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) |
| Delaware | Yes | Yes | No | No | Elmer v. Tenneco Resins, Inc., 698 F.Supp. 535 (D. Del. 1988) |
| District of Columbia | Yes | Yes | No | No | Bingham v. Goldberg. Marchesano. Kohlman. Inc., 637 A.2d 81 (D.C. 1994) |
| Florida | Yes | Yes | No | No | Graef v. Hegedus, 698 So.2d 655 (Fla. App. 1997); Bernard v. Kee Mfg. Co., Inc., 409 So.2d 1047 ( Fla. 1982) |
| Georgia | Yes | Yes | Yes | Yes | Bullington v. Union Tool Corp., 328 S.E.2d 726 (Ga. 1985); Santiago v. Safeway Ins. Co., 396 S.E.2d 506 (Ga. App. 1990); Farmex, Inc. v. Wainwright, 501 S.E.2d 802 (Ga. App. 1998); |
| Hawaii | Yes | Yes | Yes | No | Del Monte Fresh Produce ( Hawaii ), Inc. v. Fireman's Fund Ins. Co., 183 P.3d 734 (Hawaii 2007); Evanston Ins. Co. v. Luko, 783 P.2d 293 (Hawaii App. 1989) |
| Idaho | Not Addressed | Not Addressed | Not Addressed | Not Addressed | I.C. § 41-3611 |
| Illinois | Yes | Yes | Yes | No | Glass v. Crimmins Transfer Co., 299 F.Supp.2d 878 (C.D. Ill. 2004); Knoll Pharm. Co. v. Auto Ins. Co. of Hartford, 167 F.Supp.2d 1004 (N.D. Ill. 2001); Myers v. Putzmeister, Inc., 596 N.E.2d 754 ( Ill. App. 1992) |
| Indiana | Yes | Yes | No | No | Winkler v. V.G. Reed. & Sons, Inc., 638 N.E.2d 1228 ( Ind. 1994) |
| Iowa | Yes | Yes | No | No | Grand Laboratories, Inc. v. Midcon Labs of Iowa, Inc., 32 F.3d 1277 (8th Cir. 1994); DeLapp v. Xtraman, Inc., 417 N.W.2d 219 ( Iowa 1987) |
| Kansas | Yes | Yes | No | No | Comstock v. Great Lakes Distribution Co., 496 P.2d 1308 ( Kan. 1972) |
| Kentucky | Yes | Yes | No | No | American Railway. Express Co. v. Commonwealth, 228 S.W. 433 (Ky.App. 1920); Pearson ex rel. Trent v. National Feeding Systems, Inc., 90 S.W.3d 46 ( Ky. 2002) |
| Louisiana | Yes | No4 | No | No | Bourque v. Lehmann Lathe, Inc., 476 So.2d 1125 ( La. App. 1985) |
| Maine | Yes | No5 | No | No | Director of Bureau of Labor Standards v. Diamond Brands, Inc., 588 A.2d 734 ( Me. 1991) |
| Maryland | Yes | Yes6 | No | No | Nissen Corp. v. Miller, 594 A.2d 564 ( Md. 1991) |
| Massachusetts | Yes | Yes | No | No | Guzman v. MRM/Elgin, 567 N.E.2d 929 ( Mass. 1991) |
| Michigan | Yes | Yes | Yes | Yes7 | Foster v. Cone-Blanchard Mach. Co., 597 N.W.2d 506 ( Mich. 1999); Turner v. Bituminous Cas. Co., 244 N.W.2d 873 (Mich. 1976); Century Indemnity Co. v. Aero-Motive Co., No. 318 F.Supp.2d 530 (W.D. Mich. Dec. 17, 2003) |
| Minnesota | Yes | Yes | Yes | No | Niccum v. Hydra Tool Corp., 438 N.W.2d 96 (Minn. 1989); Gopher Oil Co. v. American Hardware Mut. Ins. Co., 588 N.W.2d 756 ( Minn. App. 1999); In re Opus East, LLC, Bankr.D.Del., March 23, 2015 |
| Mississippi | Yes | Yes | No | Yes | Huff v. Shopsmith, Inc., 786 So.2d 383 ( Miss. 2001) |
| Missouri | Yes | Yes | No | No | Brockmann v. O'Neill, 565 S.W.2d 796 (Mo. App. 1978); Young v. Fulton Iron Works Co., 709 S.W.2d 927 ( Mo. App. 1986) |
| Montana | Yes | No8 | No | No | Bowen v. W.R. Grace & Co., 781 F.Supp. 682 (D. Mont. 1991) |
| Nebraska | Yes | Yes | Yes | No | Jones v. Johnson Mach. & Press Co., 320 N.W.2d 481 ( Neb. 1982); Paxton & Vierling Steel Co. v. Great American Ins. Co., 497 F.Supp. 573 (D.C. Neb. 1980) |
| Nevada | Yes | Yes | No | No | Lamb v. Leroy Corp., 454 P.2d 24 (Nev. 1969); Village Builders 96, L.P. v. U.S. Laboratories, Inc., 112 P.3d 1082 ( Nev. 2005) |
| New Hampshire | Yes | Yes | Yes | No | Bielagus v. Emre of N.H. Corp., 826 A.2d 559 (N.H. 2003); Simoneau v. South Bend Lathe, Inc., 543 A.2d 407 (N.H. 1988); Total Waste Management Corp. v. Commercial Union Ins. Co., 857 F.Supp. 140 (D. N.H. 1994) |
| New Jersey | Yes | Yes | Yes | Yes | Lefever v. K.P. Hovnanian Enterprises, Inc., 734 A.2d 290 (N.J. 1999); Federal Ins. Co. v. Purex Industries, Inc., 972 F.Supp. 872 (D.N.J. 1997); Ramirez v. Amsted Industries, Inc, 431 A.2d 811 (N.J. 1981) |
| New Mexico | Yes | Yes | No | Yes | Pankey v. Hot Springs Nat'l Bank, 119 P.2d 636 (N.M. 1941); Garcia v. Coe Mfg. Co., 933 P.2d 243 (N.M. 1997) |
| New York | Yes | Yes | Yes | No | Meadows v. Amsted Industries, Inc., 760 N.Y.S.2d 604 (2003); EM Industries, Inc. v. Birmingham Fire Ins. Co., 529 N.Y.S.2d 121 (1988); Semenetz v. Sherling & Walden, Inc., 818 N.Y.S.2d 819 (2006) |
| North Carolina | Yes | Yes | No | No | Budd. Tire Corp. v. Pierce Tire Co., 370 S.E.2d 267 (N.C. App. 1988); Atwell, Plaintiff, v. DJO, Inc., 803 F.Supp.2d 369 (E.D.N.C. 2011) |
| North Dakota | Yes | Yes | No | No | Downtowner, Inc. v. Acrometal Products, Inc., 347 N.W.2d 118 (N.D. 1984) |
| Ohio | Yes | Yes | No | No | Flaugher v. Cone Automatic Mach. Co., 507 N.E.2d 331 (Ohio 1987); R.C. § 1701.82 |
| Oklahoma | Yes | Yes | No | No | Pulis v. United States Elec. Tool Co., 561 P.2d 68 (Okla. 1977); Goucher v. Parmac, Inc., 694 P.2d 953 ( Okla. App. 1984) |
| Oregon | Yes | Yes | Yes | No | Erickson v. Grand Ronde Lumber Co., 92 P.2d 170 (Or. 1939); In re Feiereisen, 56 B.R. 167 (D. Or. 1985); Western Helicopter Servs., Inc. v. Rogerson Aircraft Corp., 728 F.Supp. 1506 (D. Or. 1990) |
| Pennsylvania | Yes | Yes9 | Yes | No10 | Childers v. Power Line Equipment Rentals, 681 A.2d 201 (Pa. Super. 1996); Carpenter v. Federal Ins. Co., 637 A.2d 1008 ( Pa. Super. 1994) |
| Rhode Island | Yes | Yes11 | No | No | H.J. Baker & Brother, Inc. v. Orgonics, Inc., 554 A.2d 196 (R.I. 1989) |
| South Carolina | Yes | Yes | No | Yes | Walton v. Mazda of Rock Hill , 657 S.E.2d 67 (S.C.App. 2008); Simmons v. Mark Lift Industries, Inc., 622 S.E.2d 213 (S.C. 2005) |
| South Dakota | Yes | Yes | Yes | No | Parker v. Western Dakota Insurers, Inc., 605 N.W.2d 181 (S.D. 2000); Nat'l Am. Ins. Co. v. Jamison Agency, Inc., 501 F.2d 1125 (8th Cir. 1974) |
| Tennessee | Not Addressed | Not Addressed | Not Addressed | Not Addressed | T. C. A. § 56-12-110 |
| Texas | Yes | Yes | No | No | Mozingo v. Correct Mfg. Corp., 752 F.2d 168 (5th Cir. 1985); Griggs v. Capitol Mach. Works, Inc., 690 S.W.2d 287 ( Tex. App. 1985); But see C.M. Asfahl Agency v. Tensor, Inc., 135 S.W.3d 768 |
| Utah | Yes | Yes | No | No | Macris & Assoc., Inc. v. Neways, Inc., 60 P.3d 1176 ( Utah App. 2002) |
| Vermont | Yes | Yes12 | No | No | Ostrowski v. Hydra-Tool Corp., 479 A.2d 126 ( Vt. 1984) |
| Virginia | Yes | Yes | No | No | Harris v. T.I., Inc., 413 S.E.2d 605 ( Va. 1992); VA Code Ann. § 8.01-17 |
| Washington | Yes | Yes | Yes | Yes | Hall v. Armstrong Cork, Inc., 692 P.2d 787 ( Wash. 1984); Northern Ins. Co. of N.Y. v. Allied Mut. Ins. Co., 955 F.2d 1353 (9th Cir. 1992); George v. Parke-Davis, 733 P.2d 507 ( Wash. 1987) |
| West Virginia | Yes | Yes | No | No | Davis v. Celotex Corp., 420 S.E.2d 557 ( W.Va. 1992) |
| Wisconsin | Yes | Yes | Yes | No | Columbia Propane, L.P. v. Wisconsin Gas Co., 661 N.W.2d 776 (Wis. 2003); Fish v. Amsted Industries, Inc., 376 N.W.2d 820 (Wis. 1985); Red Arrow Products Co., Inc. v. Employers Ins. of Wausau, 607 N.W.2d 294 ( Wis. App. 2000) |
| Wyoming13 | Not Addressed | Not Addressed | Not Addressed | Not Addressed | Wyoming Stat. Ann. §40-20-113 |
1Alabama has found that anti-assignment clauses are not effective when a loss occurs before the assignment. Alabama Farm Bureau Ins. Co. v. McCurry, 336 So.2d 1109 (Ala. 1976).
2In Alabama, continuation of the same product line as previous corporation is one factor in determining if the new corporation is a mere continuation. Brown v. Economy Baler Co., 599 So.2d 1 (Ala. 1992).
3Connecticut recognizes exceptions for intent, merger, mere continuation, or fraud.
4Louisiana recognizes exceptions for express or implied agreement, fraud, or mere continuation.
5Maine recognizes exceptions for “a contrary agreement by the parties, or an explicit statutory provision in derogation of the established common law rule.”
6Maryland recognizes only the exception for continuity of managers and ownership, not continuity of enterprise.
7In Michigan, continuation of product line must also be accompanied by continuity of enterprise. Pelc v. Bendix Mach. Tool Corp., 314 N.W.2d 614 (Mich. App. 1981).
8Montana recognizes only the exception in which the successor assumes liability expressly or by implication.
9Pennsylvania also includes exceptions when the transfer was made without adequate consideration and no provisions were made for the selling corporation's creditors and when the successor continues the product line essentially unchanged. Forrest v. Beloit Corp., 278 F.Supp.2d 471 (E.D. Pa. 2003); Childers v. Power Line Equipment Rentals, 681 A.2d 201 (Pa. Super. 1996).
10The product line exception applies in Pennsylvania only if the virtual destruction of remedies against the original corporation resulted from the successor corporation's acquisition of the company. Dale v. Webb Corp., 252 F.Supp.2d 186 (E.D. Pa. 2003).
11Rhode Island also acknowledges an exception for transfers that result in the transferor being unable to pay its creditors due to dissolution in fact or law.
12 Vermont also includes exception when the transfer was made without adequate consideration.
13Wyoming specifically imposes successor liability and disallows the common law rules in certain situations under the Wyoming Fair Practices of Equipment Manufacturers, Distributors, Wholesalers and Dealers Act, Wyoming Statutes Annotated § 40-20-101 et seq. Please seek out competent legal counsel for specific questions.
Christine G. Barlow, CPCU
Christine G. Barlow, CPCU, is Executive Editor of FC&S Expert Coverage Interpretation, a division of National Underwriter Company and ALM. Christine has over thirty years’ experience in the insurance industry, beginning as a claims adjuster then working as an underwriter and underwriting supervisor handling personal lines. Christine regularly presents and moderates webinars on a variety of topics and is an experienced presenter.