Environmental Liability of Dissolved Corporations in Delaware is Forever

Ever since the Supreme Court’s decision in Citizen’s United, an effort has been made to humanize corporations, culminating in Mitt Romney’s infamous pronouncement that “Corporations are people my friend.”  Now it turns out that corporations may not be entirely like people.  In a recent decision, the Delaware Court of Chancery in In the Matter of Krafft-Murphy Company, Inc. ruled that corporations are in at least one respect immortal in that their liability to third parties lives forever. 

In Krafft-Murphy, asbestos claimants sought to reach the unexhausted liability insurance of a dissolved corporation long after the expiration of the Delaware three year wind-down period.  The corporation, defended by its liability insurers, appeared for the purpose of establishing that it was indeed dead and could not respond to new claims.  Although the trial court agreed that a dissolved corporation was dead to new claims, the Court of Chancery reversed.  Despite acknowledging that the corporation had been dissolved, the court went on to say that there was no statute of limitations in Delaware that extinguished the corporation’s liability – which apparently will continue forever.  Upon the appointment of a receiver, the dissolved corporation could be resurrected for the limited purpose of responding to the suit and potentially distributing the proceeds of the corporation’s  insurance if the claimants in the suit prevail.  

Given that many corporations are organized under Delaware law, the Krafft-Murphy decision may provide a route to gain access to the insurance of long-dissolved corporations.

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