While in most cases the company that purchases the assets of another company does not inherit the seller’s liability, there are four exceptions every buyer should be aware of that might transfer liability to buyer or purchasing company.

1. Examine the purchase agreement carefully.  It may require the buyer to assume the predecessor’s liabilities.
2. The transaction might be viewed as a merger.  In a merger, the selling company or predecessor’s rights and liabilities transfer to the buyer or surviving entity.
3. If the company buying the other company is a similar business to the company they are buying, it may be viewed as a continuation of the seller’s operation.
4. If it is determined that the transaction was fraudulent or for the purpose of the seller to avoid liability, liability could be transferred to the company that purchased the assets.

If any of the above possibilities exist, I recommend that you not only carry a product liability policy with higher than average liability limits, but that you also carry a product recall policy for added protection of you assets.