Chart Presents State-by-State Policy With Case Citations
October 19, 2016
Most jurisdictions acknowledge the general rule of successor liability: when a corporation acquires the assets of another business entity it does not as a matter of law assume the liabilities of the prior business. However, there are four exceptions to the rule that are accepted in many jurisdictions. The purchase may result in successor liability if there is (1) an express assignment of liability, (2) a merger or consolidation, (3) a mere continuation, or (4) fraud.
California adopted a fifth exception to the general rule: the product line successor. Under this exception, a manufacturing business is acquired and the output of the line continues without any outward indication of change of ownership; the selling company goes out of business. Several other jurisdictions have also adopted this exception.
Some courts have also allowed insurance policies to be transferred to successor corporations to cover the liabilities of the predecessors.
The following chart indicates which states follow the general rule of successor liability and the four exceptions, which address the transfer of insurance, and which have adopted the product line exception. Citations are also provided. The information provided is the most current as of the publication date.
Jurisdiction | Follows General Rule | Follows Four Exceptions | Addresses Transfer of Insurance | Adopted Product Line Exception | Citations |
Alabama | Yes | Yes | No1 | No2 | Andrews v. John E. Smith's Sons Co., 369 So.2d 781 ( Ala. 1979) |
Alaska | Yes | Yes | No | No | Savage Arms, Inc. v. Western Auto Supply; 18 P.3d 49 (Alaska 2001) |
Arizona | Yes | Yes | No | No | Winsor v. Glasswerks PHX, L.L.C., 63 P.3d 1040 ( Ariz. App. 2003) |
Arkansas | Yes | Yes | No | No | Ford Motor Co. v. Nuckolls, 894 S.W.2d 897 ( Ark. 1995); Swayze v. A.O. Smith Corp., 694 F.Supp. 619 (E.D. Ark. 1988) |
California | Yes | Yes | Yes | Yes | Ray v. Alad Corp., 136 Cal. Rptr. 574 (1977); Quemetco v. Pacific Automotive Ins. Co., 29 Cal.Rptr.2d 627 (1994); Myers v. U.S., 297 B.R. 774 (S.D. Cal. 2003). |
Colorado | Yes | Yes | Yes | No | Ruiz v. ExCello Corp., 653 P.2d 415 (Colo. App. 1982); Parrish Chiropractic Centers , P.C. v. Progressive Cas. Ins. Co., 874 P.2d 1049 ( Colo. 1994) |
Connecticut | Yes | No3 | Yes | Yes | Ricciardello v. J. W. Gant & Co., 717 F.Supp. 56 (D. Conn. 1989); R.E.O., Inc. v. Travelers Cos., 1998 WL 285836 (Conn. Super. 1998); Lynch v. Infinity Outdoor, Inc., 2003 WL 21213708 ( Conn. Super. 2003) |
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