The U.S. District Court for the District of Massachusetts ruled that the Massachusetts Insurers Insolvency Fund could not pierce the corporate veil or impose successor liability on a corporation that purchased the assets of another corporation, which was the subject of workplace injury claims based on exposure to asbestos and whose liability insurers had become insolvent.
Beacon Sales Company, Inc. (BSC) sold nearly all of its assets to the defendant Beacon Sales Acquisition, Inc., (BSAI) a subsidiary of defendant Beacon Roofing Supply, Inc. (BRS), in 1997. The parties’ asset sale agreement disclaimed personal injury liabilities occurring on or before the sale date, but it left BSC with its insurance policies so that it could respond to any such claims. Several such claims were filed after the sale. However, BSC’s insurers had become insolvent. The Fund, therefore, assumed the defense of the lawsuits still pending against BSC.
A Massachusetts statute allowed the Fund to seek reimbursement for defense costs from high net worth insureds. It sought such reimbursement from BRS and BSAI. BRS and BSAI moved to dismiss, arguing that they were not insureds on the policies that gave rise to the Fund’s defense costs. The Fund argued that BRS and BSAI were the corporate alter egos of BSC, or alternatively that they were liable as the successors of BSC.
The court ruled for BRS and BSAI. It reasoned that BSC ceased to do business once it sold its assets to BSAI, and there was no evidence that the assets were used interchangeably thereafter. So BRS and BSAI were not the corporate alter egos of BSC. Moreover, there was no successor liability because there was no evidence that BSC sold its assets in order to shed its debts and continue its business operations without further obligation to pay its creditors. Indeed, BSC kept its insurance policies in the sale precisely so that it could pay claims like those the Fund had paid. Thus, BRS and BSAI had no successor liability.