State of Cal. v. Continental Insurance
55 Cal. 4th 186
| Cal. | 2012Background
- State seeks indemnity from multiple excess general liability insurers for federally ordered cleanup of Stringfellow Acid Pits.
- Site operated 1956–1972; damage is long-tail, continuous over several policy periods (1964–1976).
- Insurers argue coverage should be limited to damage occurring within each policy period; State argues all-sums with stacking applies.
- Trial court adopted all-sums, no stacking, per-occurrence approach (FMC) limiting recovery to a single policy period's limit.
- Court of Appeal adopted all-sums with stacking; Supreme Court granted review to resolve triggers, allocation, and stacking for long-tail loss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Trigger of coverage for long-tail injuries | State: continuous damage triggers all policies in effect during loss. | Insurers: Montrose limits trigger to each policy period; no all-sums across periods. | Continuous injury triggers all-sums coverage across periods. |
| Allocation method for long-tail losses | All insurers liable for all sums up to their limits; stacking permitted. | Pro rata allocation should apply across periods to limit overpayment. | All-sums allocation adopted; pro rata rejected. |
| Stacking across policy periods | Allow stacking to form an aggregate policy maximum; reflects long-tail reality. | Antistacking policies or FMC approach should limit stacking. | All-sums-with-stacking rule approved; FMC overruled. |
| Role of specific policy language 'during the policy period' | Insuring agreements are not limited by 'during the policy period'. | "During the policy period" should restrict liability. | Not limited by 'during the policy period'; all-sums applies so long as loss occurred while on risk. |
| Future contract language and antistacking provisions | Insurers can prevent stacking via antistacking clauses. | Antistacking clauses are permissible; absent them, stacking is allowed. | Antistacking provisions can eliminate stacking; absence permits stacking. |
Key Cases Cited
- Montrose Chemical Corp. of California v. Admiral Insurance Co., 10 Cal.4th 645 (1995) (continuous injury trigger extends coverage to all periods)
- Aerojet-General Corp. v. Transport Indemnity Co., 17 Cal.4th 38 (1997) (all-sums rule; coverage for entire ensuing loss)
- FMC Corp. v. Plaisted & Companies, 61 Cal.App.4th 1132 (1998) (antistacking ruling; rejected by California Supreme Court decision here)
- Stonewall Ins. Co. v. City of Palos Verdes Estates, 46 Cal.App.4th 1810 (1996) (adopts horizontal stacking; context for stacking approach)
- Owens-Illinois, Inc. v. United Ins. Co., 650 A.2d 974 (1994) (pro rata allocation in long-tail environmental claims)
- J.H. France Refractories Co. v. Allstate Ins. Co., 626 A.2d 502 (1993) (indemnity allocation for long-tail injuries)