurer.[22]
On this basis, the court observed that the insurer would not face any
prejudice by operation of the assignment given that it would only be liable for
covered acts that occurred during the period of the insurer’s coverage. The court observed that it would not prevent assignment of the insurance
policy absent explicit policy language prohibiting assignment of the policy
through merger. [23] However, some recent cases have taken the position that liability
policies do not transfer by operation of law or merger.
In Knoll Pharmaceutical Co. v. Automobile
Insurance Co.,[24] the
court found that once a merger is established, the successor corporation takes
on all of the predecessor’s obligations and liabilities, including its
insurance policies. Knoll Pharmaceutical also addresses the issue of whether insurance
policies are transferred through an asset purchase agreement. The named insured under the policies was the
subsidiary of another corporation, which, by the terms of the policy, did not
have the power to transfer rights under the policy. Through an asset purchase agreement, all of
the shares in the subsidiary, and substantially all the assets, were
transferred to Basfin, a third corporation.
Later the subsidiary corporation merged with Knoll Pharmaceuticals. The court found that because the original
parent company did not have the right to transfer the insurance policies, the
rights to the policies remained with the original named insured and did not
transfer to the new parent corporation.
A number
of courts have found that when liability is transferred to a successor by
operation of law, any applicable insurance policy must be transferred as
well. In Westoil Terminals Co. v. Harbor Insurance Co.,[25] the
court found that a de facto merger transfers both liability and insurance
covering the liability. In that case,
the successor argued for protection under the predecessor companies’ coverage
based on allegations in the underlying complaint of “product line
liability.” The court first recognized
that merely because a company may be liable as a successor, does not mean that
the policies automatically follow the liability. It found, however, that since the successor
company had essentially the same name, the same operations as before, the same
equity interests and was under the same control, it fell within the exception
to the no transfer of insurance rule referred to in General Accident Ins. Co. and Quemetco. The court concluded that since there was no
longer a predecessor entity, and the insurance policies had to belong to
someone, they belonged to the successor by de facto merger.
Although
the general principle followed by many courts nationally is that insurance
follows liability in successor liability cases, some courts have restricted
that general principle to product line successor liability cases.[26] One court has found that when the predecessor
company had insurance coverage, the product line exception imposing liability
on the successor is inapplicable, because the injured party can still recover
from the predecessor through the insurance.[27]
In B.S.B Diversified Co. v. American Motorists Ins. Co.,[28] the court
found that the insurance policies transferred by operation of law because the
successor corporation was responsible for the environmental liability of
predecessor. The case is a prime example of the statement that the insurance
follows the liability. The successor
corporation was assigned the policy that provided coverage for the
environmental liability, which was specifically assigned in a purchase
agreement. Alternatively, the court,
following the Ninth Circuit's decision in Northern
Insurance, concluded that the policy transferred by operation of law
because the liability transferred by operation of law. In reaching this decision, the court expanded
the holding in Northern Insurance,
which only applied to product line successor liability cases, to environmental
liability cases. In Gopher Oil Co. v. American Hardware Mutual Insurance Co.,[29] the
court found that the policies transferred to the successor company based upon
the conclusion in the underlying matter that the successor was liable for the
environmental liability of the predecessor.
The court disregarded the anti-assignment clause on the grounds that the
transfer occurred after the loss, and thus did not increase the risk to the
insurer. The facts indicate that all the
contamination occurred prior to the corporate transfer, but the insured did not
purchase one of the properties at issue until after the policy period. This did not affect the court’s decision.
In a case
rejecting a successor corporation’s right to the benefits of a predecessor’s
CGL policies for pre-purchase liability by operation of law, the court in Red Arrow Products Co. v. Employer’s
Insurance of Wausau,[30]
rejected the extension of the product line successor liability theory to
environmental claims. The court held
that the EPA could seek recovery from both the successor and predecessor for
response cost in connection with site contamination, and therefore the
successor was liable for the contamination irrespective of the predecessor’s
liability. The court found that because
the EPA was not prevented from seeking damages from the successor corporation
independently, and because there was not the same public policy concern of
taking advantage of helpless victims, transfer of the insurance policy was not
warranted. In so holding, it noted:
As our supreme court noted, the question is not, “Who will pay the cost
of the environmental cleanup?” Rather,
the issue here is whether [successor] is an insured under the Wausau policies
as a matter of contract law. We conclude
that [successor] is not. Because
[successor] never paid premiums on the policies and never bargained for the
policies, there was no privity of contract between Wausau and [successor]. In addition, the policies were never assigned
to [successor].[31]
Maryland Casualty Co. v. W. R. Grace & Co.,[32]
presents another example of a court’s refusal to allow the transfer of
insurance. In rejecting the successor’s
claim of coverage for pre-acquisition activities of its predecessors, the court
stated:
In the present case . . . the underlying claimants
seek relief from Grace for the time period when the Maryland policies were in
effect, but before the merger. Grace had
no relationship with the claimants before the merger. Any injury to a claimant occurred before
Maryland came on the risk. Consequently,
Maryland had no duty to defend or indemnify.[33]
In General Accident & Insurance Co. v.
Superior Court,[34] the
insured argued that the insurance coverage for a corporation transferred by
operation of law to the successor corporation once the successor corporation
was found liable in tort for injuries arising from the predecessor’s
distribution of asbestos products and, therefore, it was entitled by operation
of law to the insurance coverage of its corporate predecessor. The court rejected this argument, holding
that successor liability in tort does not entitle the successor corporation by
operation of law to insurance coverage of the corporation’s predecessor,
because to do so would require an insurer that was never “a party to an
insurance contract to be liable to an ‘insured’ that has never paid a premium
or been subjected to an underwriting analysis.”[35]
The
recent case of Century Indemnity Co. v.
Aero-Motive Co.,[36] also
rejects transfer of insurance policies by operation of law. In that case, both a successor and
predecessor were pursued for environmental cleanup damages. The court rejected the reasoning in Northern Insurance and decided to follow
the reasoning in Red Arrow and Quemetco. It found that the successor was not named in
the policies, never paid any premiums on the policies and never received an
assignment of the policies, so should not receive the benefits of the
policies. The court also noted that in
CERCLA cases, unlike products liability, the successor’s liability did not
exist at the time of the asset sale, but arose years later when CERCLA was
enacted. In this particular case,
additionally, the risk would be increased because of the potential for
contribution demands from the successor against the predecessor. Finally, the court found that even though two
of the policies were assigned to the successor, the assignment was invalid
because it came after the loss without consent of the insurer. Despite the fact that the releases creating
the liability occurred prior to the transfer, the liability itself did not
arise until years afterward.
IV.
The
California Supreme Court recently applied another theory to the determination
of whether a surviving corporation of a corporate merger was entitled to
insurance coverage from the predecessor corporation. In Henkel
Corp. v. Hartford Accident & Indemnity Co.,[37] the
California Supreme Court held that the surviving corporation was not entitled
to a predecessor’s coverage as a matter of law because the surviving
corporation’s tort liability for injuries caused by the business was assumed by
contract rather than imposed by law.
Further, exceptions to the enforceability of a non-assignment clause in
an insurance policy did not apply to an assignment of coverage by another
corporation to the successor’s subsidiary.
The facts
in Henkel are complicated. Amchem No.
1 had two distinct product lines, both of which were insured by Aetna. In 1977, Union Carbide acquired Amchem No. 1
by stock purchase and merger. In 1979,
Amchem No. 1 created a new corporation (Amchem No. 2). Amchem No. 1 transferred “all its right,
title and interest . . . and its domestic assets utilized in its metal working
business” to Amchem No. 2.[38] Although the 1977 contract referred to assets
and liabilities, it did not specify particular assets transferred or
liabilities assumed. In 1980, Union
Carbide sold all of its stock of Amchem No. 2 to Henkel in a transaction in
which Henkel acquired all of Amchem No. 2’s assets and liabilities. After Henkel purchased Amchem No. 2, these
two corporations merged. In 1986, Union
Carbide sold Amchem No. 1 to Rhone Poulenc, Inc. In 1992, Amchem No. 1 and Rhone Poulenc, Inc.
merged. Henkel succeeded to all of the
rights and obligations of Amchem No. 2, and Rhone Poulenc, Inc. succeeded to
all of the rights and obligations of Amchem No. 1.
In 1989,
current and former Lockheed employees filed suit against Henkel and Amchem
Products, Inc. alleging injuries from exposure to metallic chemicals during the
period between 1959 and 1976. Henkel
tendered the defense to the insurer that had issued policies to Amchem No. 1
between 1959 and 1976, as well as to its own insurers. All insurers denied tender of the
claims. Thereafter, Henkel settled its
suit with the Lockheed plaintiffs and filed an action for declaratory relief
against Amchem No. 1’s and Henkel’s own insurers.
Amchem
No. 2 had assumed all the liabilities of Amchem No. 1 relating to the metallic
chemical product line. Henkel then
purchased all of the stock of Amchem No. 2, which made Henkel responsible for
all of Amchem No. 2’s liabilities, including those inherited from Amchem No.
1. Henkel argued that even though it was
not the corporate successor to Amchem No. 1, nevertheless, because it was
responsible for Amchem No. 1’s liabilities as a matter of law it should be
entitled to the benefit of Amchem No. 1’s liability insurance.
The Court
of Appeals decision in Henkel held
that “the right to indemnity followed the liability rather than the policy
itself. As a result, even though the
parties did not assign [the predecessor’s insurance] policy in the Agreement,
the right to indemnity under the policy transferred to [the successor
corporation] by operation of law.”[39]
In
reversing this holding, the California Supreme Court held that Henkel’s
liability for injuries caused by Amchem No. 1 arose from contract and was not
imposed by operation of law. First, the
court held that Henkel failed to make a showing that it was entitled to Amchem
No. 1’s insurance protection as a matter of law because Henkel’s tort liability
was not imposed upon it by law. The
court held that Henkel’s rights to any insurance policy benefits of Amchem No.
1 were the same as Amchem No. 2’s rights to those benefits and dependent on the
terms of the 1997 contract by which Amchem No. 2 acquired the assets of Amchem
No. 1.
The Henkel court relied on Oliver Machinery Co. v. United States
Fidelity & Guaranty Co.,[40] and Quemetco, Inc. v. Pacific Automobile Insurance
Co,[41],
for the proposition that the right of a successor company to the benefits of
its predecessor’s policy, even when liability is established by operation of
law, turns on the interpretation of the contract. Following the reasoning in Henkel, whether a company’s liabilities
are imposed by law or were imposed through contract, that company’s right to
its predecessor’s insurance policy depends upon the contract.
The Henkel court also discussed the effect
of any assignment of benefits of the policy considering the policy’s
requirement to obtain the insurer’s consent before assignment. First, the Henkel court noted that such assignments are generally valid and
enforceable. The insured argued that the
assignment with consent provision is invalid because: (1) coverage should follow liability when the
liability is transferred by operation of law; and (2) under an occurrence-based
liability policy, “policy benefits can be assigned without consent once the
event giving rise to liability has occurred.”[42] The court rejected the first argument because Henkel did not acquire the liabilities
of Amchem No. 1 by operation of law. It
rejected Henkel’s second argument
that policy benefits can be assigned without consent if the liability-causing
event has occurred before the assignment, stating:
It is established that a provision in the contract or a rule of law
against assignment does not preclude the assignment of money due or to become
due under the contract or money damages for breach of contract. Cases and commentators have applied this
principle to the assignment of benefits under an insurance policy. But even if we applied the principle to the
liability policies, it does not bar [insurers] from enforcing their restrictions
on assignment in the case here.[43]
The court
went on to distinguish between matured claims at the time of assignment and
claims that might arise at some time in the future. In rejecting the insured’s argument that the
“no assignment” clause should be ignored, the court said:
In 1979, when Amchem No. 2 assumed the liabilities of Amchem No. 1, the
duty of defending insurers to defend and indemnify Amchem No. 1 from the claims
of the Lockheed plaintiffs had not become an assignable chose in action. Those claims had not been reduced to a sum of
money due or to become due under the policy.
[The insurers] had not breached any duty to defend or indemnify Amchem
No. 1, so Amchem No. 1 could not assign any cause of action for breach of such
duty. Consequently, Amchem No. 1 could
not assign the right to defense and indemnity against such claims without the
insurer’s consent.[44]
The Henkel court also rejected the argument
that the no consent clause requires a showing of additional burden to the
insurer:
An additional burden may arise
whenever the predecessor corporation still exists or can be revived, because of
the potential for disputes over the existence and scope of assignment. If both Assignor and Assignee were to claim a
right to defense, the insurer might effectively be forced to undertake the
burden of defending both parties.”[45]
The Henkel decision represents the most
recent, comprehensive analysis of the relationship between successor liability
and the transfer of coverage under insurance policies to the successor
corporation
V.
Successor
liability questions also arise when the company seeking insurance coverage is
the parent company of a subsidiary that is being sued. Under many circumstances, related companies
are named as additional insureds. That
is not the subject of this article.
However, in situations in which the parent company is not a named
insured, courts have found no coverage for the parent company. In CertainTeed Corp. v. Federal Insurance
Co.,[46] the
court addressed whether a parent corporation should receive coverage as a
“stockholder” in the subsidiary. It
found that CertainTeed, the parent corporation, was not a stockholder for the
purposes of that insurance contract.
Alternatively, the court held that because the allegations in the
complaint did not allege that CertainTeed was liable for its actions as a
stockholder, CertainTeed could not claim coverage under the policy term
providing coverage for stockholders only while acting as stockholders.
In Elan
Pharmaceutical Research Corp. v. Employers Insurance of Wausau[47] the
parties assumed that the parent company was a shareholder for the purposes of
the insurance agreement. However, the
court followed CertainTeed in finding that because there were no allegations
against the parent based upon an alter ego relationship or the parent’s status
as the sole shareholder, the insurance did not provide coverage to the parent
for claims made against it. In Oliver Machinery Co. v. United States
Fidelity & Guaranty Co.,[48] the
court addressed a situation in which a successor corporation was being sued for
a product manufactured by its predecessor.
The court found that the successor had the opportunity to buy insurance
for injuries caused by products manufactured by its predecessor, but did not do
so. Because the insurance contract
issued to the successor only provided coverage for products manufactured by the
successor, the insurer had no coverage obligation.
Another
situation arises when the predecessor company remains in existence and retains
a specified liability. In Pittson Co.
v. Allianz Insurance Co.,[49] the
court found that insurance coverage for a site cleanup remained with the
company that retained the obligation to remediate the site. In that case, a subsidiary of Pittson owned a
contaminated site, and the subsidiary and all its assets, including the site,
were sold to Ultamar in a stock-for-cash agreement. As part of the agreement, Pittson agreed to
retain the liability of its subsidiary for remediating the site. The court found that the stock agreement, and
a separate settlement between Pittson and Ultamar, did not involve an
assumption of a liability by Pittson.
Rather, it was more a retention of the obligation to remediate the
site. The court decided that the
insurance coverage remained with Pittson.
However,
the case of Unigard Insurance Co. v. Leven,[50]
illustrates the opposite result. In Leven,
Bruce Leven owned Bayside Waste, and then sold it to WMX Technologies. The sale took place while lawsuits by Standard
Equipment, owner of a site leased by Bayside, were pending. In the sale of Bayside, Leven received stock
in WMX in exchange for agreeing to indemnify and hold WMX harmless regarding
the environmental contamination at the Standard Equipment site. Unigard insured Bayside, and Leven in his
personal capacity. In the court’s
discussion of Unigard’s duty to indemnify, it decided that the sale agreement
resulted in Leven assuming personal responsibility for Bayside’s obligation
through the indemnity agreement. It
found that this type of assumption was prohibited by the Unigard policy. The court also decided that because Leven had
no personal coverage for the underlying action, he could not create personal
coverage through the indemnification agreement.
The Leven
court also distinguished the cases that hold, in a successor context that the
insurance follows the insured risk. It
determined that Leven was a non-successor, and assumed an obligation that he
did not previously have. The court’s
reasoning is interesting and may form a basis for an argument that where the
assumption of a liability is voluntary, there should be no transfer of the
insurance policy without an express agreement to that effect. Transfer by operation of law would only
happen when the liability has also transferred through involuntary means. However, the reasoning in Leven may also be restricted to cases in
which there is a determination that the entity seeking coverage is in fact not
a “successor” to the named insured.
The
majority rule with respect to the effectiveness of the anti-assignment clause,
as discussed above, has been followed in cases related to other policy
provisions regarding various corporate forms.
Many policies exclude coverage when the insured partakes in a joint venture. In Maryland Casualty Co. v. Reeder, [51] the
court found that the fact that the insured is part of a joint venture does not
determine coverage; rather, when the liability does not increase the risk to
the insured, the exclusion does not apply.
In Reeder, the insurer argued
that the purpose of the exclusion for joint ventures is to prevent the insurer
from being held liable for unexpected risks.
The court found that it was a question of fact as to whether the insurer
was aware of the joint venture at the time the policy was issued. If the liability arises from the actions of
the insured, then there is still coverage for those actions, despite
participation in a joint venture.[52]
Concerns
of excess insurers should also be considered in determining the availability of
insurance issued to a predecessor company.
In the typical long-tail environmental liability context, both the
predecessor and successor companies may potentially be liable for remedial
action costs.[53] In many jurisdictions, insurance liability is
allocated among the primary insurers first, and then among the excess insurers
through horizontal exhaustion.[54] If the only policies available to the
successor company are policies issued to that entity, then excess coverage may
be impacted earlier than if the predecessor policies are also included.
Issues
may also be raised with respect to the fate of self-insured retentions. From a logical standpoint, if a court is
willing to transfer coverage under a policy to follow the risk or loss, then
the same conditions of coverage should apply to the successor corporation. In other words, all terms of the insurance
contract should be followed, including those that specify that the insurance is
inapplicable until a self-insured retention or deductible is exhausted.
If a
successor is granted rights to coverage under a predecessor’s policy, it should
stand in the shoes of the predecessor, meaning that it is subject to the same
obligations as the predecessor, including notice requirements. Courts that follow the rule that late notice
only applies when the notice is unreasonably late and the insurer is prejudiced
by the late notice should consider whether it was reasonable for the
predecessor not to give notice of the occurrence or claim. That entity is the insured under the
policy. This should be analyzed
especially in cases in which the successor is claiming that the anti-assignment
clause in the policy is inapplicable to a prior loss. If the predecessor was aware of the loss
prior to the transfer and failed to give notice of the loss to the insurer,
then the insurer should have arguments that the notice was unreasonably late
and it has been prejudiced by the delay.
VI.
From the
cases discussed above, some trends regarding how courts address the transfer of
insurance in successor liability cases can be discerned.
A likely
first step for a court is to determine who the named and additional insureds
are in the policy under which a corporation seeks coverage. In some instances, the successor corporation
may be named as an additional insured on the policy if, for example, the
predecessor company was first a subsidiary company or another related entity
that included the future successor as an additional insured on its policy. Under these circumstances there is no need
for further analysis by the court, since the successor would have whatever
rights it was entitled to as an additional named insured under the terms of the
policy.
If the
successor is not an insured under the terms of the policy, courts will then
look at the transaction between the successor and predecessor corporations to
determine if the terms of the agreement included a transfer of insurance. If insurance or the insurance policy at issue
is specifically listed as an asset transferred to the successor corporation,
courts will generally uphold the transfer of the policy. The only caveat is that for coverage
purposes, there is a split of decisions as to the strength of the typical “no
assignment” clause in a policy. A
majority of courts have found that when the loss occurred prior to the
transfer, the “no assignment” clause has no effect. However, courts then disagree on what the
“loss” is and what must be determined prior to transfer for the “no assignment”
clause to be avoided. A court must
decide whether the actions leading to the liability are sufficient, or whether
the liability itself must be established prior to the transfer to avoid the “no
assignment” clause. If there is no mention
of insurance in the terms of the agreement between the two corporations, courts
will look to the type of agreement, and to whether there is state law providing
for the transfer of insurance under those circumstances, for example, whether
the arrangement is a merger as opposed to an asset sale. State law purely resolves this determination,
although every jurisdiction has some form of merger statute that transfers all
assets and liabilities to the surviving corporation.
If the
court determines that the insurance is not transferred by operation of the
underlying agreement, then it will determine if there is a transfer by
operation of law. This is also dependent
upon the type of arrangement between the two companies. However, it will also depend upon what theory
of successor liability is asserted in the underlying case. The majority rule still seems to be that when
the liability is transferred to the successor company, insurance coverage for
that liability should also be transferred.
Courts typically find that under these circumstances there is no
additional risk to the insurer, and that equity favors the insurance following
the liability. However, recent cases
have noted that in many circumstances the risk is increased because then both
the successor and predecessor are receiving coverage for the same
liability. The cases of Henkel and Century Indemnity may signal a shift toward narrowing the
circumstances under which an insurance policy issued to a predecessor may be
transferred to a successor corporation.
VII.
CONCLUSION
The issue of how to
treat insurance coverage for the liability of a successor corporation will only
increase in importance as corporations consolidate and become more global. There remains disagreement among courts nationwide
as to what circumstances are required to allow the transfer to a successor
corporation of an insurance policy originally issued to a predecessor. Courts do agree that when the transfer of
insurance is included in the agreement between successor and predecessor, there
is a presumption that insurance policies will be transferred. The only hurdle in this circumstance is the
no assignment clause that is included in most insurance policies. Courts have generally avoided this
restriction when the insurance is transferred after the loss at isue. The general rule courts follow is that if the
transfer of the policy does not increase the insurer’s risk, then it should be
allowed, the no assignment clause notwithstanding, although this is by no means
a universal rule. Furthermore, courts
disagree as to what constitutes the “loss.”
When there is no express
transfer of insurance policies, some courts have allowed a transfer of coverage
by operation of law. Under a general theory that insurance should follow the
liability, courts have allowed coverage to a successor when the liability of
the predecessor is transferred as a matter of law. Several courts, however, have criticized this
theory. Although the majority that have
addressed this issue still allow transfer of insurance by operation of law,
recent decisions may signal a trend against allowing insurance coverage merely
because the successor may be liable for the acts of the predecessor. Those decisions have emphasized the difference
between the tort concepts that allow transfer of liability and the contract
concepts underlying insurance coverage.
Although insureds may still point to the slight majority of courts
allowing transfer of coverage by operation of law, insurers can focus on recent
cases as an indication of the current trend.
Appendix
State-by-State Survey of Issues
A
necessary prerequisite to the transfer of insurance is the transfer of
underlying liability. The following is a
survey of state cases discussing successor liability generally and the transfer
of insurance.
Alabama
courts follow the general rule that a purchasing corporation is not liable for
the liabilities of a selling corporation.
They have also recognized the four common exceptions to this general
rule: (1) express agreement,
(2) de facto merger or consolidation, (3) fraudulent attempt to
escape liability, and (4) the new corporation a mere continuation of the old.[55] Continuation of the same product line as the
predecessor corporation is a factor in determining whether the new corporation
is a “mere continuation.”[56] When there is an express disclaimer of
liability for the transferee corporation, liability is not transferred.[57]
In the
context of an asset purchase when the purchasing company assumed the liability
for product liability only to the extent not covered by the seller’s insurance
policy, the court found that because the seller had not been removed as a named
insured on the policy in effect at the time of the accident, the seller’s
insurer was liable for the injury claim.[58] No Alabama courts have discussed the transfer
of an insurance policy by operation of law or through means other than an
express agreement. However, they have
followed the general rule and found that an anti-assignment clause in a policy
is not effective when the loss happens prior to the assignment.[59]
Alaska
courts have recognized the general rule against successor liability and the
four standard exceptions to that rule.[60] The Alaska Supreme Court has also determined
that the “continuity of enterprise” exception is applicable as an expansion of
the “mere continuation” exception where there is not a continuity of
shareholders, but other factors indicate that the new company is a continuation
of the old.[61] The Savage
Arms court refused to consider whether the “product line exception” was
also available under Alaska law.
Alaska
courts have not addressed a situation in which a successor corporation was
seeking coverage under a policy issued to a predecessor company.
Under
Arizona law, a sale of assets does not lead to successor liability unless there
is an agreement to that effect, the transaction is a merger or consolidation,
there is a mere continuation of the company, or there is fraud.[62] In Winsor
v. Glasswerks PHX, L.L.C.,[63] the
court refused to expand successor liability to include the product line
exception or the “community of enterprise” theory, instead deferring to the
legislature to determine if successor liability should be expanded in the
products liability context.
Although
Arizona state courts have not addressed the issue of transferring insurance
policies, in Insurance Co. of North
America v. Snyder Moving & Storage, Inc.,[64] the
Ninth Circuit decided, interpreting Arizona law, that absent an agreement to
the contrary, a successor company generally is not entitled to insurance
coverage under the policies of the predecessor.
The court recognized that there are exceptions in the context of
environmental and product liability, but that Arizona courts had not recognized
any of them. Arizona courts have also
determined that anti-assignment clauses are invalid when the loss has occurred
prior to transfer.[65]
There are
no case establishing successor liability or determining when insurance policies
are transferred to a successor corporation.
California
California
follows the general rule against successor liability and the four principal
exceptions where: “(1) there is an
express or implied agreement of assumption, (2) the transaction amounts to a
consolidation or merger of the two corporations, (3) the purchasing corporation
is a mere continuation of the seller, or (4) the transfer of assets to the
purchaser is for the fraudulent purpose of escaping liability for the seller's
debts.”[66] A fifth exception to the general rule of
successor non-liability was created by the supreme court in Ray, and has become known as the
“product line successor” rule because, in certain limited situations, a person
injured by the predecessor’s product is given a remedy against the successor
corporation.[67]
As discussed
extensively above, California has had numerous occasions to address the
circumstances under which an insurance policy will transfer to a successor
corporation.[68]
Colorado
courts have adopted the standard rule against successor liability and the four
principal exceptions to this rule.[69] Colorado has limited the application of the
“mere continuation” exception to situations in which there is a continuity of
shareholders, managers and directors, not where there is a continuation of the
business operations only.[70] Furthermore, Colorado has rejected the
“product line exception” on the grounds that a successor corporation should not
be liable for the acts of another merely because it can afford to pay for them.[71] However, the Johnston court did note that this situation was different from
other cases involving the product line exception because the corporation
alleged to be liable was not the direct successor and did not cause the
termination of the injured party’s rights against the predecessor corporation.
Colorado
follows the general rule that contracts are assignable, but that if there is an
express prohibition against assignment in the contract, that term is enforced.[72] However, the Parrish court recognized the rule that “assignments of post-loss
benefits are usually found to be valid regardless of any non-assignment clause
in the policy.”[73] No Colorado decisions address the issue of
the transfer of insurance to a successor through operation of law.
Regarding
successor liability, Connecticut follows the general rule that a corporation
purchasing the assets of another is not obligated to assume its liabilities
unless there is intent to do so, merger, “mere continuation” or fraud.[74] It also follows the “product line exception”
transferring liability when the successor acquires substantially all of the
transferor’s assets, when the successor holds itself out as a continuation, and
the transferee is benefiting from the goodwill of the transferor.[75]
In the
context of insurance policies, Connecticut courts have accepted evidence that
the insurance policies were not intended to be transferred to a successor
corporation as part of an asset purchase agreement.[76] The court in R.E.O. did not address whether the policies could have transferred
under an operation of law theory.
Delaware
courts follow the general rule and standard exceptions of successor liability.[77] Furthermore, they narrowly interpret the
continuation theory of successor liability, limiting its application to
situations in which there is the appearance that the same legal entity is
continuing under a different name, including the same “legal person” operating
the company.[78]
When an
agreement includes a term assigning rights under operation of law, this
includes a merger.[79] In that case, there was a clause in an
insurance agreement between two companies concerning the ownership of
historical insurance policies that precluded transfer to another party through
merger without the consent of the other party to the insurance agreement. The court found that there was a merger, and
then applied the Delaware rule that when anti-assignment clauses do not
specifically prohibit the transfer or property rights, and “where performance
by the original contracting party is not a material condition and the transfer
itself creates no unreasonable risks for the other contracting parties, the
court should not presume that the parties intended to prohibit the merger.”[80] Although there are no Delaware cases
addressing this rule regarding an anti-assignment clause in an insurance
policy, the same standard may be used.
Florida
follows the general rule against successor liability and its standard
exceptions.[81] It has refused to adopt the “product line
exception” to successor liability.[82]
In the
context of the transfer of mortgage insurance, a Florida court enforced the
provisions of the policy prohibiting the assignment of the policy without the
insurer’s consent,[83]
although Florida courts have also recognized that the no assignment clause in a
policy does not bar assignment after a loss.[84] Florida has not addressed the issue of
transfer of an insurance policy by operation of law.
Georgia
law follows the general rule against successor liability, with the standard
exceptions to this rule.[85] Georgia has adopted a “product line”
exception when the successor continues to manufacture the same type of product,
carries over the experience and expertise of the transferor, and is in a better
position to assume the liabilities of the product’s manufacture.[86]
Regarding
the anti-assignment clause, Georgia statutes allow insurers to limit the
assignability of their policies.[87] However, Georgia cases allow the transfer of
the policy after the loss, regardless of an anti-assignment clause.[88] Georgia courts have also found that when the
transfer does not affect the risks taken by the insurer, the clause should not
apply.[89]
Hawaii
Under Hawaii law, successor liability is only allowed when (1) there is
an express or implied agreement to that effect, (2) when the transaction
amounted to a consolidation or merger, (3) when the transaction was fraudulent
or when elements of good faith transfer are lacking, and (4) when the successor
is a mere continuation of the predecessor.[90] Hawaii courts have not addressed the product
line exception to successor liability.
They have also not discussed successor liability in the context of
insurance coverage.
Idaho
Idaho courts have not addressed the issue of successor liability or the
transfer of insurance policies to a successor corporation.
Illinois
also follows the general rule against successor liability and the four standard
exceptions to this rule.[91] Under Illinois law, for the mere continuation
exception to apply there must be a continuation of the corporate entity of the
predecessor, not merely a continuation of the business operations.[92] Illinois courts have also rejected adopting
the “product line” exception.[93]
A court
interpreting Illinois law has determined that when a merger of corporations
does not increase the risk to the insurer, the policy in the predecessor
company is transferred to the successor.[94] In Knoll
a policy was issued to a subsidiary of a company. The shares in the subsidiary were sold to
another company. The court ruled that
the parent company had no authority under the insurance policy to transfer the
policy because it was not a named insured.
The court also found that the parent company had no authority under the
asset purchase agreement to transfer the policies of the subsidiary based on
the language of that agreement. The
subsidiary then merged with Knoll Pharmaceutical. The court found that the policy did transfer
to Knoll as a result of the merger. The
court reached this conclusion based on the facts that because there was a
merger, the liabilities transferred to the successor, and that since the
insurance policies were part of the obligations of the subsidiary, the transfer
did not increase the risk to the insurer.
The court also ruled that because the transfer was completed through a
statutory merger, the policy’s anti-assignment clause did not apply. It decided that the risk was not increased
because the policy would only be effective against claims against the surviving
corporation arising out of the covered acts of the predecessor.
Under
Indiana law, the general rule against successor liability applies, as do the
four basic exceptions to this rule.[95]
Indiana
courts have not discussed the transfer of insurance through operation of law,
although a very old Indiana case decided that when one company sells all of its
property to a new one, but the effect is not a merger, and the selling company
remains in existence, the purchasing company is not entitled to coverage under
policies issued to the predecessor company.[96]
Iowa
recognizes the general rule against successor liability and the four common
exceptions to this rule.[97] Iowa courts have also rejected an expansion
of the “mere continuation” exception to include situations in which there is a
continuity of the selling company’s operations, rather than the selling’s
company’s ownership and management, known as the “totality of the
circumstances” approach.[98] Iowa courts have also rejected the “product
line” exception as an expansion of successor liability.[99]
There are
no Iowa cases discussing the transfer of insurance policies to successor
corporations.
Kansas
follows the general rule against successor liability and the four general
exceptions to this rule.[100] Kansas also imposes successor liability in
the products liability situation when the successor has knowledge of the defect
and has a continuing relationship with the predecessor’s customers.[101]
Kansas
courts have not addressed how the transfer of insurance policies is handled in
the successor liability context. However,
Kansas courts have applied the rule that the no assignment clause does not bar
a transfer after the loss, meaning the events leading to the insured’s
liability have occurred.[102]
Kentucky
follows the general rule against successor liability and the four principal
exceptions to this rule.[103] Kentucky courts have not addressed the
transfer of insurance issue.
Louisiana
courts have recognized the general rule against successor liability, as well as
exceptions for express or implied agreement, fraud, or mere continuation.[104] Thus far, no Louisiana court has expressly
adopted or rejected the product line theory of successor liability.
Maine’s
law of successor liability states that “absent a contrary agreement by the
parties, or an explicit statutory provision in derogation of the established
common law rule, a corporation that purchases the assets of another corporation
in a bona fide arm’s length
transaction is not liable for the debts or liabilities of the transferor
corporation.”[105]
Maine has not adopted the product line
exception to successor liability.[106] Maine has not addressed any case related to
insurance coverage in the successor liability context.
Maryland
recognizes the general rule against successor liability and the four exceptions
to that rule.[107] However, Maryland does not recognize the
exception for continuity of enterprise, only continuity of entity where there
is a continuity of managers and ownership.[108] Maryland courts have not addressed the
product line exception or how insurance is handled in a corporate transaction.
Massachusetts
adheres to the standard rule against successor liability and the four standard
exceptions to that rule.[109] Massachusetts appears to have a more relaxed
rule regarding the mere continuation test, as it has indicated that total
shareholder continuity is not required.[110]
Under
Massachusetts law, “[w]hen acquisition is accomplished by stock purchase, all
legal attributes of the acquired entity continue,” including retention of
insurance policies issued to the predecessor company.[111]
Michigan
follows the general rule against successor liability with the four standard
exceptions.[112] However, Michigan has also adopted the
product line exception when there is a continuity of management, personnel,
location and assets, when the selling corporation ceases its business
operations, when the selling corporation dissolves, when the purchasing company
assumes the liabilities necessary for the continuation of normal operations,
and when the purchasing company holds itself out as the effective continuation
of the predecessor corporation.[113] A continuation of the product line is not
sufficient; there must be a continuity of the enterprise.[114]
In the
context of workers’ compensation, in Safeco
Insurance Co. v. Pontiac Plastics & Supply Co.,[115] the
court found that there was a factual dispute as to whether the policies
transferred because there was no evidence of an express agreement to that
effect, but the effect of the asset purchase agreement was that the successor
company would assume the predecessor’s business operations. In the recent case of Century Indemnity Co. v. Aero-Motive Co.,[116] the
court had the opportunity to analyze the transfer of insurance in successor
liability. The court rejected the
reasoning in Northern Insurance and
decided to follow the reasoning in Red
Arrow and Quemetco. It found that under Michigan law, insurance
policies would not transfer by operation of law and that any assignment of the
policies was invalid because the “loss” did not happen until liability was
imposed for the acts of the predecessor, which happened years after the
transfer.
Minnesota
courts have found that the purpose of a no assignment clause is to protect the
insurer from an increase in risk.[117] When there is an assignment of a loss that
has occurred prior to the transfer, then the no assignment clause is
ineffective. Only when there is an
attempt to transfer the policies prior to a loss will the no assignment clause
be effective.[118] The Gopher
Oil court also rejected an argument by the insurer that the loss could not
have occurred until after the enactment of CERCLA because of prior decisions
that in the CERCLA context the loss occurs at the time of contamination.[119]
Mississippi
follows the general rule against successor liability and the four standard
exception to this rule.[120] In Huff, the court
found that the product line exception was a valid theory of successor
liability, but refused to apply it to the facts of that case because not all of
the elements were met.
Missouri
has adopted the general rule against successor liability and the standard four
exceptions to that rule.[121] Missouri courts have rejected the product
line rule as an additional exception to successor liability.[122]
Montana
courts have not extensively addressed successor liability. However, the general rule against successor
liability has been recognized, as has the exception for situations in which the
successor assumes the liability expressly or by implication.[123]
Nebraska
recognizes the standard rule against successor liability and the four
exceptions to that rule.[124] It has not adopted the product line exception
because the successor did not create the risk and there is no public policy
justification for imposing the liability.[125]
In the
context of an actual merger between companies under Nebraska statute, the
insurance policies also transfer to the successor corporation by operation of
law.[126] The Paxton
& Vierling court also found that the no assignment clause was not a bar
to the transfer because the loss occurred prior to the merger of the
corporations.
Nevada
courts have not directly addressed the issue of successor liability. However, two federal decisions indicate that
Nevada would follow the lead of the California Supreme Court in this context.[127]
Although
Nevada courts have not addressed the issue of the transfer of insurance
policies to a successor, the court has determined that a liability policy is
the asset of a corporation.[128]
New
Hampshire courts have rejected expanding successor liability to include the
product line exception.[129] The state does recognize the general rule and
the four common exceptions to that rule.[130]
In Total Waste Management Corp. v. Commercial
Union Insurance Co.,[131] the
federal district court discussed the transfer of insurance policies to
successor corporations. It found that
since the new company was determined to be the successor in the underlying
action, that new company should also receive the rights of the
predecessor. The court was also
influenced by the fact that the loss occurred prior to the asset transfer to
the new company.
New
Jersey has adopted the product line exception to successor liability.[132] Liability is imposed on the successor when
the new corporation continues the same product line and the original
manufacturer is no longer in business.
Liability is also imposed when the injury giving rise to the liability
occurs before the transfer of assets.[133] As well as the product line exception, New
Jersey recognizes the four general exceptions to successor liability.[134]
Courts
interpreting New Jersey law have found that as a matter of law, an insurance
policy is transferred when two companies merge, along with other assets
involved in the transaction.[135]
New
Mexico adopted the general rule against successor liability and the four main
exceptions.[136] It has also adopted the product line
exception.[137] However, New Mexico courts have not applied
the rules related to the transfer of insurance coverage.
New York
has adopted the general rule of successor liability and the four standard
exceptions.[138] In Schumacher,
the court found that because the original manufacturer of the machine that
caused the injury survived after an asset purchase agreement by the successor
company, the successor was not a mere continuation of the predecessor. Furthermore, the status of the product line
exception is unclear under New York law, with two appellate courts reaching
opposing positions.[139] It should be noted that the court in City of New York rejected the reasoning
in Hart on the grounds that Schumacher rejected the application of the product line theory of
successor liability.
New York
courts may allow an insurance policy to be transferred to a successor
corporation when there is a merger of the two companies, when the new company
is regarded as the legal successor company through asset purchase, or when the
new company has been assigned the rights under the policy.[140] The court reached its decision that there was
no coverage for the successor corporation by determining that the insurer never
insured the successor company, and “did not become the [successor’s] insurance
carrier by virtue of plaintiff's acquisition of the business and properties” of
the former corporation.[141] In addition, the court found no evidence that
the insurer is obligated to the successor company under an assignment or “under
a successor-enterprise liability theory, since there was no merger of companies
as a result of the agreement dated July 12, 1977.”[142] This reasoning was followed in Employers Insurance of Wausau v. Duplan
Corp.,[143]
where the court stated:
Courts have permitted entities that are not named insureds to invoke rights under an insurance policy in certain narrow circumstances, such as when the party seeking coverage (1) is the surviving corporation in a merger with the insured; (2) is legally regarded as the corporate successor of the insured through purchase or transfer of the insured's assets; or (3) has been assigned the insured's rights in the policy.
As in EM Industries, the court in Duplan Corp. did not find evidence of
any of these three methods of transferring an insurance policy to a successor
entity.
New York
courts have long held that the transfer of a claim on a policy after the loss
does not violate the no assignment clause in the standard policy.[144]
North
Carolina follows the general rule against corporate succession with the four
principal exceptions.[145] North Carolina courts have refused to expand
the “mere continuation” exception into a broader “substantial continuation”
test that has evolved in CERCLA and other areas when there is a substantial
public policy concern.[146] There are no cases related to the transfer of
insurance and successor liability.
North
Dakota follows the general rule against successor liability and the four main
exceptions.[147] It has refused to adopt the product line
exception.[148] North Dakota courts have not addressed the
issue of insurance and successor liability.
Ohio
follows the general rule against successor liability and the four principal
exceptions.[149] Ohio courts have declined to expand successor
liability to include the product line exception.[150] There is a difference of opinion among Ohio
courts as to the application of the expanded view of the mere continuity test
to include factors beyond continuity of shareholders and directors.[151] There are no Ohio cases involving insurance
and successor liability.
Oklahoma
follows the general rule against successor liability and the four principal
exceptions.[152] Oklahoma has rejected the application of the
product line exception.[153] Oklahoma courts have not addressed whether an
insurance policy is transferred with assets in a successor liability context.
Oregon
courts follow the general rule against successor liability with its four
principal exceptions.[154] Federal courts interpreting Oregon law have
found that state courts would not adopt the product line exception to successor
liability.[155] One federal court has found that when a
debtor’s interest in a policy is transferred involuntarily, by operation of
law, then the prohibition against transfer in the policy is not effective. [156]
Pennsylvania
has adopted the general rule against successor liability and its four principal
exceptions. In addition, the state has
adopted an exception when transfers are not made with adequate consideration or
provision for the predecessor’s creditors, or when the successor continues a
product line of the predecessor essentially unchanged.[157]
A
Pennsylvania court found that there was a duty to defend when an insurer
refused to defend based on liabilities the insured was found to have assumed
through successor liability.[158] Federal courts in Pennsylvania have also
found that when there is a sale agreement that purports to transfer the
insurance rights to the successor company, the successor is entitled to
coverage under those policies to the same extent that the predecessor was
entitled. [159]
When there is a statutory merger, there
is a similar transfer of rights to the predecessor’s insurance policies.[160] The Brunswick
court rejected application of the no assignment clause because there would be
no increased risk to the insurer since its only coverage obligation was for
claims against Brunswick arising out of covered acts by the predecessor. However, the mere transfer of title to the
property insured by a general liability policy does not necessarily transfer
the policy.[161]
Rhode
Island recognizes the general rule against successor liability, the four
principal exceptions, and an exception where “the transfer renders the
transferor incapable of paying its creditors because it is dissolved either in
fact or by law.”[162] The additional exception would not apply when
a judgment was rendered after the transfer and the successor had no knowledge
of the possibility of such a judgment.[163] Rhode Island also takes a broader view of the
mere continuation test, involving factors including transfer of assets, less
than adequate consideration, continuation of business operations, at least one
shareholder or director in common, and inability of the transferor to satisfy
creditors.[164]
South
Carolina courts have not directly addressed the issue of successor liability,
but have recognized that liability continues when the successor has acquired
substantially all of the assets of the predecessor.[165] South Carolina has also not addressed the
issue of insurance and successor liability.
South
Dakota has adopted the general rule against successor liability and the four
principal exceptions.[166] Although not directly rejecting the product
line exception, the court in Hamaker v.
Kenwel-Jackson Machine, Inc.,[167]
agreed with the Downtowner court in
North Dakota that the new exception would not be appropriate. Regarding the transfer of insurance policies,
in interpreting South Dakota law, the Eighth Circuit has found that when a
policy is transferred by operation of law, such as in bankruptcy, there is no
more risk assumed by the insurer, and therefore the no assignment clause would
not apply.[168]
There are
no cases discussing successor liability or the transfer of insurance policies.
Texas
courts have recognized the general rule against successor liability and its
four principal exceptions.[169] Texas courts have rejected adopting the
product line exception to successor liability.[170]
Utah
follows the general rule against successor liability and the four principal
exceptions to this doctrine.[171] Utah courts have not addressed the product
line exception nor whether insurance policies are transferred in the context of
successor liability.
Vermont
follows the general rule of no successor liability in the absence of a statutory
merger, as well as the four standard exceptions to this rule.[172] Vermont has rejected the product line
exception as well as the broader community of enterprise theory for successor
liability.[173] There are no cases addressing the treatment
of insurance policies in the successor liability context.
Virginia
follows the general rule against successor liability with the four principal
exceptions to this rule.[174] Virginia has rejected the product line and
expanded mere continuation exceptions to the rule.[175] Its
courts have not addressed insurance and successor liability.
Washington
follows the general rule against successor liability and the four exceptions to
this rule.[176] It has adopted the product line exception
when a successor is liable if substantially all of the assets have been
transferred; the transferee holds itself out as a continuation of the
transferor, including the same product line under the same name; and, the
transferee benefits from the goodwill of the predecessor.[177]
Courts interpreting
Washington law have found that an insurance policy transfers by operation of
law when there is a transfer of assets and successor liability, but the
coverage only affects pre-sale activities of the predecessor company.[178] The B.S.B.
Diversified court also found that the insurance policies transferred
through the agreement between the predecessor and successor because it
indicated an intention to transfer all assets and liabilities arising prior to
the sale.[179] However, when the owner of a predecessor
corporation assumes environmental liability, it is not entitled to coverage
under the policies issued to the predecessor corporation.[180]
West
Virginia recognizes the general rule against successor liability and the four
general exceptions to this rule.[181] Its courts have not addressed the product
line exception or the transfer of insurance policies in successor liability.
Wisconsin
follows the general rule against successor liability with the four principal
exceptions.[182] The court in Fish also rejected the application of the product line exception in
Wisconsin law.
In the
context of insurance coverage, in Red
Arrow Products Co. v. Employers Insurance of Wausau,[183] the
court found that because the new company did not bargain for the defense duty
and did not pay premiums for it, the insurer had no duty to defend the
successor corporation. In its reasoning, the court rejected the argument that
insurance should follow the liability, or that the product line exception
provided justification for the transfer.
There are
no cases on this issue in Wyoming.
ENDNOTES
† Submitted by the authors on behalf of
the FDCC Insurance Coverage Section.
[1] See, e.g., Tucker v. Paxson Mach. Co.,
645 F.2d 620 (8th Cir. 1981); Schumacher v. Richards Shear Co., 451 N.E.2d 195
(N.Y. 1983); Brockman v.
O’Neill, 565 S.W.2d 796 (Mo. Ct. App. 1978).
[2] See, e.g., Cal. Corp. Code § 1107 (2004); 8 Del. Code Ann. tit. 259 (2004); 805 Ill. Comp. Stat. 5111.50 (2004); Mich. Comp. Laws § 450.1736 (2004); N.J. Stat. Ann. 14A:10-6 (2004); N.Y. Bus. Corp. Law § 906 (2004); Or. Rev. Stat. § 60.497(1)(c) (2004).
[3] See, e.g., Ray v. Alad Corp. 560
P.2d 3 (Cal. 1977); Ramirez v. Amsted
Indus., Inc., 408 A.2d 818 (N.J. Super. Ct. App. Div. 1979).
[4] Cyr v. B. Offen & Co., 501 F.2d
1145, 1151-53 (1st Cir. 1974); Turner
v. Bituminous Cas. Co., 244 N.W.2d 873, 883-84 (Mich. 1976).
[5] Compare B.S.B. Diversified Co. v. Am. Motorists Ins. Co., 947 F. Supp.
1476, 1480 (W.D. Wash. 1996) (policy transferred without specific terms) and Ins. Co. of N. Am. v. Snyder Moving &
Storage, Inc., 52 Fed. Appx. 899, 2002 WL 31748606 (9th Cir. 2002) (no
transfer of policies because not specifically mentioned).
[6] No.
94-1706 (W.D. Pa. Mar. 5, 1996), aff’d, 103 F.3d 113 (3d Cir. 1996)
(unpublished disposition) discussed in,
Joseph W. Hovermill & Angela N. Whittaker, Without Consent: Establishing A Corporate Successor’s Rights to the
Predecessor’s Insurance Coverage, 37 Tort
& Ins. L.J. 105 (2001).
[7] 167
F. Supp. 2d 1004 (N.D. Ill. 2001).
[8] 29
Cal. Rptr. 2d 627 (Ct. App. 1994).
[9] Id. at 630.
[10] 64
Cal. Rptr. 2d 781 (Ct. App. 1997).
[11] Id. at 785.
[12] Id.
[13] See, e.g., Better Constr., Inc. v. Nat’l Union Fire Ins. Co., 651 So. 2d
141, 142 (Fla. Dist. Ct. App. 1995); Gimbels
Midwest, Inc. v. Northwestern Nat'l Ins. Co., 240 N.W.2d 140 (Wis. 1976) (assignment after loss upheld); 3 Lee R. Russ & Thomas F. Segalla, Couch on Insurance §35:7 (3d ed. 2004).
[14] See Egger v. Gulf Ins. Co., 2002 WL 31053835 (Pa. Com. Pl., Sept.
11, 2002) (citing majority rule).
[15] 972
F. Supp. 872, 890 (D.N.J. 1997).
[16] See Brunswick Corp. v. St. Paul Fire & Marine Ins. Co., 509 F.
Supp. 750, 753 (E.D. Pa. 1981).
[17] Quemetco, Inc. v. Pac. Auto. Ins. Co., 29 Cal. Rptr. 2d 627 (Ct. App
1994).
[18] 947
F. Supp. 1476, 1481 (W.D. Wash. 1996).
[19] Id.
at 1479 (citation omitted); see also, SCA Disposal Servs. v. Cen. Nat’l Ins. Co., No. 900393C, 1994
Mass. Super. LEXIS 617, *12 (Mass. Super. Ct. 1994) (noting that courts have
justified overriding the “no-assignment” clause of the policy because such a
transfer does not increase the risk to the insurer when the coverage
transferred is limited to pre-acquisition occurrences); Bolz v. State Farm Mut.
Auto. Ins. Co., 52 P.3d 898, 903 (Kan. 2002); Egger v. Gulf Ins. Co., 2002 WL
31053835 (Pa. Com. Pl., Sept. 11, 2002) (actual assignment
did not happen until after verdict, so after “loss”).
[20] See Brunswick Corp.
v. St. Paul Fire & Marine Ins. Co., 509 F. Supp. 750, 753 (E.D. Pa. 1981);
Aetna Life & Cas. Co. v. United Pac. Reliance Ins. Cos., 580 P.2d 230 (Utah
1978).
[21] See, e.g., Brunswick Corp., 509 F. Supp. at
752-53.
[22] Id.
at 753 (citing Paxton & Vierling
Steel Co. v. Great Am. Ins. Co., 497 F. Supp. 573 (D. Neb. 1980)).
[23] See also, Sharon
Steel Corp. v. Aetna Cas. & Sur. Co.,
931 P.2d 127, 139 n.15 (Utah 1997) (observing that a surviving corporation
which is held responsible for the predecessor corporation’s liabilities
pursuant to a state merger statute should also enjoy the predecessor corporation’s
protections from such liabilities).
[24] 167
F. Supp. 2d 1004 (N.D. Ill. 2001).
[25] 86
Cal. Rptr. 2d 636 (Ct. App. 1999).
[26] See, e.g., N. Ins. Co. v. Allied Mut. Ins. Co., 955 F.2d 1353 (9th Cir.
1992), cert. denied, 505 U.S. 1221
(1992).
[27] See Federal Ins. Co. v. Glenn
D. Livelsberger, Inc.,
868 F. Supp. 686, 690 (M.D. Pa. 1994).
[28] 947
F. Supp. 1476 (W.D. Wash. 1996).
[29] 588
N.W.2d 756, 763-64 (Minn. Ct. App. 1999).
[30] 607
N.W.2d 294, 302 (Wis. Ct. App. 2000).
[31] Id. at 303.
[32] 794
F. Supp. 1206 (S.D.N.Y. 1991), rev. on
other grounds, 23 F.3d 617 (2d. Cir. 1994).
[33] Id. at 1232 (citation omitted).
[34] 64
Cal. Rptr. 2d 781 (Ct. App. 1997).
[35] Id.
at 788.
[36] 318
F. Supp. 2d 530 (W.D. Mich. 2003).
[37] 62
P.3d 69 (Cal. 2003).
[38] Id. at 71.
[39] Id. at 72 (quotation omitted).
[40] 232
Cal. Rptr. 691 (Ct. App. 1986).
[41] 29 Cal. Rptr. 2d 627 (Ct. App. 1994).
[42] Henkel, 62 P.3d. at 75.
[43] Id. (citations omitted) (emphasis
deleted).
[44] Id. (citations omitted).
[45] Id. (citations omitted).
[46] 913
F. Supp. 351 (E.D. Pa. 1995).
[47] 144
F.3d 1372 (11th Cir. 1998).
[48] 232
Cal. Rptr. 691 (Ct. App. 1986).
[49] 905
F. Supp. 1279 (D.N.J. 1995).
[50] 983
P.2d 1155 (Wash. App. 1999), rev. den.,
999 P.2d 1263 (Wash. 2000).
[51] 270
Cal. Rptr. 719 (Ct. App. 1990).
[52] See Scottsdale Ins. Co. v. Essex Ins.
Co., 119 Cal. Rptr. 2d 62 (Ct. App. 2002).
[53] See, e.g., Red Arrow Products Co. v. Employers Ins. of Wausau, 607 N.W.2d
294 (Wis. Ct. App. 2000).
[54] See,
eg., Stonewall Ins. Co. v. City of
Palos Verdes Estates, 54 Cal. Rptr. 2d 176 (Ct. App. 1996).
[55] See
Andrews v. John E. Smith’s Sons Co.,
369 So. 2d 781, 785 (Ala. 1979).
[56] Brown v. Economy Baler Co., 599 So.
2d 1 (Ala. 1992).
[57] See Asher v. KCS Int’l, Inc., 659 So. 2d 598, 601 (Ala. 1995).
[58] See EBSCO Indus., Inc. v. Royal Ins. Co. of Am., 775 So. 2d 128 (Ala. 2000).
[59] See Alabama Farm Bureau Ins. Co. v. McCurry, 336 So. 2d 1109, 1113
(Ala. 1976).
[60] See Savage Arms, Inc. v. Western Auto Supply Co., 18 P.3d 49 (Alaska
2001).
[61] Id. at 55-57.
[62] See A.R. Teeters & Assocs., Inc. v. Eastman Kodak Co., 836 P.2d
1034, 1039 (Ariz. Ct. App. 1992).
[63] 63
P.3d 1040 (Ariz. Ct. App. 2003).
[64] 52
Fed. Appx. 899 (9th Cir. 2002).
[65] See St. Paul Fire & Marine Ins. Co. v. Allstate Ins. Co., 543
P.2d 147, 149 (Ariz. Ct. App. 1975).
[66] Ray
v. Alad, 560 P.2d 3, 7 (Cal. 1977).
[67] See also, Chaknova v. Wilbur-Ellis Co., 81 Cal. Rptr. 2d 871 (Ct. App.
1999).
[68] See Henkel Corp. v. Hartford Accid. & Indem. Co., 62 P.3d
69 (Cal. 2003); Quemetco,
Inc. v. Pacific Auto. Ins. Co, 29 Cal. Rptr. 2d 627 (Ct. App. 1994); General
Accid. & Ins. Co. of Am. v. Superior Court, 64 Cal. Rptr. 2d 781 (Ct. App.
1997).
[69] See Ruiz v. ExCello Corp., 653 P.2d 415 (Colo. Ct. App. 1982).
[70] See Alcan Aluminum Corp. v. Electronic Metal Prods., Inc., 837 P.2d
282, 283 (Colo. Ct. App. 1992).
[71] Johnston v. Amsted Indus., Inc., 830
P.2d 1141, 1144 (Colo. Ct. App. 1992).
[72] See Parrish Chiropractic Ctr., P.C. v. Progressive Cas. Ins. Co.,
874 P.2d 1049 (Colo. 1994).
[73] Id. at 1053 (citations and emphasis
omitted). (The court was addressing the transfer of a health insurance policy
and decided that prohibitions against post-loss transfers of this type of
policy were still enforceable).
[74] Ricciardello v. J.W. Gant & Co.,
717 F. Supp. 56, 58 (D. Conn. 1989).
[75] Lynch
v. Infinity Outdoor, Inc., 2003 WL 21213708 (Conn. Super. Ct. 2003).
[76] See R.E.O., Inc. v. Travelers Cos., 1998 WL 285836 (Conn. Super. Ct.
1998).
[77] See Elmer v. Tenneco Resins, Inc., 698 F. Supp. 535, 540 (D. Del.
1988).
[78] Fehl v. S.W.C. Corp., 433 F. Supp.
939, 946 (D. Del. 1977).
[79] See Tenneco Automotive, Inc. v. El Paso Corp., 2002 WL 453930 (Del.
Ch. 2002).
[80] Star Cellular Tel. Co. v. Baton Rouge CGSA,
Inc., 1993 WL 294847, at *8 (Del. Ch. 1993), aff’d, 647 A.2d 382 (Del. 1994) (citations omitted).
[81] See Graef v. Hegedus, 698 So. 2d 655 (Fla. Dist. Ct. App. 1997).
[82] See Bernard v. Kee Mfg. Co., 409 So. 2d 1047, 1048-49 (Fla. 1982).
[83] Lexington Ins. Co. v. Simkins Indus., Inc., 704 So. 2d 1384 (Fla. 1998).
[84] See Better Constr., Inc. v. Nat’l Union Fire Ins. Co., 651 So. 2d
141, 142 (Fla. Dist. Ct. App. 1995).
[85] See Bullington v. Union Tool Corp., 328
S.E.2d 726 (Ga. 1985).
[86] See Farmex Inc. v. Wainwright, 501
S.E.2d 802, 804 (Ga. 1998).
[87] See Ga.
Code Ann. § 33-24-17 (2004).
[88] See Santiago v. Safeway Ins. Co., 396 S.E.2d 506, 508 (Ga. Ct. App.
1990).
[89] See Imperial Enters., Inc. v. Fireman’s Fund Ins. Co., 535 F.2d 287
(5th Cir. 1976).
[90] Evanston Ins. Co. v. Luko, 783 P.2d
293, 295-96 (Haw. Ct. App. 1989); Man v. Raymark Indus., Inc., 728 F. Supp.
1461, 1469 (D. Haw. 1989).
[91] See Tucker v. Paxson Mach. Co., 645 F.2d 620, 623 (8th Cir. 1981); Steel Co. v. Morgan Marshall Indus., Inc., 662
N.E.2d 595 (Ill. App. Ct. 1996).
[92] See Vernon v. Schuster, 688 N.E.2d 1172, 1176 (Ill. 1997).
[93] Gonzales v. Rock Wool Eng’g Co., 453
N.E.2d 792 (Ill. App. Ct. 1983); Myers
v. Putzmeister, Inc., 596 N.E.2d 754, 758 (Ill. App. Ct. 1992).
[94] See Knoll Pharm. Co. v. Auto. Ins. Co. of Hartford, 167 F. Supp. 2d
1004 (N.D. Ill. 2001).
[95] See Winkler v. V.G. Reed & Sons, Inc., 638 N.E.2d 1228, 1233
(Ind. 1994).
[96] See Miles Lamp Chimney Co. v. Erie Fire Ins. Co., 73 N.E. 107,
108-09 (Ind. 1905).
[97] See Grand Labs., Inc. v. Midcon Labs., 32 F.3d 1277, 1283 (8th Cir.
1994).
[98] Pancratz v. Monsanto Co., 547 N.W.2d
198, 201-02 (Iowa 1996).
[99] DeLapp v. Xtraman, Inc., 417 N.W.2d 219,
221-22 (Iowa 1987).
[100] See Comstock v. Great Lakes Distrib. Co., 496 P.2d 1308 (Kan. 1972).
[101] See Stratton v. Garvey Int’l, Inc., 676 P.2d 1290, 1294 (Kan. 1984).
[102] See Bolz v. State Farm Mut. Auto. Ins. Co.,
52 P.3d 898, 903 (Kan. 2002).
[103] See Am. Ry. Express Co. v. Commonwealth, 228 S.W. 433 (Ky. 1920).
[104] See Bourque v. Lehmann Lathe, Inc., 476 So. 2d 1125, 1127 (La. Ct.
App. 1985).
[105] Dir. Bureau of Labor Standards v. Diamond
Brands, Inc., 588 A.2d 734, 736 (Me. 1991).
[106] See Jordan v. Hawker Dayton Corp., 62 F.3d 29, 32-33 (1st Cir.
1995).
[107] See Nissen Corp. v. Miller, 594 A.2d 564, 565-66 (Md. 1991).
[108] See id.
at 567.
[109] See Guzman v. MRM/Elgin, 567 N.E.2d 929 (Mass. 1991).
[110] See Cargill, Inc. v. Beaver Coal & Oil Co., 676 N.E.2d 815, 819
(Mass. 1997).
[111] SCA Disposal Servs. of New England, Inc. v.
Central Nat’l Ins. Co., 1994 WL 879687 (Mass. Super. Ct. 1994).
[112] See Foster v. Cone-Blanchard Mach. Co., 597 N.W.2d 506 (Mich. 1999).
[113] See Turner v. Bituminous Cas. Co., 244 N.W.2d 873 (Mich. 1976).
[114] See Pelc v. Bendix Mach. Tool Corp., 314 N.W.2d 614 (Mich. Ct. App.
1981).
[115] 2000
WL 33538535 (Mich. App. Ct. 2000).
[116] 318
F. Supp. 2d 530 (W.D. Mich. 2003).
[117] See Gopher Oil Co. v. Am. Hardware Mut. Ins. Co., 588 N.W.2d 756,
763 (Minn. Ct. App. 1999).
[118] See Closuit v. Mitby, 56 N.W.2d 428, 429 (Minn. 1953).
[119] See id. at 764 (distinguishing Quemetco, Inc. v. Pacific Auto. Ins. Co.,
24 Cal. App.4th 494 (1994)).
[120] See Huff v. Shopsmith, Inc., 786 So. 2d 383, 388 (Miss. 2001).
[121] See Brockman v. O’Neill, 565 S.W.2d 796, 798 (Mo. Ct. App. 1978).
[122] See Young v. Fulton Iron Works Co., 709 S.W.2d 927 (Mo. Ct. App.
1986).
[123] See Bowen v. W.R. Grace & Co.,
781 F. Supp. 682, 683 (D. Mont. 1991).
[124] See Jones v. Johnson Mach. & Press Co., 320 N.W.2d 481, 483
(Neb. 1982).
[125] See id.
at 484.
[126] Paxton & Vierling Steel Co. v. Great Am.
Ins. Co., 497 F. Supp. 573, 581 (D. Neb. 1980).
[127] See, Hydro-Air Equip., Inc. v. Hyatt Corp., 852 F.2d 403 (9th Cir.
1988); Roll v. Tracor, Inc.,
140 F. Supp. 2d 1073, 1082 (D. Nev. 2001).
[128] See Washoe County Bd. of Sch. Trs. v.
Pirhala, 435 P.2d 756, 759 (Nev. 1968).
[129] See Simoneau v. South Bend Lathe, Inc., 543 A.2d 407 (N.H. 1988).
[130] See Bielagus v. EMRE of N.H. Corp., 826 A.2d 559, 564 (N.H. 2003).
[131] 857
F. Supp. 140 (D.N.H. 1994).
[132] See Ramirez v. Amsted Indus., Inc., 431 A.2d 811 (N.J. 1981).
[133] See Lefever v. K.P. Hovnanian Enters., Inc., 734 A.2d 290 (N.J.
1999).
[134] Id.
[135] See Federal Ins. Co. v. Purex Indus., Inc., 972 F. Supp. 872, 890
(D.N.J. 1997).
[136] See Pankey v. Hot Springs Nat’l Bank,
119 P.2d 636, 640 (N.M. 1941).
[137] See Garcia v. Coe Mfg. Co., 933 P.2d 243, 249 (N.M. 1997).
[138] See Schumacher v. Richards Shear Co., 451 N.E.2d 195, 198 (N.Y. 1983).
[139] Compare City of New York v. Charles Pfizer & Co., 688 N.Y.S.2d 23
(App. Div. 1999) (rejecting product line liability) with Hart v Bruno Mach.
Corp., 679 N.Y.S.2d 740 (App. Div. 1998) (applying product line
exception on the basis that New York courts are responsive to successor
liability in strict products liability cases).
[140] See EM Indus. Inc. v. Birmingham Fire Ins. Co., 529 N.Y.S.2d 121
(App. Div. 1988).
[141] Id. at 123.
[142] Id. at 122 (citation omitted).
[143] 1999
WL 777976 (S.D.N.Y. 1999) (citations omitted).
[144] See Ardon Constr. Corp. v. Fireman’s Ins. Co., 185 N.Y.S.2d 723, 729
(Sup. Ct. 1959).
[145] See Budd Tire Corp. v. Pierce Tire Co., 370 S.E.2d 267, 269 (N.C.
1988).
[146] G.P. Publications, Inc. v. Quebecor
Printing-St. Paul, Inc., 481 S.E.2d 674, 681-82 (N.C. Ct. App. 1997).
[147] See Downtowner, Inc. v. Acrometal Prods., Inc., 347 N.W.2d 118, 121
(N.D. 1984).
[148] See id. at 124-25.
[149] See Flaugher v. Cone Automatic Mach. Co., 507 N.E.2d 331, 334 (Ohio
1987).
[150] See id.
at 337.
[151] See McGaw v. South Bend Lathe, Inc., 598 N.E.2d 18, 21 (Ohio Ct.
App. 1991); Hunt v. Waterbury Farrell
Mfg. Ltd. P’ship, 1996 WL 697085 (Ohio Ct. App. 1996).
[152] See Pulis v. U.S. Elec. Tool Co., 561 P.2d 68, 69 (Okla. 1977).
[153] See Goucher v. Parmac, Inc., 694 P.2d 953, 954 (Okla. Ct. App.
1985).
[154] See Erickson v. Grand Ronde Lumber Co., 92 P.2d 170 (Or. 1939).
[155] See W. Helicopter Services, Inc. v. Rogerson Aircraft Corp., 728 F.
Supp. 1506, 1511 (D. Or. 1990).
[156] See In re Feiereisen, 56 B.R. 167, 169 (Bankr. D. Or. 1985).
[157] See Childers v. Power Line Equip. Rentals, 681 A.2d 201, 212 (Pa.
Super. Ct. 1996).
[158] See Carpenter v. Federal Ins. Co., 637 A.2d 1008, 1012 (Pa. Super.
Ct. 1994).
[159] See Gen. Refractories Co. v. Travelers Ins. Co., 107 F.3d 7 (3d Cir.
1996) (reversing lower court without published opinion).
[160] See Brunswick Corp. v. St. Paul Fire & Marine Ins. Co., 509 F.
Supp. 750, 752-53 (E.D. Pa. 1981).
[161] See Bunzl Pulp & Paper Sale, Inc. v. Golder, 1995 WL 89026 (E.D.
Pa. 1995).
[162] H.J. Baker & Bro., Inc. v. Orgonics, Inc.,
554 A.2d 196, 205 (R.I. 1989) (citation omitted).
[163] See Casey v. San-Lee Realty, Inc., 623 A.2d 16, 19 (R.I. 1993).
[164] See H.J.
Baker & Bro., 554 A.2d at 205.
[165] See Pee Dee Nursing Home, Inc. v. S.C. Employment Sec. Div., 399
S.E.2d 777, 779 (S.C. 1990).
[166] See Parker v. W. Dakota Insurers, Inc., 605 N.W.2d 181, 184 (S.D.
2000).
[167] 387
N.W.2d 515, 519-20 (S.D. 1986).
[168] See Nat’l Am. Ins. Co. v. Jamison Agency, Inc., 501 F.2d 1125,
1128-29 (8th Cir. 1974).
[169] See Mozingo v. Correct Mfg. Corp., 752 F.2d 168, 174 (5th Cir.
1985).
[170] See Griggs v. Capital Mach. Works, Inc.,
690 S.W.2d 287, 292 (Tex. Ct. App. 1985).
[171] See Marcis & Assoc., Inc. v. Neways, Inc., 60 P.3d 1176, 1180
(Utah Ct. App. 2002).
[172] See Ostrowski v. Hydra-Tool Corp., 479 A.2d 126, 127 (Vt. 1984).
[173] See id.
[174] See People’s Nat’l Bank of Rocky Mount. v. Morris, 148 S.E. 828, 829
(Va. 1929).
[175] See Harris v. T.I., Inc., 413 S.E.2d 605, 609-10 (Va. 1992).
[176] See Hall v. Armstrong Cork, Inc., 692 P.2d 787 (Wash. 1984).
[177] See George v. Parke-Davis, 733 P.2d 507, 510 (Wash. 1987).
[178] See N. Ins. Co. v. Allied Mut. Ins. Co., 955 F.2d 1353, 1357-58 (9th Cir.
1992); B.S.B. Diversified Co., Inc. v. Am. Motorists Ins. Co., 947 F. Supp.
1476, 1481 (W.D. Wash. 1996).
[179] See B.S.B. Diversified, 947 F. Supp. at 1480.
[180] See Unigard Ins. Co. v. Leven, 983 P.2d 1155, 1164 (Wash. Ct. App.
1999).
[181] See Davis v. Celotex Corp., 420 S.E.2d 557 (W. Va. 1992).
[182] See Fish v. Amsted Indus., Inc., 376 N.W.2d 820 (Wis. 1985).
[183] 607
N.W.2d 294, 299 (Wis. Ct. App. 2000).
(Authors’ bios)
Diane L. Polscer is a partner in the firm Gordon & Polscer, LLC in
Portland, Oregon. Her practice is
dedicated to insurance coverage and defense and complex commercial
litigation. Ms Polscer is past chair of DRI’s Excess & Reinsurance
Subcommittee. She is a faculty member of
the National Institute for Trial Advocacy, an organization for the professional
training of lawyers in trial advocacy skills.
Ms. Polscer is a member
of the Federation of Defense & Corporate Counsel.
Thomas A. Gordon is a partner in the firm Gordon &
Polscer, LLC in Portland, Oregon. His
practice is dedicated to insurance coverage litigation, insurance defense
litigation, complex commercial law, and technological torts. Mr. Gordon has served on DRI’s Board of
Directors, chaired DRI’s Insurance Law Committee and served on its Law
Institute Committee. He is also a member
of I.A.D.C.