WILMINGTON, Del. (Legal Newsline) - Saying there was evidence a long-bankrupt manufacturer of asbestos gaskets had valuable insurance policies when it was dissolved, a Delaware judge reversed the cancellation of the company’s corporate status and ordered a receiver to be appointed to investigate further.
Linda A. Cook is suing Reinz Wisconsin Gasket, one of many companies she and her husband Roland sued over asbestos exposure he claimed to have suffered from various products. Roland died in 2022.
Reinz Wisconsin had its roots in a company founded in 1943 to make wartime gaskets and was purchased by Dana Corp. in 1994. Dana, like many companies that made asbestos-containing products, filed for bankruptcy in 2006 and listed RWG as solvent, with unidentified insurance assets, in its reorganization plan filed in 2007.
The Cooks sued RWG in federal court in Massachusetts, but the action shifted to Delaware after the company proposed a “Wind Up Plan” to dissolve itself as a Delaware corporation. The plaintiffs asked the Delaware Chancery Court to nullify the cancellation as a bad faith to attempt paying asbestos claims and to appoint a receiver to determine if the company had any insurance policies or assets. In a March 20 decision, Judge Morgan Zurn agreed.
Lawyers for RWG opposed the motion, saying the company separated itself from asbestos liabilities and any insurance coverage back in 1981 and had no assets when it dissolved. (The company’s appearance in court led Judge Zurn to muse in a footnote: “how the Company can retain counsel and itself appear in this action when it has been cancelled, and counsel insists it should remain cancelled, is a metaphysical wonder.”)
In her order, Judge Zurn said Cook wouldn’t be an actual creditor of RWG until she had a judgment against the company, but she had standing to seek a receiver under a law extending the privilege to anyone with “good cause” to challenge cancellation.
The judge also ruled that it was “reasonably likely” RWG had insurance policies when it was dissolved. Evidence at trial showed there might be unidentified prepaid insurance policies, Aetna workers’ compensation policies and corporate insurance with Kemper or CNA.
In 2016, Enstar, which buys bankrupt companies with insurance to settle asbestos claims, bought Dana and RWG and Dana became DCo. Employees found copies of RWG’s CNA policies while cleaning out an office in 2021. The company also possibly could tap directors’ and officers’ insurance and a German reinsurance policy, the judge ruled.
There is some risk for Cook going forward, the judge concluded. Since she would benefit from finding any assets to pay her claim, she “must bear the risk that her efforts are in vain.” If the receiver doesn’t find any assets, she will have to pay the receiver’s fee.