14 Cal.App.5th 1306
Cal. Ct. App.2017Background
- Montrose manufactured DDT from 1947–1982 and faces large CERCLA liabilities for continuing environmental contamination; it purchased primary and many layered excess CGL policies across multiple years.
- Montrose sued its excess insurers seeking a declaratory judgment (32nd cause) that it may “electively stack” excess policies—i.e., access any excess policy so long as the underlying policies for that same policy year are exhausted—and to allocate liabilities as it chooses.
- Insurers (grouped as Continental insurers and Travelers) opposed and cross-moved, arguing Montrose must horizontally exhaust lower-lying coverage across all triggered years before higher excess layers have any duty to pay.
- The trial court denied Montrose’s summary adjudication and adopted a horizontal-exhaustion rule, granting insurers’ cross-motion; Montrose petitioned for writ of mandate to the Court of Appeal.
- The Court of Appeal held Montrose was not entitled to a blanket elective-stacking declaration (so denial of Montrose’s summary adjudication was correct) but reversed the trial court’s universal horizontal-exhaustion adjudication and directed a policy-by-policy analysis of coverage/duty.
Issues
| Issue | Plaintiff's Argument (Montrose) | Defendant's Argument (Insurers) | Held |
|---|---|---|---|
| Whether Montrose may ‘electively stack’ excess policies (access any excess policy so long as underlying limits in the same policy year are exhausted) | Elective stacking follows from Continental and from policy language stating attachment upon exhaustion of same-year underlying limits | Policies (and California precedent) require horizontal exhaustion: excess policies are excess to all underlying insurance (scheduled and ‘other insurance’), so all lower layers across years must be exhausted before higher excess pays | Montrose is not entitled to a universal elective-stacking declaration; summary adjudication for Montrose denied (elective-stacking rejected as a categorical rule) |
| Whether Continental compels elective stacking across excess layers/time | Continental permits stacking across policy years and thus supports insureds’ choice to allocate vertically | Continental does not control sequence of exhaustion; it depends on policy language and Continental did not decide when higher excess policies are triggered | Continental does not mandate elective stacking here; it provides limited guidance—policies must be interpreted by their terms |
| Role and effect of “other insurance” / policy language in determining exhaust sequence | "Other insurance" clauses concern insurer-to-insurer allocation and do not affect policyholder’s right to recovery or attachment of excess coverage | “Other insurance” language can make an excess policy excess to all underlying collectible insurance (scheduled and unscheduled) and is relevant to whether a higher excess attaches | "Other insurance" clauses may be dispositive; they must be given effect in context—some excess policies attach only after all underlying insurance is exhausted |
| Whether insurers were entitled to summary adjudication declaring universal duty (horizontal exhaustion) | Montrose: no universal rule; entitlement depends on each policy’s terms | Insurers: yes—given the policies before the trial court, horizontal exhaustion applies across the portfolio | Trial court erred to adjudicate duty universally; record/policy variation requires policy-by-policy determination, so insurers’ cross-motion on duty reversed in part |
Key Cases Cited
- Montrose Chemical Corp. v. Superior Court, 6 Cal.4th 287 (California Supreme Court) (background precedent involving Montrose and DDT contamination)
- State of California v. Continental Ins. Co., 55 Cal.4th 186 (California Supreme Court) (held long-tail injuries may permit stacking of policy limits across policy periods under the policies’ terms)
- Community Redevelopment Agency v. Aetna Casualty & Surety Co., 50 Cal.App.4th 329 (Court of Appeal) (excess policy with "other insurance" language held excess to all underlying collectible insurance)
- Dart Industries, Inc. v. Commercial Union Ins. Co., 28 Cal.4th 1059 (California Supreme Court) (primary insurer obligations and limitation on relevance of "other insurance" clauses in primary context)
- Carmel Development Co. v. RLI Ins. Co., 126 Cal.App.4th 502 (Court of Appeal) (demonstrates that "other insurance" clauses must be read in policy context; two excess policies at different layers can have different attachment rules)