Supreme Court of California Justia
Citation State v. Cont'l Ins. Co., 55 Cal. 4th 186 (2012), as modified 55 Cal.4th 568c (Sept. 19, 2012); 281 P.3d 1000; 145 Cal. Rptr. 3d 1
State of Cal. v. Continental Insurance

Filed 8/9/12


Plaintiff, Cross-Defendant
and Appellant,
Ct. App. 4/2
COMPANY et al.,
Riverside County
Defendants, Cross-
Complainants and Appellants; )
Super. Ct. No. 239784
Defendant, Cross-
Complainant and Respondent. )

This case considers complex questions of insurance policy coverage
interpretation in connection with a federal court-ordered cleanup of the state‟s
Stringfellow Acid Pits waste site. We initially address the “ „continuous injury‟
trigger of coverage,” as that principle was explained in Montrose Chemical Corp.
v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 655 (Montrose) and the “all sums” rule
adopted in Aerojet-General Corp. v. Transport Indemnity Co. (1997) 17 Cal.4th
38, 55-57 (Aerojet), and conclude that the principles announced in those cases
apply to the insurers‟ indemnity obligations in this case, so long as the insurers
insured the subject property at some point in time during the loss itself.

Because we conclude that the continuous injury trigger and all sums rule
apply to the duty to indemnify here, we must also determine how best to allocate
the indemnity duty among the insurers responsible for covering the property loss.
As we explain, we conclude that the Court of Appeal below correctly applied the
“all-sums-with-stacking” allocation rule. We therefore affirm the judgment of the
Court of Appeal.
The State of California (State) seeks indemnity from several of its insurers
in connection with a federal court-ordered cleanup of the State‟s Stringfellow Acid
Pits waste site.1 The site was an industrial waste disposal facility that the State
designed and operated from 1956 to 1972. Each insurer that is party to this appeal
issued one or more excess commercial (also known as comprehensive) general
liability (CGL) insurance policies to the State between 1964 and 1976.2 The site
was uninsured before 1963, and after 1978.
Insurers are Continental Insurance Company (Continental), successor in
interest to Harbor Insurance Company (Harbor); Continental Casualty Company
(Casualty), successor by merger to CNA Casualty Company of California (CNA);
Yosemite Insurance Company (Yosemite); Stonebridge Life Insurance Company
(Stonebridge), successor of Beneficial Fire & Casualty Company (Beneficial) (see
post, fn. 3); Horace Mann Insurance Company (Horace Mann); and Employers
Insurance of Wausau (Wausau).
Excess liability insurance is coverage “whereby, under the terms of the
policy, liability attaches only after a predetermined amount of primary insurance
has been exhausted.” (2 Cal. Insurance Law & Practice (Matthew Bender 1986)
The Insurance Contract, § 14.02[1], p. 14-4.) Frequently there are several layers
of secondary coverage, sometimes referred to as “excess insurance.” (Ibid.; see
Ins. Code, § 676.6, subd. (b).)

In 1955, a state geologist determined that a Riverside County quarry was a
suitable location for the disposal of industrial waste. According to the geologist‟s
report, the site was a canyon lined on its bottom with impermeable rock. The
geologist advised the State to build a concrete barrier dam to close a 250-foot gap
in the canyon‟s natural walls. He claimed that, once the dam was in place, “the
operation of the site for industrial wastes [would] not constitute a threat of
pollution.” The State subsequently developed the facility, which went into
operation in 1956, and eventually received more than 30 million gallons of
industrial waste.
In reality, the site suffered from three major flaws that made it ill-suited to
serve as an industrial waste facility. First, the state geologist had failed to identify
an underground aquifer located 70 feet below the canyon floor that facilitated the
movement of groundwater into and out of the site. Second, the rock underlying
the canyon floor was fractured, so it allowed waste to leak into the groundwater
system and escape the facility. Third, the barrier dam proved ineffective. It
permitted contaminants to escape the facility during heavy rains in 1969 and again
in 1978. The severity of the latter event forced the State to conduct a “controlled
discharge” of contaminants into Pyrite Channel. The ensuing plume of waste
extended for miles. The State closed the facility in 1972 after discovering the
groundwater contamination.
In 1998, a federal court found the State liable for, inter alia, negligence in
investigating, choosing, and designing the site, overseeing its construction, failing
to correct conditions at it, and delaying its remediation. The State was held liable
for all past and future cleanup costs. The State claims costs associated with the
Stringfellow site remediation could reach $700 million. The insurers stipulate that
the State is liable for at least $50 million. The State filed an action against several

of its insurers in September 1993, seeking indemnification for its liability in the
federal action.
The pertinent language of all the policies at issue is essentially identical.
Under the heading “Insuring Agreement,” insurers agreed “[t]o pay on behalf of
the Insured all sums which the Insured shall become obligated to pay by reason of
liability imposed by law . . . for damages . . . because of injury to or destruction of
property, including loss of use thereof.” Limits on liability in the agreements were
stated as a specified dollar amount of the “ultimate net loss [of] each occurrence.”
“Occurrence” was defined as meaning “an accident or a continuous or repeated
exposure to conditions which result in . . . damage to property during the policy
period . . . .” In addition, “ „ultimate net loss‟ [was] understood to mean the
amount payable in settlement of the liability of the Insured arising only from the
hazards covered by this policy after making deductions for all recoveries and for
other valid and collectible insurances . . . .”
The trial was conducted in multiple phases. At the conclusion of a June
1999 bench trial, the court ruled that the policy limits under policies with multiple-
year periods applied “per occurrence” and not annually. Following this, in April
2002, the trial court held that the State‟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, the State brought a second suit, asserting related
claims against additional insurers, including those which are parties to this appeal.
This case was consolidated with the first action, and defendant insurers in the
second suit agreed to be bound by all prior rulings in the original action. All
parties stipulated that the property damage that the Stringfellow site‟s selection,
design, and construction caused took place continuously throughout the defendant
insurers‟ multiple consecutive policy periods from 1964 to 1976.

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. (Ante, at p. 4.) It also held
that the State 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. The court then concluded that the State
had to choose a single policy period for the entire loss coverage, and it could
recover only up to the specific single policy limit in effect at the time the loss
occurred. The court based its ruling on the decision in FMC Corp. v. Plaisted &
Companies (1998) 61 Cal.App.4th 1132 (FMC), which prevented an insured from
stacking multiple consecutive policies in a case in which the insured had caused
toxic contamination “over a period of many years” (id. at p. 1142).
In May 2005, a jury in phase three of the trial rendered special verdicts
finding the insurers had breached their policies. By that time, the State had
already entered into settlement agreements totaling approximately $120 million
with several other insurers. The trial court required that these settlements reduce
the insurers‟ liability as setoffs. Therefore, “[u]nder the trial court‟s one-
occurrence, no-annualization and no-stacking rulings, the most the State could
recover [from all insurers] was $48 million.” Because the State had already
recovered $120 million, the court entered judgment nominally in the State‟s favor,
but in the amount of “$0.”
The State filed an appeal and, with the exception of Wausau, all of the
insurers filed cross-appeals. The Court of Appeal affirmed in part and reversed in
part the trial court‟s ruling. The Court of Appeal, like the trial court, rejected the
insurers‟ contention that they could not be liable for property damage occurring
outside their respective policy periods. It held that once coverage was triggered,
all of the insurers had to indemnify the insured for the loss. However, the Court of

Appeal reversed the trial court‟s ruling that prohibited the State from stacking the
total policy limits in effect for any one policy period. In doing so, the Court of
Appeal rejected the holding of FMC, supra, 61 Cal.App.4th 1132, characterizing
that antistacking decision as “flawed and unconvincing.”
Our grant of review followed the insurers‟ petitions for review.
A. Background

1. Standard of Review and Insurance Law Principles
In general, interpretation of an insurance policy is a question of law that is
decided under settled rules of contract interpretation. (E.M.M.I. Inc. v. Zurich
American Ins. Co. (2004) 32 Cal.4th 465, 470; Waller v. Truck Ins. Exchange, Inc.
(1995) 11 Cal.4th 1, 18.) “ „While insurance contracts have special features, they
are still contracts to which the ordinary rules of contractual interpretation apply.‟
(Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264; see AIU [Ins. Co.
v. Superior Court (1990)] 51 Cal.3d [807,] at pp. 821-822.)” (Foster-Gardner,
Inc. v. National Union Fire Ins. Co. (1998) 18 Cal.4th 857, 868.) “The
fundamental goal of contractual interpretation is to give effect to the mutual
intention of the parties.” (Bank of the West v. Superior Court, supra, 2 Cal.4th at
p. 1264; Civ. Code, § 1636.) “Such intent is to be inferred, if possible, solely from
the written provisions of the contract.” (AIU, supra, 51 Cal.3d at p. 822; Civ.
Code, § 1639.) “If contractual language is clear and explicit, it governs.” (Bank
of the West v. Superior Court, supra, 2 Cal.4th at p. 1264.) “ „The “clear and
explicit” meaning of these provisions, interpreted in their “ordinary and popular
sense,” unless “used by the parties in a technical sense or a special meaning is
given to them by usage” ([Civ. Code,] § 1644), controls judicial interpretation.
(Id., § 1638.)‟ [Citations.]” (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th
at p. 18.)

“A policy provision will be considered ambiguous when it is capable of two
or more constructions, both of which are reasonable.” (Waller v. Truck Ins.
Exchange, Inc, supra, 11 Cal.4th at p. 18, citing Bay Cities Paving & Grading,
Inc. v. Lawyers’ Mutual Ins. Co. (1993) 5 Cal.4th 854, 867.) A term is not
ambiguous merely because the policies do not define it. (Bay Cities Paving,
supra, 5 Cal.4th at p. 866; Bank of the West v. Superior Court, supra, 2 Cal.4th at
pp. 1264-1265; Castro v. Fireman’s Fund American Life Ins. Co. (1988) 206
Cal.App.3d 1114, 1120.) Nor is it ambiguous because of “[d]isagreement
concerning the meaning of a phrase,” or “ „the fact that a word or phrase isolated
from its context is susceptible of more than one meaning.‟ ” (Castro v. Fireman’s
Fund American Life Ins. Co., supra, 206 Cal.App.3d at p. 1120.) “ „[L]anguage in
a contract must be construed in the context of that instrument as a whole, and in
the circumstances of that case, and cannot be found to be ambiguous in the
abstract.‟ ” (Bank of the West v. Superior Court, supra, 2 Cal.4th at p. 1265, italics
omitted, quoting Producers Dairy Delivery Co. v. Sentry Ins. Co. (1986) 41 Cal.3d
903, 916, fn. 7.) “If an asserted ambiguity is not eliminated by the language and
context of the policy, courts then invoke the principle that ambiguities are
generally construed against the party who caused the uncertainty to exist (i.e., the
insurer) in order to protect the insured‟s reasonable expectation of coverage.” (La
Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co. (1994) 9 Cal.4th 27,
37.) We now apply these principles to the present case.

2. “Long-tail” Claims
Disputes like the one here frequently occur in the context of environmental
damage and toxic exposure litigation. The kind of property damage associated
with the Stringfellow site, often termed a “long-tail” injury, is characterized as a
series of indivisible injuries attributable to continuing events without a single
unambiguous “cause.” Long-tail injuries produce progressive damage that takes

place slowly over years or even decades. Traditional CGL insurance policies,
including those drafted before such environmental suits were common, are
typically silent as to this type of injury. (Hickman & DeYoung, Allocation of
Environmental Cleanup Liability Between Successive Insurers (1990) 17 N. Ky.
L.Rev. 291, 292 (Hickman & DeYoung).) Because of this circumstance, many
insurers are unwilling to indemnify insureds for long-tail claims. Their refusal to
indemnify often causes insureds to sue for coverage. As the present case
highlights, these suits tend to be complex. Typically they involve dozens of
litigants and even larger numbers of insurance policies covering multiple time
periods that stretch back over many years.
It is often “virtually impossible” for an insured to prove what specific
damage occurred during each of the multiple consecutive policy periods in a
progressive property damage case. (Hickman & DeYoung, supra, at p. 292.) If
such evidence were required, an insured who had procured insurance coverage for
each year during which a long-tail injury occurred likely would be unable to
recover. “While CGL policies [such as the ones at issue here] limit coverage to
their policy period, the policies . . . require only that some damage occur during
the policy period. . . . Unfortunately, CGL policies leave unanswered the crucial
question for long-tail injuries: when does a continuous condition become an
„occurrence‟ for the purposes of [triggering] insurance coverage?” (Bratspies,
Splitting the Baby: Apportioning Environmental Liability Among Triggered
Insurance Policies (1999) 1999 B.Y.U. L.Rev. 1215, 1228-1229, fn. omitted
B. Montrose and Aerojet
While the term “trigger of coverage” does not appear in the language of the
CGL insurance policies here, it is a term of “convenience used to describe that
which, under the specific terms of an insurance policy, must happen in the policy

period in order for the potential of coverage to arise. The issue is largely one of
timing — what must take place within the policy’s effective dates for the potential
of coverage to be „triggered‟?” (Montrose, supra,10 Cal.4th at p. 655, fn. 2.) In
Montrose, we held that in the context of a third party liability policy “property
damage that is continuous or progressively deteriorating throughout several policy
periods is potentially covered by all policies in effect during those periods.” (Id. at
p. 655.) In that case, the dispute centered on a series of successive liability
policies that seven insurers issued covering a 26-year period. (Id. at p. 656.) At
issue was whether an insurer whose policy covered only the last four years of this
period had a duty to defend suits alleging continuous and progressive property
damage and bodily injury that resulted from hazardous chemicals that the insured
manufactured beginning before, but continuing during, the insurer‟s policy period.
This court held that “ „[p]roperty damage‟ ” was “ „physical injury to or
destruction of tangible property which occurs during the policy period . . . .’ ” (Id.
at p. 668.) The policy defined “ „occurrence‟ ” as “ „an accident, including
continuous or repeated exposure to conditions, which results in . . . property
damage . . . .‟ ” (Id. at p. 669; see also id. at pp. 671-673.) Under the insurance
policy language at issue in Montrose, we determined that a continuous condition
becomes an occurrence for the purposes of triggering insurance coverage when
“ „property damage‟ ” results from a causative event consisting of “the accident or
„continuous and repeated exposure to conditions.‟ ” (Id. at p. 669.) The limitation
on potential indemnity was that the damage must “ „occur‟ during the policy
period, and „. . . result[]‟ from the accident or „continuous and repeated exposure
to conditions.‟ ” (Ibid.)
In 1997, this court again was asked to interpret the all sums insurance
policy language in determining an insurer‟s defense duties under a similar CGL
policy. We noted that “the „settled rule‟ of the case law” is that “ „an insurer on the

risk when continuous or progressively deteriorating [property] damage or [bodily]
injury first manifests itself remains obligated to indemnify the insured for the
entirety of the ensuing damage or injury.‟ ” (Aerojet, supra, 17 Cal.4th at p. 57, fn.
10, italics added by the Aerojet court.) Although Aerojet, like Montrose,
principally involved the duty to defend, the issue the court addressed included the
question whether the insurers could require the insured to pay any part of the
defense costs. (Id. at pp. 55-56.) Aerojet reasoned that the insurers would be
liable to indemnify the insured against all claims that resulted from some
triggering harm during the respective policy periods, even if the claims arose after
the policy period expired. (Id. at p. 71.) Therefore, the insurers were responsible
for defending the insured for all claims that involved the triggering damage.
(Ibid.) Aerojet understood Montrose as extending insurers‟ indemnity obligations
beyond the expiration of the policy period where there has been a continuous loss.
In other words, under Aerojet, as long as the property is insured at some point
during the continuing damage period, the insurers‟ indemnity obligations persist
until the loss is complete, or terminates. (Ibid.)3 As the present Court of Appeal
observed, Aerojet‟s “all sums” approach to the duty to indemnify was essential to
its holding regarding the duty to defend.
Similar reasoning applies to the indemnity question presented here. Neither
the State nor the insurers dispute that progressive damage to property at the
Stringfellow site “occurred” during numerous policy periods. In addition, the
insurers concede that in cases such as this it is impossible to prove precisely what
My concurring and dissenting opinion in Aerojet (Aerojet, supra, 17
Cal.4th at pp. 88-92 (conc. & dis. opn. of Chin, J.)) related to the allocation of
defense costs to one insurer‟s limited cash flow and self-insurance policy at issue
in that case, and is not relevant to the present facts or decision.

property damage occurred during any specific policy period. The fact that all
policies were covering the risk at some point during the property loss is enough to
trigger the insurers‟ indemnity obligation.
The insurers rely on footnote 19 in Montrose, supra, 10 Cal. 4th at page
681, which generally noted that the court could not endorse a holding that insurers
are “jointly and severally liable for the full amount” of a long-tail loss. (Italics
omitted.) Aerojet explained the Montrose footnote. “In Montrose, we also made
plain that „successive‟ insurers „on the risk when continuous or progressively
deteriorating [property] damage or [bodily] injury first manifests itself‟ are
separately and independently „obligated to indemnify the insured‟: „[W]here
successive . . . policies have been purchased, bodily injury and property damage
that is continuing or progressively deteriorating throughout more than one policy
period is potentially covered by all policies in effect during those periods.‟
[Citation.] The successive insurers are not „jointly and severally liable.‟
[Citation.]” (Aerojet, supra, 17 Cal.4th at p. 57, fn. 10, italics added, quoting
Montrose, supra, 10 Cal.4th at pp. 686-687, 681, fn. 19.) Rather, as the Court of
Appeal observed, each insurer is severally liable on its own policy up to its policy
The insurers advocate that we adopt an alternative allocation scheme — a
pro rata rule for indemnity allocation. Pro rata (or apportionment) allocation
“assigns a dual purpose to the phrase „during the policy period‟ in the CGL
policy‟s definition of „occurrence.‟ The phrase serves both as a trigger of
coverage and as a limitation on the promised „all sums‟ coverage [language in the
„Insuring Agreement‟].” (Bratspies, supra, 1999 B.Y.U. L.Rev. at p. 1234.)
Courts apportioning coverage on a pro rata basis require the allocation of loss to a
particular policy be “proportionate to the damage suffered during that policy‟s
term.” (Interim 23, Appleman on Insurance 2d (Holmes ed. 2003)

§ 145.4[A][2][b], p. 25 & fn. 109 [citing cases].) “This approach emphasizes that
part of a long-tail injury will occur outside any particular policy period. Rather
than requiring any one policy to cover the entire long-tail loss, [pro rata] allocation
instead attempts to produce equity across time.” (Bratspies, supra, 1999 B.Y.U.
L.Rev. at p 1232.) Of states addressing similar questions concerning
indemnification for long-tail injuries involving multiple consecutive CGL policies,
several have adopted some variation of the pro rata allocation approach.4
Under the most basic scheme of pro rata allocation, an equal share of the
amount of damage is assigned to each year over which a long-tail injury occurred.
The amount owed under any one policy is calculated by dividing the number of
years an insurer was “on the risk” by the total number of years that the progressive
damage took place. The resulting fraction is the portion of the liability owed by
that particular insurer. Some states, most notably New Jersey, utilize more
complicated systems of pro rata allocation allowing for the “weighing” of each
insurer‟s liability to compensate for an insured‟s increased perception of risk over
time. (See Owens-Illinois, Inc. v. United Ins. Co., supra, 650 A.2d 974.)
See, e.g., Owens-Illinois, Inc. v. United Ins. Co. (N.J. 1994) 650 A.2d 974
(adopting pro rata approach to continuous loss); see also Public Serv. Co. of Colo.
v. Wallis & Cos. (Colo. 1999) 986 P.2d 924, 935; Security Ins. Co. v. Lumbermens
Mut. Cas. Co
. (Conn. 2003) 826 A.2d 107; Atchison, Topeka & Santa Fe Ry. v.
Stonewall Ins. Co. (Kan. 2003) 71 P.3d 1097; Aetna Cas. & Sur. Co. v.
Commonwealth (Ky. 2005) 179 S.W.3d 830, 842; Southern Silica of Louisiana,
Inc. v. Louisiana Insurance Guarantee Association
(La. 2008) 979 So.2d 460;
Boston Gas Co. v. Century Indem. Co. (Mass. 2009) 910 N.E.2d 290; Domtar, Inc.
v. Niagara Fire Ins. Co. (Minn. 1997) 563 N.W.2d 724, 732; EnergyNorth
Natural Gas, Inc.
v. Certain Underwriters at Lloyd's (N.H. 2007) 934 A.2d 517;
Consolidated Edison Co. of N.Y. v. Allstate Ins. Co. (N.Y. 2002) 774 N.E.2d 687;
Sharon Steel Corp. v. Aetna Cas. & Sur. Co. (Utah 1997) 931 P.2d 127, 140-142;
Towns v. Northern Sec. Ins. Co. (Vt. 2008) 964 A.2d 1150, 1167.

Significantly, all pro rata allocation methods assign liability to the insureds for
those years of the continuous injury that the insureds chose not to purchase
insurance. Although some states have concluded, as the insurers urge in this case,
that pro rata coverage would be more fair and equitable when compared to all
sums allocation, we are constrained by the language of the applicable policies here
(as noted ante, at p. 4), which supports adoption of the all sums coverage
principles, as it does not differ in any meaningful way from the Montrose and
Aerojet policies. (Aerojet, supra, 17 Cal.4th at p. 49.) Under the CGL policies
here, the plain “all sums” language of the agreement compels the insurers to pay
“all sums which the insured shall become obligated to pay . . . for damages . . .
because of injury to or destruction of property . . . .” (Ante, at p. 4.) As the State
observes, “[t]his grant of coverage does not limit the policies‟ promise to pay „all
sums‟ of the policyholder‟s liability solely to sums or damage „during the policy
period.‟ ”
The insurers contend that it would be “objectively unreasonable” to hold
them liable for losses that occurred before or after their respective policy periods.
But as the State correctly points out, the “during the policy period” language that
the insurers rely on to limit coverage, does not appear in the “Insuring Agreement”
section of the policy and therefore is neither “logically [n]or grammatically related
to the „all sums‟ language in the insuring agreement.” The insurers‟ claim that
their indemnity responsibility is limited to damage occurring “during the policy
period” would unduly restrict their agreement to pay “all sums” the insured is
obligated to pay for damages due to “injury to or destruction of property. . . .” The
CGL policy language does not contemplate such a limited result once there is a
property damage occurrence that triggers the insurers‟ indemnity responsibilities

for the entirety of the loss, and a growing number of states have similarly adopted
this interpretation of the all sums language.5
We therefore conclude that the policies at issue obligate the insurers to pay
all sums for property damage attributable to the Stringfellow site, up to their
policy limits, if applicable, as long as some of the continuous property damage
occurred while each policy was “on the loss.” The coverage extends to the
entirety of the ensuing damage or injury (Montrose, supra, 10 Cal.4th at p. 686),
and best reflects the insurers‟ indemnity obligation under the respective policies,
the insured‟s expectations, and the true character of the damages that flow from a
long-tail injury.
C. Stacking Considerations
As we have explained, the all sums indemnity coverage that the Court of
Appeal below adopted under Montrose and Aerojet envisions that each successive
insurer is potentially liable for the entire loss up to its policy limits. When the
entire loss is within the limits of one policy, the insured can recover from that
insurer, which may then seek contribution from the other insurers on the risk
during the same loss. Recognizing, however, that this method stops short of
satisfying the coverage responsibilities of the policies covering a continuous long-
tail loss, and potentially leaves the insured vastly uncovered for a significant
portion of the loss, the present Court of Appeal allowed the insured to stack the
See, e.g., Hercules, Inc. v. AIU Ins. Co. (Del. 2001) 784 A.2d 481, 494;
Allstate Ins. Co. v. Dana Corp. (Ind. 2001) 759 N.E.2d 1049, 1058; Goodyear
Tire & Rubber Co.
v. Aetna Cas. & Sur. Co. (Ohio 2002) 769 N.E.2d 835; J.H.
France Refractories Co.
v. Allstate Ins. Co. (Pa. 1993) 626 A.2d 502; American
Nat’l Fire Ins. Co.
v. B & L Trucking & Constr. Co. (Wn. 1998) 951 P.2d 250;
Plastics Engineering Co. v. Liberty Mut. Ins. Co. (Wis. 2009) 759 N.W.2d 613,

consecutive policies and recover up to the policy limits of the multiple plans.
“Stacking” generally refers to the stacking of policy limits across multiple policy
periods that were on a particular risk. In other words, “Stacking policy limits
means that when more than one policy is triggered by an occurrence, each policy
can be called upon to respond to the claim up to the full limits of the policy.”
(Colon, Pay It Forward: Allocating Defense and Indemnity Costs in
Environmental Liability Cases in Cal. (Feb. 2002) 24 Ins. Litig. Rptr. 43, 53.)
“When the policy limits of a given insurer are exhausted, [the insured] is entitled
to seek indemnification from any of the remaining insurers [that were] on the
risk . . . .” (J.H. France Refractories Co. v. Allstate Ins. Co., supra, 626 A.2d at p.
509 [adopting all sums allocation and serial stacking of policies in Pennsylvania
for continuous bodily injuries caused by asbestos manufacturer]; see also Koppers
Co. v. Aetna Cas. & Sur. Co. (3d Cir 1996) 98 F.3d 1440 [adopting all sums and
stacking for environmental cleanup liability].) The all-sums-with-stacking
indemnity principle properly incorporates the Montrose continuous injury trigger
of coverage rule and the Aerojet all sums rule, and “effectively stacks the
insurance coverage from different policy periods to form one giant „uber-policy‟
with a coverage limit equal to the sum of all purchased insurance policies. Instead
of treating a long-tail injury as though it occurred in one policy period, this
approach treats all the triggered insurance as though it were purchased in one
policy period. The [insured] has access to far more insurance than it would ever
be entitled to within any one period.” (Bratspies, supra, 1999 B.Y.U. L.Rev. at p.
1245.) The all-sums-with-stacking rule means that the insured has immediate
access to the insurance it purchased. It does not put the insured in the position of
receiving less coverage than it bought. It also acknowledges the uniquely
progressive nature of long-tail injuries that cause progressive damage throughout
multiple policy periods. (Ibid.)

In adopting the all-sums-with-stacking rule, the Court of Appeal rejected
the FMC court‟s antistacking ruling because it “disregarded the policy language
entirely.” The Court of Appeal noted that, as in this case, the policies in FMC did
not include antistacking provisions, so the FMC court resorted to “judicial
intervention” in order to avoid stacking. As the Court of Appeal recognized,
absent antistacking provisions, statutes that forbid stacking, or judicial
intervention, “standard policy language permits stacking.” We agree with the
Court of Appeal, and find that the policies at issue here, which do not contain
antistacking language, allow for its application. In so holding, we disapprove
FMC Corp. v. Plaisted & Companies, supra, 61 Cal.App.4th 1132.6
An all-sums-with-stacking rule has numerous advantages. It resolves the
question of insurance coverage as equitably as possible, given the immeasurable
aspects of a long-tail injury. It also comports with the parties‟ reasonable
expectations, in that the insurer reasonably expects to pay for property damage
occurring during a long-tail loss it covered, but only up to its policy limits, while
the insured reasonably expects indemnification for the time periods in which it
purchased insurance coverage. All-sums-with-stacking coverage allocation
ascertains each insurer‟s liability with a comparatively uncomplicated calculation
that looks at the long-tail injury as a whole rather than artificially breaking it into
There is precedent in the Court of Appeal for adopting the stacking rule,
although the insurers correctly point out that stacking was allowed in the presence
of a stipulation only. (See Stonewall Ins. Co. v. City of Palos Verdes Estates
(1996) 46 Cal.App.4th 1810, 1853 [adopting “horizontal” approach to excess
liability coverage, meaning that if limits of liability of each primary insurance
policy adequately cover the occurrences, there is no excess coverage expectation].)
This case is the first in our court to consider the stacking of excess policies in the
continuous property loss scenario.

distinct periods of injury. As the Court of Appeal recognized, if an occurrence is
continuous across two or more policy periods, the insured has paid two or more
premiums and can recover up to the combined total of the policy limits. There is
nothing unfair or unexpected in allowing stacking in a continuous long-tail loss.
The most significant caveat to all-sums-with-stacking indemnity allocation is that
it contemplates that an insurer may avoid stacking by specifically including an
“antistacking” provision in its policy. Of course, in the future, contracting parties
can write into their policies whatever language they agree upon, including
limitations on indemnity, equitable pro rata coverage allocation rules, and
prohibitions on stacking.
In the present case, consistent with this court‟s precedent, principles of
equity, and sound insurance policy interpretation considerations, we conclude that
the all sums approach to insurance indemnity allocation applies to the State‟s
successive property or long-tail first party property loss. In addition, we conclude
that allocation of the cost of indemnification under these circumstances should be
determined with stacking. Consequently, we affirm the Court of Appeal‟s


See last page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion State of California v. Continental Insurance Company

Unpublished Opinion

Original Appeal
Original Proceeding
Review Granted
XXX 170 Cal.App.4th 160
Rehearing Granted


Opinion No.

Date Filed: August 9, 2012


County: Riverside
Judge: Sharon J. Waters, Stephen D. Cunnison and Erik Michael Kaiser



Edmund G. Brown, Jr., Attorney General, Darryl L. Doke and Jill Scally, Deputy Attorneys General;
Cotkin & Collins, Joan Cotkin; Law Offices of Roger W. Simpson, Roger W. Simpson; Law Offices of
Daniel J. Schultz, Daniel J. Schultz; Anderson Kill & Olick, Robert M. Horkovich, Edward J. Stein, Robert
Chung and Cort Malone for Plaintiff, Cross-defendant and Appellant.

Gauntlett & Associates, David A. Gauntlet, James A. Lowe; Orrick, Herrington & Sutcliffe, Barry S. Levin
and Darren S. Teshima for United Policyholders and Center for Community Action and Environmental
Justice as Amici Curiae on behalf of Plaintiff, Cross-defendant and Appellant.

Winston & Strawn, Scott P. DeVries, Yelitza V. Dunham and Gene C. Schaerr for the League of California
Cities as Amicus Curiae on behalf of Plaintiff, Cross-defendant and Appellant.

Latham & Watkins, David L. Mulliken, Kristine L. Wilkes, Johanna S. Schiavoni and Drew T. Gardiner for
Montrose Chemical Corporation of California as Amicus Curiae on behalf of Plaintiff, Cross-defendant and

Heller Ehrman, Proskauer Rose, Pillsbury Winthrop Shaw Pittman, Reynold L. Siemens and David A.
Thomas for Aeorojet-General Corporation and Whittaker Corporation as Amici Curiae on behalf of
Plaintiff, Cross-defendant and Appellant.

Epstein, Turner & Song and David B. Epstein for Consumer Federation of America as Amicus Curiae on
behalf of Plaintiff, Cross-defendant and Appellant.

Berkes Crane Robinson & Seal, Steven M. Crane, Barbara S. Hodius; Berman & Aiwasian, Aiwasian &
Associates, Deborah A. Aiwasian, Steven M. Haskell; Woolls & Peer, John E. Peer and H. Douglas Galt
for Defendants, Cross-complainants and Appellants Continental Insurance Company, Continental Casualty
Company, Horace Mann Insurance Company and Yosemite Insurance Company.

Page 2 – counsel continued – S170560


Wilson, Elser, Moskowitz, Edelman & Dicker, Patrick M. Kelly, Carey B. Moorehead, Craig C. Hunter,
Robert Cooper; Sonnenschein Nath & Rosenthal, SNP Denton US, Paul E. B. Glad and Katherine J. Evans
for Defendant, Cross-complainant and Appellant Stonebridge Life Insurance Company.

Duane Morris, Philip R. Matthews, Andrew K. Gordon and William J. Baron for Certain London Market
Insurers as Amicus Curiae on behalf of Defendants, Cross-complainants and Appellants.

Gibson, Dunn & Crutcher and Scott R. Hoyt for Truck Insurance Exchange as Amicus Curiae on behalf of
Defendants, Cross-complainants and Appellants.

Barber Law Group, Bryan M. Barber and Steven D. Meier Defendant, Cross-complainant and Respondent.

Wiley Rein, Laura A. Foggan, Gregory J. Langlois; Sinnott Dito Moura & Puebla and Randolph P. Sinnott
for Complex Insurance Claims Litigation Association and American Insurance Association as Amici
Curiae on behalf of Defendants, Cross-complainants and Appellants and Defendant, Cross-complainant and

Counsel who argued in Supreme Court (not intended for publication with opinion):

Roger W. Simpson
Law Offices of Roger W. Simpson
18441 Santa Eugenia Street
Fountain Valley, CA 92708
(714) 968-8521

Steven M. Crane
Berkes Crane Robinson & Seal
515 South Figueroa Street, Suite 1500
Los Angeles, CA 90071
(213) 955-1150

Petition for review after the Court of Appeal reversed the judgment in a civil action. This case presents the following issues: (1) When continuous property damage occurs during the periods of several successive liability policies, is each insurer liable for all damage both during and outside its period up to the amount of the insurer's policy limits? (2) If so, is the "stacking" of limits - i.e., obtaining the limits of successive policies - permitted?

Opinion Information
Date:Citation:Docket Number:Cross Referenced Cases:
Thu, 08/09/2012State v. Cont'l Ins. Co., 55 Cal. 4th 186 (2012), as modified 55 Cal.4th 568c (Sept. 19, 2012); 281 P.3d 1000; 145 Cal. Rptr. 3d 1S170560

Kaiser Cement And Gypsum Corp. v. Ins. Co. of the State of Pennsylvania, 215 Cal. App. 4th 210 (2013)
Montrose Chem. Corp. v. Admiral Ins. Co., 10 Cal. 4th 645 (1995)
Aerojet-Gen. Corp. v. Transp. Indem. Co., 17 Cal. 4th 38 (1997)
FMC Corp. v. Plaisted & Companies, 61 Cal. App. 4th 1132 (1998)

Opinion Authors
OpinionJustice Ming W. Chin

Brief Downloads
application/pdf icon
1-s170560-pet-rev-021309.pdf (1133982 bytes) - Defendants, Cross-Complainants and Appellants, Continental Insurance Company, et al., and Defendant, Cross-Complainant and Respondent, Employers Insurance of Wausau, Petition for Review
application/pdf icon
2-s170560-state-ca-answer-pet-rev-030409.pdf (342021 bytes) - Plaintiff, Cross-Defendant and Appellant, State of California, Answer to Petition for Review
application/pdf icon
3-s170560-reply-answer-pet-rev-031609.pdf (144035 bytes) - Defendants, Cross-Complainants and Appellants, Continental Insurance Company, et al., and Defendant, Cross-Complainant and Respondent, Employers Insurance of Wausau, Reply to Answer to Petition for Review
application/pdf icon
4-s170560-opening-brief-merits-041709.pdf (570063 bytes) - Defendants, Cross-Complainants and Appellants, Continental Insurance Company, et al., and Defendant, Cross-Complainant and Respondent, Employers Insurance of Wausau, Opening Brief on the Merits
application/pdf icon
5-s170560-state-ca-answer-brief-merits-061109.pdf (1256001 bytes) - Plaintiff, Cross-Defendant and Appellant, State of California, Answer Brief
application/pdf icon
6-s170560-reply-brief-merits-080509.pdf (466613 bytes) - Defendants, Cross-Complainants and Appellants, Continental Insurance Company, et al., and Defendant, Cross-Complainant and Respondent, Employers Insurance of Wausau, Reply Brief
If you'd like to submit a brief document to be included for this opinion, please submit an e-mail to the SCOCAL website
Jun 10, 2013
Annotated by Kyle DeThomas

Facts: The state was found negligent in its design/operation of the Stringfellow Acid Pitts (Riverside, CA) and held liable for environmental remediation measures costing an estimated $700M (see Stringfellow v. Concerned Neighbors in Action, 480 U.S. 370 (1987)). Having contemplated the possibility of unforeseen liabilities, the state had paid for excess coverage under several commercial or comprehensive liability (CGL) policies of varying lengths and with multiple insurers from 1956-1972, all of which indemnified the state for costs associated with the pollution.

Procedural history: In 1993, the State filed an action against five named insurers, seeking indemnity for its liability in the underlying federal action. Proceeding at first in a protracted (phased) trial, the State’s action against six additional insurers was finally consolidated into a single action in 2003. In 2005, a jury rendered special verdicts finding (among other things) that the insurers had breached their respective policies. At that point, the State had already entered into settlements with other insurers totaling approximately $120M. The trial court ruled that these settlement amounts had to be “set off” against the insurers' liability (the “set off” ruling). Under the trial court's no-stacking ruling (based on FMC Corp. v. Plaisted & Companies, 61 Cal.App.4th 1132 (1998)— later disapproved) the most the State could recover was $48 million. Accordingly, the trial court entered judgment nominally in favor of the State, but in the amount of “$0.” The State filed a timely notice of appeal and (except for Wausau) all of the insurers filed timely notices of cross-appeal. In 2009, the Court of Appeal reversed and remanded. Insurers petitioned for review. In 2012, the Supreme Court granted review, superseding the opinion of the Court of Appeal.

Issues: The initial question was essentially one of (insurance) policy interpretation (i.e., reviewable, de novo): whether insurers would be liable for the total amount of the loss (subject to relevant policy limits) or only for the portion of the loss attributable to their own policy periods (the “all-sums” issue). This question was particularly important in the context of continuous injuries (e.g., environmental contamination that leaches into the surrounding environment over time) because of the “long-tail” nature of the damages they create (and the attendant financial exposure for insurers). Given the magnitude of total damages (i.e., all-sums liability), a subsequent legal question, which is also reviewable, de novo, was whether the State could add coverage limits for consecutive policies issued or whether it should instead be forced to choose a single policy period and thus be limited to recover only up to the policy limits of the policies in effect during that period (the “stacking” issue).

Holding: The Supreme Court affirmed the trial/appellate interpretations of the all-sums issue, holding each insurer liable (subject to policy limits) for the total amount of state's losses associated with the continuous property damage. Additionally, the Court overturned a 14-year precedent (see FMC supra), by holding that the State was entitled to stack policy limits of all applicable policies.

Analysis: In resolving the all-sums issue, the Court relied both upon the precedential analysis in two important cases (Montrose Chem. Corp. v. Admiral Ins. Co., 10 Cal. 4th 645 (1995) and Aerojet-Gen. Corp. v. Transp. Indem. Co., 17 Cal. 4th 38 (1997)), as well as the “language” of the policies in question (which explicitly assumed liability for “all-sums” for property damage), despite insurers’ arguments for a “pro-rata” allocation. In departing from precedent on stacking, the Court focused again on the language of the policies, disregarding FMC’s analysis specifically because it “disregarded the policy language entirely,” resorting to “judicial intervention” instead. The Court affirmed the Court of Appeal’s holding that absent an “anti-stacking provision”, a statute prohibiting stacking, or judicial intervention, standard policy wording permits stacking. This analysis essentially stated that there is nothing unfair where an insured recovers multiple limits after it has also paid premiums for multiple years of coverage. A later case, (Kaiser Cement And Gypsum Corp. v. Ins. Co. of the State of Pennsylvania, 215 Cal. App. 4th 210 (2013)) declined to extend this stacking rule; however, the policy language there included an “anti-stacking” provision, which would limit liability under Continental in any case.

Tags: all-sums, all-sums-with-stacking, commercial general liability insurance, comprehensive general liability insurance, continuous injury, environmental liability, hazardous waste, judicial intervention, long-tail, set off, stacking