The Supreme Court of the State of Delaware recently reversed a Court of Chancery decision declining to appoint a receiver for a dissolved Delaware corporation, Krafft-Murphy Company, Inc. (Krafft). The Chancery Court determined that a receiver was inappropriate because Krafft had no property for the receiver to distribute to potential tort victims. The Supreme Court disagreed, holding that an unexhausted insurance policy is property of the dissolved company even after its three-year wind-up period under Delaware law.
Krafft, a plastering business that supplied and installed an asbestos-containing product, dissolved in 1999. Petitioners were tort plaintiffs seeking recovery from Krafft. Krafft’s only remaining assets were unexhausted insurance policies, which paid for the continuing litigation costs. Delaware law provides that corporations dissolved for more than the three-year wind-up period can no longer be sued; in order for tort victims to recover, a receiver must be assigned to handle the dissolved corporation’s assets. The plaintiffs sought to appoint a receiver for Krafft’s assets so that their cases could continue. The Chancery Court held that because Krafft had no property for the receiver to manage, appointing one would be inappropriate.
The Supreme Court reversed, finding that in Delaware a contingent contractual right is property under 8 Del. C. § 279, the statute for appointing receivers, to the extent the contingent right could still vest. The court held that unexhausted insurance policies could still vest, and that they should be considered property of the dissolved company. Because the court found that the insurance contracts were assets of Krafft, it held that a receiver must be appointed to manage those assets in tort litigation.
In the Matter of Krafft-Murphy Co., Inc., No. 85, 2013 (Del. Nov. 26, 2013).