Greb v. Diamond International Corp., __ Cal.4th __, __ Cal. Rptr.4th __ (February 21, 2013)

In a victory for liability insurers against the asbestos plaintiffs’ bar, the California Supreme Court ruled in Greb v. Diamond International Corp., that California’s statutory provision that a dissolved corporation continues to exist perpetually for purposes of being named as a defendant in a suit does not apply to dissolved foreign corporations. Instead, the law of the state of incorporation governs how long a foreign corporation can be sued after it is dissolved, even for suits by injured California residents. Diamond International Corporation was a dissolved Delaware corporation, and the Supreme Court held that the three-year Delaware survival statute barred an asbestos bodily injury suit in California filed more than three years after the corporation was dissolved under Delaware law. The practical effect is that the dissolved corporation’s insurers do not have any liability for suits filed more than three years after the Delaware dissolution, because the plaintiff cannot obtain a judgment against the insured necessary to bring a direct action against the liability insurer.

California law had been conflicting on this issue since the mid-1980’s, with the most recent decision (1986) holding that the California perpetual survival statute applied to foreign corporations. North American Asbestos Corp. v. Superior Court, 180 Cal.App.3d 902, 225 Cal.Rptr. 877 (1986). This essentially allowed asbestos plaintiffs to bring suits against dissolved foreign corporations decades after the survival period authorized by their state of incorporation in hopes that the trial judge would follow the decision applying California law out of sympathy for the asbestos plaintiff.