A New York state trial court has held that plaintiffs alleging asbestos injuries may bring suit against a dissolved and liquidated New Jersey corporation and may effectuate service of process on the dissolved corporation by serving the corporation’s insurer. Germain v. A.O. Smith Water Products Co., No. 190281/12, 2013 WL 6065986 (N.Y. Sup. Ct. Oct 23, 2013).
The policyholder had been incorporated under the laws of New Jersey in 1907. It was authorized to do business in New York during the period of 1944 to 1985. In 1989, the policyholder filed for bankruptcy, and it was liquidated in 1997. The New Jersey Department of State involuntarily dissolved the policyholder in 2004.
The insurer had issued to the policyholder four liability insurance policies in the 1970s. The policyholder had manufactured valves that allegedly contained asbestos. After the policyholder had been liquidated and dissolved, several individuals sued the policyholder claiming injuries due to an alleged failure to warn of the hazards associated with asbestos. The plaintiffs sought eventually to collect against the insurance policies. Because the plaintiffs were unable to serve process on the dissolved policyholder, the insurer moved to dismiss the suits on the grounds that there was no corporate entity to be sued or to be served with process.
The trial court held that the asbestos plaintiffs could bring suit against the dissolved policyholder notwithstanding that the policyholder had been liquated 16 years earlier and had been dissolved 9 years earlier. The trial court noted that under New Jersey’s Business Corporation Act, a corporation “may sue and be sued in its corporate name and process may issue by and against the corporation in the same manner as if dissolution had not occurred.” N.J. Stat. Ann. §14A:12-9(2)(e). The court stated that the dissolved policyholder’s “corporate existence continued despite its dissolution.” Germain, 2013 WL 6065986 at *3.
The court further determined that the dissolved policyholder could be sued even though it had completed the winding up process. The court refused to follow Global Landfill Agreement Group v. 280 Development Corp., 992 F. Supp. 692 (D. N.J. 1998), in which a New Jersey federal district court held that a dissolved corporation could not be sued once it finishes winding up. Construing the same New Jersey statute, the court in Global Landfill had concluded that “[a] corporation may not be sued in perpetuity.” Global Landfill, 992 F. Supp. at 695.
Having determined that the dissolved policyholder was amendable to suit, the court stated that the asbestos plaintiffs may seek to obtain a judgment against the dissolved policyholder, and if judgment is obtained, they then could initiate a direct action against the insurer under New York Insurance Law § 3420 to satisfy the judgment. The court noted that Section 3420 allows the plaintiff to bring suit against the insurer directly if a judgment against the policyholder remains unsatisfied. Germain, 2013 WL 6065986 at *3. Section 3420 applies to insurance policies issued or delivered in the State of New York. The court’s opinion did not address whether the insurance policies had been issued or delivered in New York or whether Section 3420 applies if the insurance policies had been issued and delivered outside of New York.
The court next considered whether the dissolved policyholder was amendable to service of process, since the asbestos plaintiffs had been unable to serve the company. The court noted that it has the discretion to order an alternative method of service if the prescribed methods of services are “impracticable.” Id. at *6. The court decided that process could be served on the dissolved policyholder via the insurer, stating that “substituted service may be effectuated on a defendant’s liability insurer if it is the real party-in-interest and is contractually bound to defend and indemnify the defendant.” Id. The court’s opinion did not analyze, however, whether the insurer was the real party-in-interest, whether the insurer, in fact, had a duty to defend or indemnify with respect to the asbestos suits, or whether service of process to an insurer gives notice to a dissolved corporation that a suit has been filed against it.