Sale Transaction Documents Obviate Need for Policy Interpretation

OREGON – The plaintiff Allianz Global Risks US Ins. Co. defended and indemnified its insured, Daimler Trucks North America LLC, as successor to Freightliner, in three CERCLA cases and more than 1,500 asbestos personal injury cases. It then brought suit seeking contribution against several insurance companies that had issued insurance policies to Con-way, Inc., the former parent company of Freightliner, for policy years that were implicated in the underlying asbestos actions. The trial court ruled in favor of the defendants on several policy interpretation issues, and the plaintiff appealed.

Con-way, which intervened in the case, filed a separate appeal arguing that the trial court never should have reached the policy interpretation issues, but that a directed verdict should have been granted. Con-way contended that, when it sold Freightliner to Daimler, Daimler did not assume Freightliner’s contingent liabilities. As a result, Daimler’s insurers — including Allianz —had no right to sue the Freightliner insurers whose policies were implicated in the underlying asbestos actions. The court agreed with Con-way.

The general rule of successor liability is that when one entity purchases all of another entity’s assets, it does not succeed to the seller’s liabilities. There are four well-recognized exceptions to the general rule, one of which is for express assumption of liability. Allianz had relied on the express assumption exception to the general rule, but based on its analysis of the transaction documents, the court held that Daimler had not assumed Freightliner’s liabilities. When Con-way sold Freightliner to Daimler, it cancelled the certificates of insurance it had purchased on Freightliner’s behalf and transferred to Freightliner cash reserves set aside for payment of known and unknown claims. Freightliner then sold all of its assets to Daimler. Daimler assumed Freightliner’s liabilities, with the exception of contingent liabilities, which were specifically excluded in a separate transaction letter executed contemporaneously with the sale documents.

Daimler did not assume Freightliner’s contingent liabilities therefore, Allianz could not seek contribution from Freightliner’s historical liability insurers.

Read the case decision here.