Court Opinion

ID: 6789942
Source: CourtListenerOpinion
Date Created: 2022-07-21 01:09:15.039011+00
Date Added: 2024-06-11T16:03:01.889035
License: Public Domain

Pfeifer, J.,
dissenting.
{¶ 55} In Pilkington N. Am., Inc. v. Travelers Cas. & Sur. Co., 112 Ohio St.3d 482, 2006-Ohio-6551, 861 N.E.2d 121, we dealt with a case involving a short line of corporate succession where the original insured made a clear transfer of assets and liabilities to a successor entity. Here, the corporate history is more tangled. Even so, I would hold that the chose in action that arose at the time of the occurrence of the covered loss in this case was ultimately successfully transferred to Glidden III via the 1986 side Letter Agreement between Hanson and ICI. That Hanson, as the majority states, “did not directly own the policies for which it attempts to convey the benefits” is irrelevant. Hanson did own a chose in action — the right to the insurance benefits arising under the policy at the time of the loss — and was free to transfer it. Hanson successfully made that transfer through the side Letter Agreement, wherein it provided that ICI (and eventually Glidden III) would retain “the benefit of any policy of insurance to the extent the same would provide cover for liability in respect of occurrences relating to the Business prior to Closing giving rise to loss, injury, or damage thereafter subject to indemnity on costs.” As in Pilkington, the chose in action, not an insurance policy, was transferred to the successor entity. Therefore, I would apply this court’s holdings in Pilkington — as to Questions 1 and 2 — to the facts of this case.
{¶ 56} Further, even if I agreed with the majority’s conclusion that the benefits of the policy were not successfully transferred by contract in this case, I would hold that Glidden III acquired the benefits of the policy through operation of law.
{¶ 57} The idea that one twist within a tortuous corporate history could absolve an insurer from the duty to indemnify and defend on a claim that arose within the policy period is intolerable. The majority’s holding today, that the entity that has assumed liability for past, covered acts does not receive any benefit of the insurance coverage related to that liability, has unacceptable implications for would-be insureds, for corporate succession in Ohio, and most important, for victims of tortious acts. This case demonstrates that a corporation that succeeds to liability for preacquisition operations of another entity should acquire the rights of insurance coverage by operation of law.
{¶ 58} This case involves potentially catastrophic losses that allegedly resulted from business activities for which the appellant insurers provided liability coverage. Glidden I paid premiums for that protection. The losses arose during the policy period. The losses were covered under the insurance contracts. Does the transfer of Glidden I’s liabilities mean that the coverage never arose? Does the coverage simply vanish as if it had never existed because the policies themselves were not transferred to Glidden III? No. “[The] right to indemnity followed the liability rather than the policy itself. As a result, even though the parties did not assign [the] policy in the agreement, the right to indemnity under the policy *481transferred to [the successor] by operation of law.” N. Ins. Co. of N.Y. v. Allied Mut. Ins. Co. (C.A.9, 1992), 955 F.2d 1353, 1357. When the loss arises, the coverage implications become a part of the nature of the liability; the coverage is attached to the liability.
Anderson Kill & Olick, P.C., William G. Passannante, Cathleen Cinella Tylis, and Cort Malone; Goodman Weiss Miller, L.L.P., Drew A. Carson, and Sarah H. Kostura, for appellee.
{¶ 59} The operation-of-law theory offers the simplest, cleanest solution to the problems concerning the effects of corporate restructuring on insurance policies and benefits. Only through recognition of the attachment of coverage to the liability can we have true predictability in corporate restructuring in Ohio. Only then can successor companies know with certainty that indemnity and defense costs will be transferred along with liabilities.
{¶ 60} Moreover, when coverage follows liability by operation of law, there is no risk that insurers will reap a windfall by denying coverage for covered losses based not upon the nature of the loss, but upon the postloss corporate maneuverings of the entity that paid for the coverage. Should a corporate structural change that negligibly affects an insurer’s obligation be the basis for the complete abrogation of coverage?
{¶ 61} The disappearance of coverage affects more than corporate successors— it greatly affects the victims of tortious acts. Families that suffered injuries long before Glidden III ever existed will be punished for the manner in which Glidden III came into being. The original tortfeasor may have been reorganized into unrecognizability, but the injuries it caused remain. Despite what the original corporation looked like, whether or not the current incarnation has the resources to face responsibility, the fact is that insurers agreed to cover those very injuries for which the victims seek compensation.
{¶ 62} Whether the motives for restructuring include an attempt to avoid responsibility for historical acts or to assign liability where it cannot be effectively dealt with, this court should not allow restructuring to also free insurers from their primary responsibility of defending lawsuits and insuring the harm up to the policy limits. The recognition of the transfer of coverage by operation of law holds insurers to their agreement to cover losses, simplifies corporate restructuring, and provides available damages for injured parties. I would affirm the court’s holding below.
Resnick, J., concurs in the foregoing opinion.
Reminger & Reminger Co., L.P.A., and Holly Marie Wilson; Tressler, Soderstrom, Maloney & Priess, Judith Fournie Helms, and Todd S. Schenck, for appellants American Motorists Insurance Company and Lumbermens Mutual Casualty Company.
Tucker Ellis & West, L.L.P., and Kevin M. Young; Hogan & Hartson, L.L.P., William J. Bowman, and H. Christopher Bartolomucci, for appellant Hartford Accident & Indemnity Company.
Davis & Young, L.P.A., and David J. Fagnilli; Cohn Baughman & Martin, Brian A. Frankl, and James F. Martin, for appellant Century Indemnity Company, as successor to CCI Insurance Company, as successor to Insurance Company of North America.
Dennis J. Bartek; Lord, Bissell & Brook, L.L.P., John B. Haarlow, and Michael P. Comiskey, for appellants Certain Underwriters at Lloyd’s, London, and London Market Insurance Companies.
Frantz Ward, L.L.P., Stephen F. Gladstone, and Travis F. Jackson; Wiley, Rein & Fielding, L.L.P., Laura A. Foggan, and John C. Yang, urging reversal for amicus curiae Complex Insurance Claims Litigation Association.
Anderson Kill & Olick (Illinois), P.C., Paul Walker-Bright, and Evan T. Knott; Taft, Stettinius & Hollister, L.L.P., and Timothy C. Sullivan, urging affirmance for amicus curiae M & M Metals International, Inc.