The Illinois Appellate Court for the Third District has held that persons with claims against a corporation dissolved for more than 5 years could not recover against the corporation’s liability insurers.
In this case, defendant insurers included Employers Insurance Co. of Wausau, TIG Insurance Co. and Travelers Casualty and Surety Co. The claimants were numerous individuals who were former employees of Sprinkmann Sons Corp. of Illinois who were diagnosed with mesothelioma and lung cancer. The claimants brought a lawsuit against the former Sprinkmann company, its previous owners and its liability insurers in 2011.
The former Sprinkmann company, however, had been dissolved in 2003 with certain of its assets having been sold to a new corporation, Sprinkmann Insulation Inc. The new Sprinkmann company did not acquire any liabilities or insurance policies of the older dissolved Sprinkmann company.
The claimants’ complaint acknowledged that their causes of action did not accrue until after the 5-year wind-up for the former Sprinkmann, as provided for under the Illinois Business Corporation Act, 805 ILCS 5/12.80.
Section 12.80 states that dissolution of a corporation does not impair any civil remedy against the company or shareholders for claims existing prior to dissolution if the lawsuit is commenced within 5 years after dissolution.
The insurers moved to dismiss on the ground that Section 12.80 barred the action against the former Sprinkmann company and that the claimants’ action thus constituted a direct action against the insurers, which is prohibited. The trial court agreed and granted the motion dismissing the claimants’ claim who brought this appeal.
The justice writing the majority opinion said Section 12.80 created a statute of repose for actions against a dissolved corporation, such as the former Sprinkmann. As for the claimants’ argument that the former Sprinkmann’s insurance policies nonetheless transferred to new shareholders by virtue of its purchase and assets, the justice said that was not possible because the purchase agreement provided neither for the acquisition of the former Sprinkmann’s liabilities or insurance liability policies.
The appeals panel also said that even if the policies were passed to the new corporation by operation of law, the claimants were still statutorily prohibited from bringing an action against the new corporation to reach those assets by virtue of Section 12.80.
Because the claims against the former Sprinkmann and its shareholders were barred, the court reasoned that the claimants’ lawsuit effectively constituted a direct action against the insurers. Such direct actions, however, are prohibited by Illinois public policy, at least if the issue of coverage is not effectively severed from any issue of the insured’s liability and assessment of damages.
The claimants also argued that the court was free to make new law that would be equitable to the claimants. They contended that the legislature’s failure to create a remedy was not an impediment to the court’s ability to do so. The court declined.
In the opinion it was observed that this was not a situation where the legislature had simply failed to fashion an equitable remedy. Rather, the legislature enacted a statute in the nature of a statute of repose that foreclosed a liability termination against the former Sprinkmann’s and its owners, at least in the absence of circumstances that did not here exist. The court accordingly affirmed the dismissal of the claims against the insurers.
Adams v. Employers Insurance Co. of Wausau, 2016 IL App (3d) 150418 (February 18, 2016).
Kreisman Law Offices has been handling catastrophic injury cases, wrongful death cases, construction work accident cases, diesel fumes injury cases, worker injury cases and truck accident cases for individuals and families who have been injured or killed by the negligence of another for more than 40 years, in and around Chicago, Cook County and its surrounding areas including, Palatine, Naperville, Wheaton, Evergreen Park, LaGrange, South Barring, South Holland, Chicago Heights, Oak Forest, Forest Park, Elmwood Park, Countryside, Cicero and Blue Island, Ill.
Related blog posts:
Guarantor’s Obligations Are Discharged When the Principal Obligor is Released Because of the Running of the Statute of Limitations
Illinois Appellate Court Reverses Decision Where Contractor was Entitled to Insurance Coverage for Vicarious Liability