In a continuous and progressive injury case, an excess policy was not triggered until all collectible primary policies were exhausted, but multiple primary policies issued by the same insurer could not be “stacked.” ( Kaiser Cement and Gypsum Corporation v. Insurance Co. of the State of Pennsylvania (2013) 215 Cal.App.4th 210)
Facts
From 1944 through the 1970’s, Kaiser Cement and Gypsum Corporation (Kaiser) operated facilities at which Kaiser manufactured various asbestos-containing products. Later, thousands of claimants sued Kaiser for bodily injuries resulting from alleged exposure to Kaiser’s asbestos products.
Between 1947 and 1984, Kaiser had comprehensive general liability and excess liability coverage through various insurers. Among Kaiser’s general liability insurers was Truck Insurance Exchange (Truck), which had issued general liability policies in effect from 1964 to 1983. At least one of the Truck general liability policies – the one in effect for 1974 – had a $500,000 per occurrence limit with no annual aggregate limit and only a $5,000 per occurrence deductible. Among Kaiser’s excess insurers was Insurance Company of the State of Pennsylvania (ICSOP), which had issued first layer excess policies in effect from 1974 to 1977. The ICSOP excess policies – including the one in effect for 1974 – provided coverage for loss in excess of the retained limit up to $5,000,000 per occurrence.
Kaiser sued Truck, ICSOP and other insurers to determine the scope of coverage available to Kaiser. Kaiser first obtained a ruling that each individual asbestos claim constituted a separate “occurrence.” Kaiser then selected Truck’s 1974 general liability policy (which had a $500,000 per occurrence limit but no aggregate limit) to respond to all asbestos claims involving injury partially occurring during 1974. Thereafter, Kaiser obtained a ruling that to the extent any individual asbestos claim exceeded the $500,000 per occurrence limit of Truck’s 1974 general liability policy, ICSOP’s 1974 excess policy would immediately apply. ICSOP appealed that ruling, asserting that ICSOP’s excess policy should not attach until all other collectible general liability policies had been exhausted.
Holding
The appellate court agreed that ICSOP was not responsible to indemnify Kaiser for losses until all collectible primary policies had been exhausted. The court emphasized that the ICSOP 1974 excess policy covered Kaiser for ultimate net loss in excess of the “retained limit,” and defined “retained limit” as an amount equal to the limits of liability indicated in the schedule of underlying insurance ” plus the applicable limit(s) of any other underlying insurance collectible by the Insured .” Thus, under the language of ICSOP’s 1974 excess policy and the principle of “horizontal exhaustion,” ICSOP’s 1974 excess policy did not apply until all other collectible primary policies had been exhausted.
The appellate court then turned to the issue of which primary policies were actually “collectible.” The court acknowledged that in a continuous injury situation, consecutive primary policies can be “stacked” across multiple policy periods unless a policy contains “anti-stacking” language . Here, according to the court, Truck’s general liability policies did contain “anti-stacking” language. Specifically, Truck’s general liability policies provided that “[t]he limit of liability stated in this policy as applicable ‘per occurrence’ is the limit of the Company’s liability for each occurrence” and that “the limit of the Company’s liability as respects any occurrence … shall not exceed the per occurrence limit designated in the Declarations.” The appellate court emphasized that this language “does not say that the per occurrence limit is the limit of the company’s liability under the policy,” but rather “says that the per occurrence limit is the limit of the company’s liability.” According to the appellate court, this was sufficient “anti-stacking” language to avoid the “stacking” rule that would otherwise apply. As such, ICSOP could not require that all of the Truck primary policies be “stacked” before ICSOP’s 1974 excess policy would apply.
Notwithstanding the above rulings, the appellate court remanded the case to the trial court to determine whether Kaiser had coverage under any general liability policies issued by insurers other than Truck . The appellate court indicated that if Kaiser had already exhausted all other general liability policies through other insurers, then for any individual asbestos claim that exceeded the $500,000 per occurrence limit of Truck’s 1974 general liability policy, ICSOP’s 1974 excess policy would immediately apply.
Comment
In State of California v. Continental Ins. Co. (2012) 55 Cal.4th 186 , the California Supreme Court held that in a continuous injury case, consecutive primary policies can be “stacked” across multiple policy periods in order to increase indemnity coverage available to an insured. However, the Supreme Court also made it clear that a primary insurer could avoid this result “by specifically including an ‘anti-stacking’ provision in its policy.”
In the above Kaiser case, the Court of Appeal concluded that the Truck general liability policies did contain “anti-stacking” language that was sufficient to avoid “stacking” of those policies. As noted, the Truck policies provided that “[t]he limit of liability stated in this policy as applicable ‘per occurrence’ is the limit of the Company’s liability for each occurrence.” As to that language, the appellate court did “not know what more Truck could have said when the policy was drafted in 1974 to make clear that its policy’s limitation-of-liability term was an absolute cap on its per occurrence exposure – and, as such, it is fundamentally inconsistent with ‘stacking’ the liability limits of the several Truck policies.” It remains to be seen whether California appellate courts will reach the same conclusion. In any event, this result will apply only to the extent that one insurer has issued multiple primary policies.