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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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