(Article from Insurance Law Alert, April 2026)
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Holding
The Delaware Chancery Court denied a petition to void the certificate of cancellation for Reinz Wisconsin Gasket Company (“RWG”). The court determined that alleged insurance rights did not constitute “assets” under the Delaware LLC Act, and thus RWG’s dissolution complied with the law. In re Reinz Wis. Gasket LLC, 2026 Del. Ch. LEXIS 164 (Del. Ch. Apr. 2, 2026).
Background
The petitioner, a widow of a decedent pursuing an asbestos-related wrongful death claim, alleged that RWG was obligated to preserve assets, including insurance policies and related claims, to cover both current and future asbestos liabilities under the Delaware LLC Act. She contended that, at the time of dissolution, RWG’s principal assets constituted unexhausted insurance policies and related insurance coverage claims. She argued that RWG’s failure to preserve these rights rendered its dissolution invalid under Sections 18-803 and 18-804 of the Delaware LLC Act.
Decision
The court’s analysis focused on whether the alleged insurance rights qualified as assets under Delaware law. Citing In re Krafft-Murphy Co., 82 A.3d 696, 701 (Del. 2013), the court held that contingent rights, such as insurance policies, can only be considered assets if they are “capable of vesting” and “represent significant potential indemnification value to the company.” The petitioner failed to meet this standard.
First, the court found insufficient evidence that specific asbestos-era insurance policies even existed. The record contained only fragmentary references—such as correspondence and internal insurer memoranda—lacking concrete policy details. Without evidence of the policies’ existence, the court concluded they could not be treated as assets.
Second, the court rejected the argument that insurance coverage for historical asbestos exposure transferred to RWG through a 1981 asset sale. The purchase agreement referenced the policies but did not provide sufficient documentation to confirm their transfer. Accordingly, the court concluded that RWG could not claim coverage for pre-sale asbestos liabilities.
Third, the court held that post-sale Travelers umbrella policies offered no value for asbestos claims. These policies only applied after the exhaustion of underlying primary coverage, and the petitioner offered no evidence that this prerequisite had been met. The court also noted that RWG lacked the resources to exhaust primary coverage. Although the court acknowledged the theoretical possibility that someone other than RWG could exhaust the underlying policies, it found no evidence making that scenario realistic. Because the umbrella policies could not be invoked on the record presented, they were not assets that could vest.
Finally, the court rejected the petitioner’s claims related to potential insurance litigation and fiduciary duty breaches. Without viable insurance coverage, the court ruled these claims lacked value. Concluding that RWG had no assets to preserve, the court affirmed the validity of the dissolution.
Comments
This decision underscores a critical aspect of asbestos litigation, where insurance frequently serves as the primary source of recovery. However, Delaware courts may not recognize speculative or unverifiable insurance rights as assets, particularly when such coverage cannot be proven to exist or realistically accessed.