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State v. Continental Insurance Co.

January 5, 2009; as modified January 15, 2009 and January 28, 2009

STATE OF CALIFORNIA, PLAINTIFF, CROSS-DEFENDANT AND APPELLANT,
v.
CONTINENTAL INSURANCE COMPANY ET AL., DEFENDANTS, CROSS-COMPLAINANTS AND APPELLANTS;
EMPLOYERS INSURANCE OF WAUSAU, DEFENDANT, CROSS-COMPLAINANT AND RESPONDENT.



APPEAL from the Superior Court of Riverside County. Sharon J. Waters, Stephen D. Cunnison, and Erik Michael Kaiser, Judges.*fn2 Reversed with directions. (Super. Ct. No. 239784).

The opinion of the court was delivered by: Richli J.

CERTIFIED FOR PARTIAL PUBLICATION*fn1

OPINION

In this action, the State of California (the State) seeks to recover from its liability insurers the amounts that a federal court has ordered it to pay for the cleanup of the Stringfellow hazardous waste site. Some insurers were granted summary judgment; the propriety of that ruling is currently before the California Supreme Court in State of California v. Underwriters at Lloyd's London (2006) 146 Cal.App.4th 851, review granted April 18, 2007, S149988. Other insurers settled with the State.

By the time the trial court entered the judgment that is the subject of this appeal, there were only six insurers left standing: Continental Insurance Company (Continental), Continental Casualty Company (Casualty), Employers Insurance of Wausau (Wausau), Horace Mann Insurance Company (Horace Mann), Stonebridge Life Insurance Company (Stonebridge), and Yosemite Insurance Company (Yosemite) (collectively the Insurers). Each of them had issued to the State an excess corporate general liability policy covering a two- or three-year policy period.

The trial court ruled that every policy in effect for any policy period during which the loss was occurring covered the entire loss - which was at least $50 million, and could be as much as $700 million - subject to the policy limits. However, it also ruled that the State could not recover more than the total policy limits for any one policy period; this effectively limited the State's recovery to $48 million. Finally, it ruled that the Insurers were entitled to a setoff for settlement amounts previously paid by other insurers. Because the State had already recovered approximately $120 million in settlements, the trial court entered a judgment awarding the State "$0" against the Insurers.

The State has appealed; the Insurers (other than Wausau) have filed a protective cross-appeal.

In the end, we will uphold (or find moot) all of the trial court's rulings, with two exceptions: The trial court did err by (1) ruling that the State could not recover more than the total policy limits in effect for any one policy period, and (2) admitting certain documents under the ancient documents exception to the hearsay rule (Evid. Code, § 1331). Accordingly, we must reverse and remand for further proceedings.

We hasten to add that we do not fault the trial court in any way. Each of the successive judges who have handled the case since it was first filed, way back in 1993, has done yeoman's service. In particular, Judge Erik Michael Kaiser (now retired), who handled the case throughout its final stages, including the jury trial, did an outstanding job of organizing, managing, and ultimately adjudicating this complex case.

Judge Kaiser ruled that the State could recover for only one policy period because he believed that he was bound to follow FMC Corp. v. Plaisted & Companies (1998) 61 Cal.App.4th 1132 (FMC), which was the closest case on point. As an appellate court, however, we can and do respectfully disagree with FMC. It failed to follow other, closely analogous California cases, based on reasoning that we find to be flawed and unconvincing.

Similarly, in ruling on the ancient documents exception, Judge Kaiser entered uncharted territory, as this exception has not been the subject of an appellate opinion since it became effective, along with the rest of the Evidence Code, in 1967. We will construe it for the first time.

I. FACTUAL BACKGROUND

A. The Stringfellow Site

J.B. Stringfellow, Jr., owned a quarry near Glen Avon in Riverside County. In 1955, a state geologist inspected the quarry to determine whether it was suitable for use as an industrial waste disposal site. He reported that the site lay in a canyon, underlain by impermeable rock. He recommended that a concrete barrier dam be built to close a 250-foot gap in the canyon's natural walls. He concluded that, once such a dam was built, "the operation of the site for industrial wastes will not constitute a threat of pollution . . . ."

The State therefore proceeded to design the site and to supervise its construction. The site went into operation in 1956. More than 30 million gallons of industrial waste was deposited into unlined ponds at the site.

Actually, the site was badly flawed. First, an underground stream channel lay about 70 feet below the surface; it carried groundwater into and out of the site. Second, the underlying rock was fractured; contaminants could leak down through it and reach the groundwater. Third, the barrier dam was inadequate; it allowed contaminants to escape.

In 1969, heavy rains caused contaminants to overflow the dam. In 1972, groundwater contamination was discovered, and the site was closed. However, it continued to leak. In 1978, heavy rains once again made the ponds overflow; the State decided to allow a "controlled discharge" of contaminants into Pyrite Channel. Hazardous waste released from the site merged into a plume that ultimately extended miles away.

B. The Underlying Federal Action

In 1983, the United States and the State filed suit against numerous defendants, including companies that had deposited waste at the site, as well as the hapless Mr. Stringfellow, alleging that they were liable for the resulting contamination. Certain defendants counterclaimed against the State.

In September 1998, the federal court found the State liable for, among other things, negligence in investigating the site, choosing the site, designing the site, supervising construction of the site, failing to remedy conditions at the site, and delaying the clean up of the site. The State was held liable for all past and future remediation costs, which the State claims could be as much as $700 million.

The Insurers stipulated that the State was liable for at least $50 million. C. The Insurance Policies at Issue.

Each of the Insurers (or their predecessors in interest) had issued one or more excess liability policies to the State, covering a multi-year policy period, as follows:

Insurer (short name)Policy No.StartEndLimit per Occurrence Wausau0637000308969/20/649/20/67$2 million Beneficial (Stonebridge's predecessor)*fn3116949/20/649/20/66$2.05 million Wausau0637000308969/20/679/20/70$2 million Continental914-12-359/20/709/20/73$5 million Harbor (Continental's predecessor)1098229/20/709/20/73$5 million Wausau3333001126909/20/709/20/73$2 million CNA (Casualty's predecessor)954-37-539/20/739/20/76$2 million Horace MannGLA 5000639/20/738/7/75$1 million Wausau0636000367139/20/739/20/76$2 million YosemiteYXL 1051189/20/739/20/75$5 million

The State had drafted a master liability policy form, which it required its insurers to use. However, many provisions of the form used language that was standard in the industry. It is undisputed that the relevant language of each of the Insurers' policies was essentially the same, as follows:

1. Insuring agreement: "To 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."

2. Limitation of liability: This was stated as a specified dollar amount of the "ultimate net loss each occurrence." (Capitalization omitted.)

3. Definition of occurrence: "'Occurrence' means an accident or a continuous or repeated exposure to conditions which result in . . . damage to property during the policy period . . . ."

4. Definition of ultimate net loss: "'[U]ltimate net loss' shall be 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 . . . ."

II. PROCEDURAL BACKGROUND

In September 1993, the State filed an action against five named insurers, seeking indemnity for its liability in the underlying federal action.

The trial court ordered the case tried in a series of phases. On June 10, 1999, following a bench trial, the trial court (per Judge Cunnison) entered its statement of decision regarding phase II. It ruled, among other things, that the policy limits under policies with a multi-year policy period applied per occurrence, not annually (no-annualization ruling).

In April 2002, the trial court (per Judge Waters) ruled that the State's negligence in failing to remediate and delaying remediation at the site did not breach any duty to mitigate the defendant insurers' damages (no-mitigation ruling).

In September 2002, the State filed a second action, asserting similar claims against additional insurers, including the six that are parties to this appeal. In October 2003, the trial court consolidated the two actions. The defendants in the second action agreed to be bound by all previous rulings in the first action.

In November 2003, the case was assigned to Judge Kaiser.

The State and the defendant insurers stipulated that third party property damage resulting from the selection, design and construction of the site occurred continuously throughout all of the relevant policy periods.

In March 2004, the trial court ruled that each of the defendant insurers was potentially liable for the total amount of the loss (subject to their policy limits), rejecting their contention that they could be liable only for the portion of the loss attributable to their own policy periods (all-sums ruling). At the same time, however, it also ruled that the State could not recover the policy limits in effect for every policy period. Instead, the State had to choose one policy period, and it could recover only up to the policy limits of the policies in effect during that period (no-stacking ruling).

In February 2005, the trial court ruled that, for purposes of policy limits, there had been only a single occurrence, rejecting the State's contention that there had been as many as five occurrences (one-occurrence ruling).*fn4

On March 28, 2005, a jury trial on phase III began. On May 16, 2005, the 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 $120 million. The trial court ruled that these settlement amounts had to be set off against the Insurers' liability (setoff ruling). Under the trial court's one-occurrence, no-annualization and no-stacking rulings, 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. Except for Wausau, all of the Insurers filed timely notices of cross-appeal.

III. THE "ALL-SUMS" AND "NO-STACKING" RULINGS

The State contends that the trial court erred by limiting it to the policy limits in effect for any one policy period.

In their protective cross-appeal, the Insurers*fn5 contend that the trial court erred by ruling that they could be liable for property damage that occurred outside their respective policy periods.

Because these contentions are related, and because the trial court ruled on them both at the same time, we consider them seriatim. For clarity, however, we address them in the reverse order.

A. Additional Factual and Procedural Background

In phase III, the parties stipulated that the trial court could resolve certain legal issues by motion. Accordingly, the State filed a motion for a ruling that, because it had been held liable for property damage that was continuous across multiple policy periods, it was "entitled to indemnity up to the combined limits of all policies in effect during those policy periods . . . ."

At the same time, the Insurers filed briefs asking the trial court to rule that each of their policies covered only property damage attributable to the stated policy period, as opposed to the entire continuous loss. Alternatively, they argued that, even assuming each policy was deemed to cover the entire loss, the State could not recover the policy limits in effect for more than one policy period.

In its all-sums ruling, the trial court ruled in favor of the State: "[O]nce coverage for . . . continuous . . . damage . . . is triggered under a liability policy, the insurer is required to pay for all sums (up to the policy limits) of the insured's liability - not just liability specifically allocable to damage during the policy period."

In its no-stacking ruling, however, it ruled in favor of the Insurers: "[The] State may not 'stack' or combine policy periods . . . . [¶] . . . [¶] [The] State is entitled to select a single policy period triggered by continuing damage from the occurrence at the Stringfellow site. [It] may recover the full amount of the limits of the policies in that period . . . ." It explained, in part: "[I]t appears that the court is bound by the holding in FMC Corp. [v]. Plaisted & Companies (1998) 61 Cal.App.4th 1132, which seems to be the case most fully on point."

B. The "All-Sums" Ruling

We begin with Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645 (Montrose). There, the California Supreme Court held that "bodily injury and 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; see also id. at pp. 654-655, 675, 685-689.) In other words, it adopted the "'continuous injury' trigger of coverage." (Id. at p. 655.)

In Montrose, seven insurers had issued a series of liability policies, collectively covering the period from 1960 to 1986. Admiral Insurance Company (Admiral) had issued polices covering only the last four years of this period. (Montrose, supra, 10 Cal.4th at p. 656.) The issue before the court was whether Admiral had a duty to defend actions alleging either continuous or progressively deteriorating bodily injury or property damage, resulting from toxic chemicals manufactured by the insured, that began before, but continued during, Admiral's policy periods.

Admiral argued that a "manifestation" trigger of coverage applied; in other words, the only relevant "occurrence," within the meaning of its policies, was when appreciable bodily injury or property damage first appeared. (Montrose, supra, 10 Cal.4th at pp. 662-663, 669, 677 & fn. 17.) The Supreme Court disagreed. It noted that Admiral's policies defined "property damage" as "physical injury to or destruction of tangible property which occurs during the policy period"; similarly, they defined "bodily injury" as "bodily injury, sickness or disease sustained by any person which occurs during the policy period . . . ." (Id. at p. 668.) They then defined "occurrence" as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage . . . ." (Id. at p. 669.) The court concluded: "[T]his policy language unambiguously distinguishes between the causative event - an accident or 'continuous and repeated exposure to conditions' - and the resulting 'bodily injury or property damage.' It is the latter injury or damage that must 'occur' during the policy period, and 'which results' from the accident or 'continuous and repeated exposure to conditions.'" (Ibid.)

The Insurers do concede that, under Montrose, they are liable for any property damage that actually occurred during their respective policy periods. They deny, however, that they are liable for any property damage that occurred before or after their policy periods. They acknowledge that on the facts of this case neither side would be able to prove that any particular property damage occurred during any particular policy period. Hence, they urge us to adopt a rule allocating the total property damage pro rata, based on each insurer's time on the risk.

Technically, the issue in Montrose was the trigger of coverage, not the allocation of coverage. In other words, the court was only called upon to decide which policies provided any coverage for a continuous loss. It was not called upon to decide how much of the loss was covered under each policy.

Nevertheless, Montrose did declare it to be a "settled rule that an insurer on the risk when continuous or progressively deteriorating damage or injury first manifests itself remains obligated to indemnify the insured for the entirety of the ensuing damage or injury." (Montrose, supra, 10 Cal.4th at p. 686, italics added.) It also cited Gruol Construction Co. v. Insurance Co. of North America (1974) 11 Wn.App. 632 [524 P.2d 427] with apparent approval, noting that "the holding of Gruol was that, when warranted by the facts, property damage should be deemed to occur over the entire process of the continuing injury. An insurer would become liable at any point in the process for the entire loss up to the policy limits, even though the continuing injury or progressively deteriorating damage may extend over several policy periods." (Montrose, at p. 678, italics added.) Similarly, it cited California Union Ins. Co. v. Landmark Ins. Co. (1983) 145 Cal.App.3d 462 (California Union) as holding that: "[A]n insurer's liability for a still insured and continuing event is not terminated by the expiration of the policy term. [Citations.] . . . '[I]n a "one occurrence" case involving continuous, progressive and deteriorating damage, the carrier in whose policy period the damage first becomes apparent remains on the risk until the damage is finally and totally complete, notwithstanding a policy provision which purports to limit the coverage solely to those accidents/occurrences within the time parameters of the stated policy term.' [Citation.]" (Montrose, at p. 680, quoting California Union, at p. 476.)

Accordingly, in Armstrong World Industries, Inc. v. Aetna Casualty & Surety Co. (1996) 45 Cal.App.4th 1 (Armstrong), the appellate court held squarely that every insurer that issued a liability policy for any period during which a continuous loss occurred was liable for "the full extent of the loss up to the policy's limits . . . ." (Id. at p. 49.) Armstrong relied primarily on out-of-state cases involving liability coverage for asbestos-related diseases. Those cases, in turn, had relied on the words "all sums" in the insuring agreement: "'The policies at issue in this case provide that the insurance company will pay on behalf of [the insured] "all sums" that [the insured] becomes legally obligated to pay as damages because of bodily injury during the policy period. . . .

[W]hen [the insured] is held liable for an asbestos-related disease, only part of that disease will have developed during any single policy period. The rest of the development may have occurred during another policy period or during a period in which [the insured] had no insurance. The issue that arises is whether an insurer is liable in full, or in part, for [the insured]'s liability once coverage is triggered. We conclude that the insurer is liable in full, subject to the "other insurance" provisions . . . .' [Citation.]" (Id. at p. 49, quoting Keene Corp. v. Ins. Co. of North America (D.C. Cir. 1981) 667 F.2d 1034, 1047 (Keene).)

Subsequent decisions by our sister courts have unanimously concurred with Armstrong and followed the all-sums approach. (Stonelight Tile, Inc. v. California Ins. Guarantee Assn. (2007) 150 Cal.App.4th 19, 37; FMC, supra, 61 Cal.App.4th at pp. 1184-1187; Stonewall Ins. Co. v. City of Palos Verdes Estates (1996) 46 Cal.App.4th 1810, 1854-1855 (Stonewall).)

Moreover, in Aerojet-General Corp. v. Transport Indemnity Co. (1997) 17 Cal.4th 38, the Supreme Court itself followed the all-sums approach. It stated that the duty to indemnify "is triggered if specified harm is caused by an included occurrence, so long as at least some such harm results within the policy period. [Citation.] It extends to all specified harm caused by an included occurrence, even if some such harm results beyond the policy period. [Citation.] In other words, if specified harm is caused by an included occurrence and results, at least in part, within the policy period, it perdures to all points of time at which some such harm results thereafter." (Id. at pp. 56-57, italics added, fns. omitted.)

The court added: "To illustrate by a hypothetical . . . Insurer has a duty to indemnify Insured for those sums that Insured becomes legally obligated to pay as damages for property damage caused by its discharge of hazardous substances, up to a limit of $1 million. Insured discharges such a substance. It thereby causes property damage to Neighbor's land, in the amount of $100,000 (determined by the cost of returning the soil to its original condition), within the policy period of year one. It causes further damage of this sort as the substance spreads under the surface, in the amount of $100,000 annually, in year two through year thirty. Insured must pay Neighbor $3 million in damages under judgment. Insurer must pay Insured the limit of $1 million for indemnification." (Aerojet-General Corp. v. Transport Indemnity Co., supra, 17 Cal.4th at p. 57.)

Admittedly, Aerojet-General, like Montrose, involved the duty to defend. The Insurers therefore argue that this language was dictum. But not so. The precise issue in Aerojet-General was whether the insurer could make the insured pay any part of the costs of defense. (Aerojet-General Corp. v. Transport Indemnity Co., supra, 17 Cal.4th at pp. 45, 51, 55-56.) The court reasoned that the insurer would be liable to indemnify the insured against all claims that resulted from some "triggering harm" during the policy period, even if the claims arose after the policy period. (Id. at pp. 59-60, 68-69.) The court therefore held that the insurer was liable to defend the insured, unless it could prove that those claims did not result from some triggering harm during the policy period. (Id. at p. 71.) It added: "[T]he insurers assume that their contractual duty to defend is limited to only that part of a 'mixed' claim that comes within a policy period because specified harm may possibly have been caused by an included occurrence therein. They are wrong. As explained above, the duty to defend embraces all the parts of such a claim in which some such harm may possibly have resulted, whether within the policy period or beyond." (Ibid., italics added; see also id. at p. 74.) Thus, the all-sums approach to the duty to indemnify was crucial to the court's holding regarding the duty to defend.

In any event, "'"[e]ven if properly characterized as dictum, statements of the [California] Supreme Court should be considered persuasive. [Citation.]" [Citation.]' [Citation.]" (People ex rel. Totten v. Colonia Chiques (2007) 156 Cal.App.4th 31, 39, fn. 6, quoting Hubbard v. Superior Court (1997) 66 Cal.App.4th 1163, 1169.)

The Insurers understandably rely on footnote 19 in Montrose, which stated: "We do not endorse that aspect of the California Union court's holding that both insurers in that case were jointly and severally liable for the full amount of damage occurring during the successive policy period. [Citation.] Allocation of the cost of indemnification once several insurers have been found liable to indemnify the insured for all or some portion of a continuing injury or progressively deteriorating property damage requires application of principles of contract law to the express terms and limitations of the various policies of insurance on the risk. [Citations.]" (Montrose, supra, 10 Cal.4th at p. 681, fn. 19.)

The all-sums approach, however, is not literally joint and several liability. Admittedly, the outcome is much the same as if it were; hence, it is sometimes loosely referred to as such. Nevertheless, it is not. The insurers are not jointly liable on each other's policies; rather, each insurer is severally liable on its own policy. (See Rohr Industries, Inc. v. First State Ins. Co. (1997) 59 Cal.App.4th 1480, 1489 [insurers are, at most, serial obligors on separate contracts, not co-obligors on a contract debt]; Topa Ins. Co. v. Fireman's Fund Ins. Companies (1995) 39 Cal.App.4th 1331, 1339-1340 [same]; Hartford Accident & Indemnity Co. v. Superior Court (1995) 37 Cal.App.4th 1174, 1181 [same].)

In Aerojet-General, the Supreme Court explained that this was all that it meant by footnote 19 in Montrose: "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-General Corp. v. Transport Indemnity Co., supra, 17 Cal.4th at p. 57, fn. 10, italics added, quoting Montrose, supra, 10 Cal.4th at pp. 686-687 & 681, fn. 19.)

To summarize, then, in California, when there is a continuous loss spanning multiple policy periods, any insurer that covered any policy period is liable for the entire loss, up to the limits of its policy. The insurer's remedy is to seek contribution from any other insurers that are also on the risk.

The Insurers' arguments to the contrary founder on the fact that we must follow the California Supreme Court's lead. For example, they argue that the trial court's ruling is inconsistent with the language of the applicable policies. That language, however, is not significantly different from the standard policy language that was at issue in Montrose and Aerojet-General. (See Aerojet-General Corp. v. Transport Indemnity Co., supra, 17 Cal.4th at p. 49.) Similarly, they argue that it is "objectively unreasonable" to hold them liable for losses before or after their respective policy periods. The same argument, however, could have been made in Montrose and Aerojet-General. Finally, they argue that "[t]he majority of jurisdictions that have considered this issue have rejected the 'all sums' approach in the indemnity context." Even if so,*fn6 California has firmly aligned itself with the minority.

We therefore conclude that the trial court correctly ruled that each of the Insurers covered the total amount of the State's liability for property damage (subject to their respective policy limits), including property damage that actually occurred before or after their policy periods.

C. The "No-Stacking" Ruling

1. Introduction

As we have just held, each successive insurer is potentially liable up to the entire loss. Nevertheless, that liability is capped by the policy limits. Accordingly, the next question is whether the State is entitled to stack the policy limits of the different policy periods.

"Stacking" is a useful shorthand term, but it can be ambiguous. Hence, we begin by defining what we mean by it. In its broadest sense, stacking means treating multiple policies that apply to a single loss as cumulative - as a "stack" of coverage - rather than as mutually exclusive. Hence, stacking issues can arise almost any time multiple policies cover a single loss. In Wallace v. Farmers Ins. Group (1986) 177 Cal.App.3d 735, for example, "stacking" was used to refer to a husband's recovery under both his and his wife's automobile policies. (Id. at p. 740.) In Barrett v. Farmers Ins. Group (1985) 174 Cal.App.3d 747, "stacking" was used to refer to recovery by the victims of an auto accident under three policies, each covering a different vehicle. (Id. at p. 749.)

Most often - as in this case - stacking refers to stacking of policy limits. Thus, the California Supreme Court has defined stacking as "'the ability of the insured, when covered by more than one insurance policy, to obtain benefits from a second policy on the same claim when recovery from the first policy would alone be inadequate' to compensate for the actual damages suffered. [Citation.]" (Wagner v. State Farm Mutual Auto. Ins. Co. (1985) 40 Cal.3d 460, 463, fn. 2, quoting Nationwide Ins. Co. v. Gode (1982) 187 Conn. 386, 388, fn. 2 [446 A.2d 1059].) However, as we will discuss in more detail in part III.C.5, post, there can also be issues as to stacking of deductibles.

Also - and again, as in this case - stacking is most often used to refer to the stacking of policy limits across different policy periods. As we discussed in part III.B, ante, under Montrose, a continuous loss that occurs across multiple policy periods may be covered under every policy applicable to every such period; moreover, under Aerojet-General, each such policy may provide coverage up to the entire amount of the loss. When the entire loss is within the limits of any one policy, there is no stacking issue; the insured can recover from that insurer, which will then be entitled to contribution from the other insurers. However, whenever the loss is greater than the limits of any one applicable policy, the insured will seek to stack the policy limits across the policy periods.

That is what the State seeks to do in this case. Accordingly, from now on, whenever we refer to "stacking," without any further qualification, we will be referring to the stacking of policy limits across policy periods.

Note that, in a jurisdiction that does not follow Montrose, holding instead that a single continuous loss can only be covered by the policies in effect during a single policy period, an issue of stacking simply cannot arise. Likewise, in a jurisdiction that does not follow Aerojet-General, holding instead that a single continuous loss must be prorated across the applicable policy periods, stacking cannot be an issue. Stacking is an issue only in a jurisdiction that, like California, has both a continuous injury trigger (Montrose) and an all-sums rule (Aerojet-General). Under these circumstances, some jurisdictions have permitted stacking. (E.g., Society Ins. v. Town of Franklin (Wis.App. 2000) 233 Wis.2d 207, 216 [607 N.W.2d 342]; J.H. France Refractories Co. v. Allstate Ins. Co. (1993) 534 Pa. 29, 42 [626 A.2d 502]; Cole v. Celotex Corp. (La. 1992) 599 So.2d 1058, 1077-1080.) Others have not. (E.g., American Physicians Ins. Exchange v. Garcia (Tex. 1994) 876 S.W.2d 842, 854-855; Keene, supra, 667 F.2d at pp. 1049-1050.)*fn7

"Whether a policyholder may stack the applicable policy limits . . . can drastically affect the amount of the policyholder's eventual recovery." (Gillespie, The Allocation of Coverage Responsibility Among Multiple Triggered Commercial General Liability Policies in Environmental Cases: Life After Owens-Illinois (1996) 15 Va. Envtl. L.J. 525, 533-534, fns. omitted.) Indeed, the choice between stacking and not stacking can have an even more drastic effect than the choice between an all-sums approach and a pro rata approach.

Take the following hypothetical (summarized in the table below): Polluter Corp. is held liable for $30 million in property damage, resulting from six years of continuous pollution. In year one, it was insured by Insurer A, subject to policy limits of $1 million per occurrence. In each of years two and three, it was insured by Insurer B, subject to policy limits of $10 million per occurrence. And in each of ...


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