Thursday, March 19, 2009
Supreme Court Agrees to Review Ruling on ‘Stacking’ Insurance Policies
By KENNETH OFGANG, Staff Writer
The California Supreme Court yesterday agreed to review a Fourth District Court of Appeal ruling that leaves six insurers potentially liable for up to $700 million in costs for cleaning up the Stringfellow Acid Pits in Riverside County.
The justices, at their weekly conference in San Francisco, unanimously granted review in State v. Continental Ins. Co., 170 Cal.App.4th 160, decided Jan. 8.
The decision to hear the case is the latest development in the decades of litigation resulting from the pollution of groundwater resulting from discharges at the site, located in the Jarupa mountains just north of Glen Avon. Just last week, the high court ruled that summary judgment had been improperly granted to four insurers who claimed that pollution exclusions in their policies precluded coverage.
More than 30 million gallons of industrial waste was deposited at the site after a geologist erroneously concluded, in the mid-1950s, that there was no water beneath an impermeable layer of rock, leading to the belief that there would be no threat of pollution if a watertight barrier dam was built across the canyon in which the site was located.
A state expert found pollution seeping into the groundwater through fractured bedrock as early as 1960. In addition to the underground leaking, there were two major overflows, in 1969 and 1978, resulting from heavy rains.
A suit by the federal government resulted in a 1998 U.S. District Court ruling that the state was liable under state and federal law for past and future costs of cleaning up the state.
The state then sued about three dozen insurance companies to recover those costs.
Yesterday’s ruling involves six insurers—Continental Insurance Company, Continental Casualty Company, Employers Insurance of Wausau, Horace Mann Insurance Company, Stonebridge Life Insurance Company and Yosemite Insurance Company—who were sued in 2002 and 2003. Each of them had issued the state an excess policy covering a two-to-three year period.
The trial court ruled that every policy in effect for any policy period during which the loss was occurring covered the entire loss, subject to the policy limits. But it also ruled that the state could not recover more than the total policy limits for any one policy period and thus could not recover more than $48 million total.
It also ruled that the six were entitled to a setoff for settlement amounts previously paid by other insurers, about $120 million by the time of the trial court’s ruling. Since that amount exceeded what it found to be the state’s maximum recovery, the court awarded the state zero damages.
The Court of Appeal, while upholding most of the trial court’s ruling, held that coverage could be “stacked”across policy periods absent policy language to the contrary. It rejected FMC Corp. v. Plaisted & Companies (1998) 61 Cal.App.4th 1132, which the trial judge pronounced himself bound by.
The court applied the “all sums” rule, saying that because the loss was continuous, each insurer that covered any part of the claim had an obligation to pay the entire claim, and then seek reimbursement from other insurers.
In other conference action, the justices left standing the Dec. 19 ruling of the First District’s Div. Four in Salk v. Regents of the University of California, A120289.
The court in that case rejected a suit by animal rights activists—including Pia Salk, a clinical psychologist whose uncle, Dr. Jonas Salk, invented the polio vaccine, and Dr. Lawrence Hansen, who teaches at UC San Diego Medical Center—against the University of California. It held that private citizens cannot sue for violations of the federal Animal Welfare Act, which governs how animals are used by research facilities.
The plaintiffs had asked the high court to review the ruling, while the university asked that the opinion be published. But only Justice Kathryn M. Werdegar voted to grant review, and no justice voted to publish the opinion, in which Justice Timothy Reardon concluded that in giving the Department of Agriculture comprehensive authority to enforce the act, Congress implicitly preempted private actions.
Copyright 2009, Metropolitan News Company