Baxter Healthcare Corp. v. California Ins. Guarantee Assn

In Baxter Healthcare Corp. v. California Ins. Guarantee Assn. (2000) 85 Cal.App.4th 306, two affiliated corporations, Baxter Healthcare Corporation (BHC) and Baxter International, Inc. (BII), sued CIGA seeking a judicial declaration that certain product liability claims against them should be covered by CIGA. (Baxter, supra, 85 Cal.App.4th at p. 309.) CIGA filed a motion for summary judgment contending the claims of BHC and BII were not covered claims because the corporations were not "the original claimant under the insurance policy in his or her own name" for purposes of section 1063.1, subdivision (c)(9)(B). (Baxter, supra, 85 Cal.App.4th at p. 310.) The trial court agreed and granted the motion for summary judgment. (Ibid.) The Court of Appeal affirmed. (Id. at p. 315.) In 1984, American Hospital Supply Company (AHSC) sold its breast implant business and retained responsibility for product liability claims from products it sold before the closing. (Baxter, supra, 85 Cal.App.4th at p. 309.) Later in 1984, Baxter Travenol Laboratories, Inc. (BTLab), acquired all of AHSC's stock. BTLab then merged with AHSC--BTLab being the surviving corporation after the merger. (Ibid.) Effective on the same day as the merger, BTLab assigned substantially all of the assets formerly owned by AHSC to Baxter Acquisition Sub., Inc. (BASI), and changed BASI's name to American Hospital Supply Corporation (AHSCorp). (Ibid.) In 1986, AHSCorp merged into Travenol Laboratories, Inc., which then changed its name to BHC (this corporation is one of the plaintiffs in the coverage action). In 1987, BTLab changed its name to BII (this corporation is the other plaintiff). (Baxter, supra, 85 Cal.App.4th at p. 309.) As a result of acquiring AHSC, BII and BHC were named as defendants in thousands of product liability lawsuits concerning breast implants. BII and BHC filed suit against the insurance companies that sold excess liability insurance policies to AHSC during the period in which the implants were manufactured and sold. Because the insurance companies had become insolvent, BII and BHC joined CIGA in their place. (Baxter, supra, 85 Cal.App.4th at p. 309.) In Baxter, the parties disputed whether BII and BHC qualified as an "original claimant under the insurance policy in his or her own name" for purposes of section 1063.1, subdivision (c)(9)(B). The plaintiffs argued that (1) AHSC, a named insured, became BII through the merger and (2) AHSC was reconstituted as BII and then BHC. (Baxter, supra, 85 Cal.App.4th at p. 311.) The Court of Appeal rejected these arguments and concluded BII and BHC did not qualify because "the policies are not in their names and AHSC, the named insured under the policies, no longer exists." (Id. at p. 312.) The court concluded that the statutory phrase in dispute must be read to mean "original insured" and that any other reading would do violence to the phrase. (Id. at p. 313.) The court noted that BII briefly was the parent corporation of AHSC, but stated that the parent corporation was not a named insured. (Baxter, supra, 85 Cal.App.4th at p. 313.) In addition, the court concluded that BHC was not AHSC as "'hereafter constituted'" because AHSC no longer existed in 1986 when BHC was created. (Ibid.)