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Liberty Mutual Fire Insurance issued workers’ compensation and general liability insurance policies to Shea Homes (Shea) since 2010.

Shea, a residential real estate developer, maintains an owner-controlled insurance program called the Shea Homes Partnership Insurance Program (SHPIP). Under the SHPIP, Shea purchases workers’ compensation insurance coverage for contractors enrolled in the program. Enrollment in the SHPIP is mandatory for all contractors working at Shea projects.

Falcon Framing Company, Inc. was an approved Shea trade partner and had been continuously enrolled in the SHPIP since at least 2009. On March 1, 2012, Falcon and Shea entered into a construction contract for the Shea Seaside project in Encinitas, California.

On April 5, 2012, Falcon formed a new corporate entity named FFC, Inc. (FFC). It conducted the same business, at the same office, with the same customers, suppliers, and equipment as Falcon. FFC acquired Falcon’s assets for no consideration and Falcon was dissolved on August 13, 2012.

Falcon did not notify Shea, Orion, or Liberty that they had dissolved Falcon and were continuing their business operations through FFC until August 20, 2012, when Marc Corbitt, an FFC employee suffered catastrophic injuries while working at the Shea Seaside project. At the time of the accident, Falcon had been paid in full for the Seaside project and had paid all of the premiums for the Liberty policy issued to Falcon.

FFC tendered the claim to Liberty and to Zenith, who had issued a worker’s compensation policy to Falcon for work on projects other than Shea jobsites. Liberty denied coverage for the claim. Zenith paid $3,239,003.86, subject to a reservation of rights, to resolve the claim. It then filed an action against Liberty and was awarded the full amount from Liberty. In a prior appeal, the judgment was reversed and remanded.

After remand, the trial court ruled that the Liberty policy did not provide coverage to FFC for Corbett’s injuries and that Liberty had no obligation to indemnify or reimburse Zenith for sums paid on FFC’s worker’s compensation claim. The Court of Appeal affirmed in the unpublished case of Zenith v. Liberty Mutual Fire Insurance.

FFC is not an insured under the Liberty policy terms. Zenith provides no legal support for its contention that the successor corporation of a named insured employer in a worker’s compensation policy acquires the named insured’s rights under the policy.

Falcon’s failure to notify Liberty of its dissolution and the formation of FFC after the date of the policy’s inception did not extend coverage to FFC. The plain language of the Liberty policy does not provide coverage to FFC.