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KNOLL PHARMACEUTICAL CO. v. AUTOMOBILE INS. CO.

October 5, 2001

KNOLL PHARMACEUTICAL CO., PLAINTIFF,
v.
AUTOMOBILE INSURANCE CO. OF HARTFORD, NATIONAL UNION FIRE INSURANCE CO. OF PITTSBURGH, PA AND ROYAL INSURANCE CO. OF AMERICA, DEFENDANTS.



The opinion of the court was delivered by: Castillo, District Judge

MEMORANDUM OPINION AND ORDER

Knoll Pharmaceutical Company ("Knoll") filed this diversity lawsuit, seeking a declaration that Automobile Insurance Company of Hartford ("Automobile"), National Union Fire Insurance Company of Pittsburgh, Pennsylvania ("National Union") and Royal Insurance Company of America ("Royal")(collectively "Defendant Insurers") owed a duty to defend Knoll in the underlying case, In re Synthroid Mktg. Litig., 110 F. Supp.2d 676 (N.D.Ill. 2000). On July 13, 2001, we partially granted Knoll's motion for judgment on the pleadings and denied Defendant Insurers' motions for judgment on the pleadings. (R. 60.) Further briefing was required to adjudicate the present issue, whether Defendant Insurers' policies transferred as a matter of law to Knoll. This motion is being treated as Knoll's motion for summary judgment. For the reasons set forth below, Knoll's motion for summary judgment is granted. (R. 23-1.)

RELEVANT FACTS

We will assume familiarity with our prior opinion in this case, Knoll Pharm. Co. v. Auto. Ins. Co. of Hartford, Nat'l Union Fire Ins. Co. of Pittsburgh, PA and Royal Ins. Co. of Am., 152 F. Supp.2d 1026 (N.D. Ill. 2001) ("Knoll I"), and will not needlessly repeat the facts not relevant to this motion.

Boots USA and Knoll combined into one entity through two transactions. First, in March 1995, Boots PLC sold various assets to Basfin Corporation ("Basfin") through an asset purchase agreement.*fn2 In this initial asset purchase agreement, Boots PLC sold all of the shares of Boots USA, as well as the Business Plant and Machinery, Business Stocks and the Business Goodwill, to Basfin. The sale of Boots USA's shares included all rights attached to or accruing to these shares and provided for the name change to Knoll Pharmaceutical Company-B. Inc.*fn3 In addition, the asset purchase agreement contained specific provisions to guide the transfer of the seller's contracts. Such contracts were defined as:

All the contracts and engagements relating exclusively to the Business or relating in part to the Business (but then only to the extent that the same do so relate) current at Completion to which the Seller is a party or the benefit of which is held in trust for or has been assigned to it but excluding: (i) all policies of insurance, past and present, relating to any aspect of the Business.

(3. 69, Pl.'s Reply Mem., App. B at 11.) The asset purchase agreement defined the "seller" as Boots PLC.

The second transaction combining Boots USA with Knoll Pharmaceutical Company was the April 1995 statutory merger of the two entities. (Id, App. F, Certificate of Merger.) After the merger, consumers filed several lawsuits, mostly class action, against Knoll regarding the sale and marketing of the prescription drug Synthroid between 1990 and 1997. The present case arose when Defendant Insurers denied that they had a duty to defend Knoll under their insurance policies. In Knoll I, we granted Knoll's motion for judgment on the pleadings, finding that Defendant Insurers had a duty to defend Knoll because the allegations corresponded to and arose out of the covered offenses. We required further briefing, however, on the issue of whether the insurance policies transferred from Boots USA to Knoll through the transactions described above. In order to allow for the inclusion of materials outside the pleadings, we transformed Knoll's motion for judgment on the pleadings to one for summary judgment. Presently before this Court is Knoll's motion for summary judgment on the transferability of the policy rights.

STANDARD OF REVIEW

Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). A genuine issue for trial exists only when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Accordingly, the nonmovant must "come forward with specific facts showing that there is a genuine issue for trial." Miller v. Am. Family Mut. Ins. Co., 203 F.3d 997, 1003 (7th Cir. 2000) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). It is not however, the task of this Court to "scour the record" in search of a genuine issue, for we rely on the nonmoving party to identify "with reasonable particularity" the evidence that militates against summary judgment. Richard v. Combined Ins. Co. of Am., 55 F.3d 247, 251 (7th Cir. 1995).

ANALYSIS

I. Transferability Through the Asset Purchase Agreement

Knoll maintains that the rights and duties under the insurance policies were unaffected by the initial asset purchase agreement that transferred the shares of Boots USA from Boots PLC to Basfin. (R. 69, Pl.'s Reply Mem. at 7.) Therefore, Knoll contends that the provisions in the agreement referring to the transfer of contractual obligations and liabilities are irrelevant to this matter and that the analysis ...


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