California High Court Upholds Stacking Policies in Continuous Injury Claims

The California Supreme Court recently ruled that policy stacking is the “correct” and “equitable” way to allow insureds the ability to collect up to the policy limit for continuous injury cases.

The high court’s ruling affirmed the Court of Appeal’s judgment in the case of The State of California v. Continental Insurance Company, in which the courts examined whether continuing property damage over a series of policy terms should be considered a one-time occurrence and covered by only one policy or if multiple policies should respond to cover a continuous event.

The 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, according to Robert M. Horkovich, managing partner of Anderson Kill & Olick and one of seven attorneys representing the state of California in the case.

“In terms of allocating that loss among all similarly implicated insurers, the court found that allowing the insured to ‘stack’ its policies and recover up to the policy limits of all the triggered policies was not only the correct rule based on the policy language but also the equitable result and one that can be achieved ‘with a comparatively uncomplicated calculation,'” said Larry Golub, litigation partner at the Los Angeles office of Barger & Wolen.

While an insurer may find several policies for a particular insured, the only policies triggered would be those covering damage that occurred during a specific policy term.

“The court relied on policy language found in most commercial general liability policies, as well as rules announced in two of its past decisions, to find that each insurer who provided coverage to the insured when some property damage occurred would be ‘on the loss’ and its indemnity obligations triggered up to the extent of its policy limits,” said Golub.

According to the Los Angeles insurance defense expert, the court did note that insurers would be able to continue to add “anti-stacking” policy language to policies, a provision that has been used for a number of years.