United States: All Sums, All Policies For Long-Tail Claims

Previously published in the Risk Management magazine (November 26, 2012)

A recent decision in the California Supreme Court clarifies the full extent to which policyholders facing environmental clean-up costs or other long tail claims can tap into their historic policies to help pay for those costs. California's highest court recognized that all insurance policies triggered by continuing damage must pay "all sums" of resulting liability. The decision is cause for all policy holders with liability for long-tail claims under California law, such environmental property damage, asbestos injury, toxic tort or construction defect, to reassess their coverage carefully. Even if you previously settled your insurance claim, you should check your settlements to see if coverage may be available now under rules recognized by this decision.

The new opinion, reported in State of California v. Continental Insurance Company, et al., eliminates two restrictions on coverage for long-tail claims that the insurance industry long has asserted. Insurance companies denied indemnification up to the limits of all the triggered policies, arguing that each triggered policy only should pay a pro-rata fraction of the liability, not" all sums." Many insurance companies also relied on a1998 intermediate appellate court decision involving FMC Corporation to argue that even if policies during several successive policies were triggered by continuing damage or injury, the policyholder only could recover from the insurance in a single period and could not "stack" the coverage purchased for other periods when the injury or damage also had occurred.

The California Supreme Court first affirmed that each insurance company had to pay up to its policy limit for all sums of liability because of damage during the policy period. Rejecting the insurance companies' "equitable" argument that each policy should be allocated only a pro rata fraction of the full amount of liability in proportion to the full time span of the loss, the court found that "the language of the applicable policies ...supports adoption of the all sums coverage principles."Like most "occurrence"-based comprehensive general liability (CGL) insurance policies, the state's policies promised to pay "all sums which the insured shall become obligated to pay ... for damages ... because of injury to or destruction of property...."

The California Supreme Court agreed with the State of California that this 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,'" as insurance companies have argued. The court noted that the "during the policy period" language on which the insurance companies relied does not appear in the policy's insuring agreement, and therefore is neither logically nor grammatically related to the "all sums" language in the insuring agreement.

The California Supreme Court ruled that "the policies at issue obligate the insurers to pay all sums for property damage attributable to the String fellow 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.'" Once a policy is triggered by damage during its period, "[t]he coverage extends to the entirety of the ensuing damage or injury," which "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." The court also observed that "a growing number of states have similarly adopted this interpretation of the all sums language," while acknowledging that other shave taken the pro-rata position .

Next, the California Supreme Court turned to the so called "stacking" issue, which arose because the State's liability exceeded the limits available during a single policy period, and it therefore sought to collect from more than a single period's insurance.

The California Supreme Court explained that "stacking" policy limits simply 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." Emphasizing that this provides the benefit of the parties' bargain, he California Supreme Court explained that stacking gives the policyholder "immediate access to the insurance it purchased," while the anti-stacking decision in FMC had "put the insured in the position of receiving less coverage than it bought."The California Supreme Court expressly disapproved of the FMC decision, finding that it "disregarded the policy language" and resorted to unwarranted "judicial intervention."

The California Supreme Court noted several advantages to the all-sums-with-stacking indemnity rule. Requiring indemnification of all sums under all appliby cable policies is consistent with standard insurance policy language; it acknowledges the progressive nature of long-tail injuries that continue through multiple policy periods; and it provides an equitable resolution of the scope of coverage under each policy and the allocation of coverage between different policies. The rule comports with reasonable expectations, in that each insurance company reasonably expects to indemnify liability because of property damage occurring during a long-tail loss it covered, but only up to its policy limits, and the policy holder reasonably expects indemnification for all the periods in which it purchased insurance coverage. Thus, the court found "nothing unfair or unexpected in allowing stacking in a continuous long-tail loss."

Now that the California Supreme Court definitively has spoken on the right to all sums under all policies, any liability insurance policy that has not paid its full indemnity limit, and that has not been settled with a policy release or buy-back, remains a valuable asset for any policyholder with liability for long-tail claims under insurance policies to which California law may apply. Policyholders seeking to resolve environmental, asbestos, toxic tort or construction defect claims in California should expect to recover all limits under all available policies during the period of damage or injury, so that the policyholder's entire loss is covered. Such a recovery is neither unfair nor overreaching; it simply is the benefit of the bargain for which policyholders paid the premiums asked by their underwriters.

Robert M. Horkovich is managing partner and shareholder in the New York office of Anderson Kill & Olick, P.C. He is a trial lawyer who has obtaining more $5 billion in settlements and judgments for policyholders from insurance companies.

Edward J. ("Ted") Stein is a shareholder in Anderson Kill& Olick's New Jersey office. His practice concentrates on insurance recovery, exclusively on behalf of policy holders, in matters involving fidelity, environmental, directors and officers, professional liability and other insurance coverage cases against U.S. and London market insurers.

About Anderson Kill & Olick, P.C.

Anderson Kill practices law in the areas of Insurance Recovery, Commercial Litigation, Environmental Law, Estate, Trusts and Tax Services, Corporate and Securities, Antitrust, Bankruptcy, Real Estate and Construction, Anti-Counterfeiting, Employment and Labor Law, Captives, Intellectual Property, Corporate Tax, Health Reform and International Business. Recognized nationwide by Chambers USA for Client Service and Commercial Awareness, and best-known for its work in insurance recovery, the firm represents policyholders only in insurance coverage disputes – with no ties to insurance companies and has no conflicts of interest. Clients include Fortune 1000 companies, small and medium-sized businesses, governmental entities, and nonprofits as well as personal estates. Based in New York City, the firm also has offices in Ventura, CA, Stamford, CT, Washington, DC, Newark, NJ and Philadelphia, PA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions