State Of California v. Continental Insurance Company

55 Cal.4th 186 (2012)

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Nature of the Case

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Facts

P seeks indemnity from several of its insurers in connection with a federal court-ordered cleanup of the State's Stringfellow Acid Pits waste site. Each defendant insurer that is party to this appeal issued one or more excess commercial (also known as comprehensive) general liability (CGL) insurance policies to P between 1964 and 1976. In 1998, a federal court found P liable for negligence in investigating, choosing, and designing the site, overseeing its construction, failing to correct conditions at it, and delaying its remediation. P sued Ds in September 1993, seeking indemnification for its liability in the federal action. The court ruled that the policy limits under policies with multiple-year periods applied “per occurrence” and not annually. In April 2002, the trial court held that P's failure to remediate and its delay in remediating the site was not a breach of any duty to mitigate the insurers' damages. In September 2002, P brought a second suit, asserting related claims against additional insurers, including those which are parties to this appeal. The trial court held that each insurer was liable for damages, subject to its particular policy limits for the total amount of the loss. The court based this ruling on the “all sums” language in the insuring agreements. It also held that P could not recover the policy limits in effect for every policy period, and could not “stack,” or combine, policy periods to recover more than one policy's limits for covered occurrences. P had to choose a single policy period for the entire liability coverage, and it could recover only up to the total policy limits in effect during that policy period. A jury rendered special verdicts finding Ds had breached their policies. P had already entered into settlement agreements totaling approximately $120 million with several other insurers. The trial court required that these settlements reduce Ds' liability as setoffs. Under the trial court's one-occurrence, no-annualization, and no-stacking rulings, the most P could recover [from all insurers] was $48 million.” P had already recovered $120 million. The court entered judgment nominally in P's favor but in the amount of “$0.” P appealed. The Court of Appeal, like the trial court, rejected Ds' contention that they could not be liable for property damage occurring outside their respective policy periods. Once coverage was triggered, all of the insurers had to indemnify the insured for the loss. The Court of Appeal reversed the trial court’s ruling that prohibited P from stacking the total policy limits in effect during all policy periods. Ds appealed.