In Brilliant National Services, Inc. v. Travelers Indemnity Co., 349 S.3d 581 (La. App. 2022), the insured had exposed various individuals to asbestos. The insured later transferred some of its assets to a successor company. The Court found that the transferred assets did not include the insurance policy. Additionally, a transfer of liability, generally, did not transfer insurance coverage by operation of law. Therefore, allegations brought against the successor entity did not trigger a duty to defend because the successor entity was not within the definition of “persons insured.”
As a general principle, a successor company does not assume its predecessor’s liabilities except when the successor company purchases all or substantially all of the predecessor’s assets. The extent of purchase is a fact issue. Under the facts of the Brilliant case, a successor business, Coastal Chemical Co., Inc., did not purchase all of the assets of the predecessor, but only the assets “necessary to operate a chemical distribution business.” The predecessor company retained its other assets and continued to operate thereafter. The insurance policy was not transferred to the successor in the sale. Under Louisiana statute, Civil Code Article 1821, the Louisiana legislature required that a person’s assumption of another’s liability must be done in writing to be enforceable against a third party. Under the statute, liabilities did not automatically transfer. As such, a successor was not entitled by operation of law to its predecessor’s insurance coverage. In order to transfer coverage, the transfer needed to be in writing.