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The California Supreme Court issued its decision in the
State of California v. Continental Insurance case on
August 9. In a unanimous opinion, written by Justice Ming
Chin, the Court held that the policy language at issue provides for
"all sums" allocation and permits stacking of policy
limits.
The Court's opinion reflects a focus on the particular
insurance policy wording at issue. In its first holding, the
opinion states: "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 ...." The Court went on to hold that the policy
language before it "does not limit the policies' promise
to pay 'all sums' of the policyholder's liability
solely to sums or damage 'during the policy
period.'"
Thus, the Court's "all sums" ruling is limited to
the particular language in the State of California policies.
The Court concluded that the wording at issue contains no language
limiting covered "property damage" to damage during the
policy period. By contrast, where a policy does contain
language limiting coverage to damage during the policy period, the
State of California opinion may not apply.
In its second holding, the Court held that the policy wording
permits stacking of limits. The Court held that, without
wording precluding stacking, the policies allow the insured to
recover multiple limits under the various triggered policies.
In this holding, the Court adopted the appellate court's ruling
below, and disapproved the anti-stacking holding in FMC Corp.
v. Plaisted & Companies, 61 Cal.App.4th 1132 (1998).
The reference to horizontal exhaustion in the case is helpful for
excess insurers. As noted, the Court disapproves of
FMC and then cites to Stonewall in footnote
6. FMC held that where the loss was big enough to
exceed the primary then the insured could "pick a year"
and that year (which involves excess insurance) had to pay the
claim subject to contribution. FMC is no longer good
law on anti-stacking and limiting all triggered excess policies to
only one year. The Court then refers to Stonewall in
footnote 6 and characterizes it as holding that if there are
adequate limits on the primary level (after stacking the primaries)
then there is no "excess coverage expectation."
This article is for general information and does not include
full legal analysis of the matters presented. It should not be
construed or relied upon as legal advice or legal opinion on any
specific facts or circumstances. The description of the results of
any specific case or transaction contained herein does not mean or
suggest that similar results can or could be obtained in any other
matter. Each legal matter should be considered to be unique and
subject to varying results. The invitation to contact the authors
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Duane Morris LLP, a full-service law firm with more than 700
attorneys in 24 offices in the United States and internationally,
offers innovative solutions to the legal and business challenges
presented by today's evolving global markets. Duane Morris LLP,
a full-service law firm with more than 700 attorneys in 24 offices
in the United States and internationally, offers innovative
solutions to the legal and business challenges presented by
today's evolving global markets. The
Duane Morris Institute provides training workshops for HR
professionals, in-house counsel, benefits administrators and senior
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