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Kaiser Cement and Gypsum Corporation v. Insurance Company of the State of Pennsylvania

April 8, 2013


(Los Angeles County Super. Ct. No. BC249550) APPEAL from a judgment of the Superior Court of Los Angeles County, Carl J. West, Judge.

The opinion of the court was delivered by: Suzukawa, J.

Opinion on remand from Supreme Court


Reversed and remanded.


We are well acquainted with this case, having addressed it several years ago in London Market Insurers v. Superior Court (2007) 146 Cal.App.4th 648, 652 (LMI). There, we considered whether thousands of asbestos bodily injury claims brought against respondent Kaiser Cement and Gypsum Corporation (Kaiser) constituted a single annual "occurrence" within the meaning of comprehensive general liability (CGL) policies issued by respondent Truck Insurance Exchange (Truck). We concluded that they did not: Because under the relevant Truck policies "occurrence" meant injurious exposure to asbestos, the thousands of claims against Kaiser could not be deemed a single annual occurrence.

The present appeal concerns a separate but related coverage issue, which arises in part out of the Supreme Court's seminal decision in Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645 (Montrose). In Montrose, the court adopted a "'continuous injury' trigger of coverage" approach to continuing injury claims. Under that approach, bodily injuries and property damage that occur in several insurance policy periods are potentially covered by all policies in effect during those periods. (Id. at pp. 654-655, 689.) Montrose provides no guidance, however, as to how to apportion liability among insurers in continuing injury cases.

That question of apportioning liability for continuing injuries is raised squarely by the present case. Between 1947 and 1987, Kaiser purchased primary insurance policies from four different insurers, including Truck. During many of the same years, Kaiser also purchased excess insurance policies. For purposes of this litigation, Kaiser has selected the Truck CGL policy in effect in 1974 (the 1974 primary policy), which has a $500,000 per occurrence limit and no annual liability limit, to respond initially to all claims that allege asbestos exposure in that year. At issue here is who is responsible to indemnify Kaiser for asbestos claims that exceed the 1974 primary policy's $500,000 per occurrence limit. Kaiser and Truck contend that appellant Insurance Company of the State of Pennsylvania (ICSOP), which issued a first-level excess policy to Kaiser for 1974 (the 1974 excess policy), is responsible to pay claims over $500,000.*fn1 ICSOP disagrees: It contends that primary insurance limits must be "stacked," such that all available primary insurance policies--that is, all Truck policies issued to Kaiser between 1964 and 1983, as well as primary policies issued to Kaiser by three other carriers between 1947 and 1987--are exhausted before any excess insurer need indemnify Kaiser for asbestos bodily injury claims.

On June 3, 2011, we issued an opinion in which we concluded that under the language of the 1974 primary policy and principles of California law, Truck's maximum exposure for asbestos bodily injury claims was $500,000 per occurrence. We thus agreed with the trial court that, based on the policy language, once Truck contributed $500,000 per occurrence, its obligation to Kaiser ceased. We did not affirm the trial court's grant of summary adjudication, however, because there was no evidence in the record as to whether the policies issued to Kaiser by primary insurers other than Truck had been fully exhausted. We therefore could not determine whether ICSOP had a present duty to indemnify Kaiser. (Kaiser Cement & Gypsum Corp. v. Insurance Co. of State of Pennsylvania (2011) 196 Cal.App.4th 140, review granted Aug. 24, 2011, S194724.)

The California Supreme Court granted review on August 24, 2011. On October 31, 2012, the Supreme Court transferred the matter to this court with directions to vacate our decision and to reconsider it in light of State of California v. Continental Ins. Co. (2012) 55 Cal.4th 186 (Continental). Having done so, we again conclude that the policies Truck issued to Kaiser cannot be stacked, and we remand to the trial court to determine whether Kaiser therefore is entitled to summary adjudication of the fifth and sixth causes of action of the cross-complaint.


I. The Underlying Asbestos Litigation

Kaiser manufactured a variety of asbestos-containing products, including joint compounds, finishing compounds, fiberboard, and plastic cements, from 1944 through the 1970's. Kaiser manufactured these products at 10 different facilities at various times. (LMI, supra, 146 Cal.App.4th at p. 652.)

Truck provided primary insurance to Kaiser from 1964 to 1983, through four CGL policies covering 19 annual policy periods.*fn2 As relevant here, the policy in effect from January 1, 1974, through March 1, 1981, contained a $500,000 "per occurrence" liability limit and, in policy years 1974 and 1975, a $5,000 deductible for "each occurrence." Until April 1980, the policy did not contain an annual aggregate limit.

Kaiser apparently was also insured by three other primary carriers between 1947 and 1987: Fireman's Fund Insurance Company (Fireman's Fund) from 1947 through 1964; Home Indemnity Company (Home Indemnity) from 1983 through 1985; and National Union Fire Insurance Company of Pittsburgh (National Union) from 1985 through 1987. In 1993, Truck and Kaiser entered into agreements with Fireman's Fund, Home Indemnity, and National Union to share defense and indemnity costs until the aggregate limits of each primary policy were exhausted. According to Truck, by April 2004, all three primary carriers had given notice that their aggregate limits were exhausted; thus, after April 30, 2004, Truck was the only primary carrier continuing to pay defense and indemnity costs for asbestos bodily injury claims.

ICSOP issued a first layer excess policy to Kaiser from January 1, 1974, through January 1, 1977. That policy provided that ICSOP would indemnify Kaiser for its "ultimate net loss" in excess of its retained limit, up to the policy limit of $5,000,000 per occurrence. Other insurers, including amici curiae Certain Underwriters at Lloyd's, London, and certain London Market insurance companies, issued excess insurance policies to Kaiser in other years.

By 2004, more than 24,000 claimants had filed products liability suits against Kaiser alleging that they had suffered bodily injury, including asbestosis and various cancers, as a result of their exposure to Kaiser's asbestos products. Kaiser tendered these claims to Truck. By October 2004, Truck's indemnity payments for asbestos bodily injury claims exceeded $50 million and included at least 39 claims that resulted in payments in excess of $500,000. (Ibid.)

II. The Present Coverage Action

Truck filed the present action against Kaiser on April 30, 2001, seeking a declaration that its primary policies had been exhausted and it had no further obligation to defend or indemnify Kaiser for asbestos bodily injury claims. It filed a second amended complaint in August 2007, adding causes of action for equitable subrogation and contribution against Kaiser's excess insurers.

Kaiser cross-claimed against its excess insurers, including ICSOP, seeking a declaration that the excess insurers were obligated to defend and indemnify Kaiser for asbestos bodily injury claims once primary coverage was exhausted. As relevant to this appeal, the fifth and sixth causes of action in the operative third amended consolidated cross-complaint allege as follows:

"Fifth Cause of Action

"Declaratory Relief Against All Cross-Defendants

"66. A controversy and dispute currently exists between Kaiser, Truck and the Excess Insurers with Kaiser and Truck contending, and the Excess Insurers failing to acknowledge that the Excess Insurers are currently obligated under the Excess Policies to defend and to make liability payments in response to ABIC [asbestos bodily injury claims] asserted against Kaiser or to indemnify Kaiser for the costs of defending and making liability payments in response to ABIC asserted against Kaiser.

"67. Truck has alleged in its Second Amended Complaint that Truck has exhausted its policies by paying the full applicable limits of its insurance in response to ABIC and that Truck owes no further duties and obligations to Kaiser pursuant to its policies with respect to such ABIC. Additionally, those primary insurers with policy periods before and after Truck's policy periods have also exhausted their policies with respect to ABIC.

"68. Where, as here, Kaiser has excess insurance coverage extending through multiple consecutive policy periods and where, as here, insurance coverage in multiple consecutive policy periods covers Kaiser's liabilities arising out of the 'occurrence' or 'accident' that resulted in the ABIC asserted against Kaiser . . . , Kaiser is entitled to the protection of the full limits of such policies to the extent necessary to fully indemnify Kaiser. With respect to each individual ABIC, Kaiser is entitled to select, among the triggered policies, the policy or policies to pay the loss. Each Excess Insurer with an Excess Policy immediately in excess of Kaiser's primary policies for any given policy period is obligated to provide coverage upon the exhaustion of the primary policy for that policy period. The remaining Excess Insurers are obligated to provide coverage upon the exhaustion of each applicable underlying Excess Policy.

"Sixth Cause of Action

"Breach of Contract Against Cross-Defendant ICSOP

". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

"70. [O]nce the Truck policy incepting January 1, 1974 responds to an individual ABIC by paying its occurrence limit of $500,000, ICSOP is obligated under its Excess Policy incepting January 1, 1974 to indemnify Kaiser for the 'ultimate net loss' in excess of $500,000 for such claim up to $5,000,000 per occurrence.

"71. By correspondence dated July 3 and July 13, 2007, Kaiser confidentially notified the Excess Insurers, including ICSOP, of the existence of a number of claims that have been settled in excess of Truck's per occurrence limit of $500,000, and the amount paid to settle each such claim.

"72. [ICSOP] has breached the terms of its first layer Excess Policy incepting January 1, 1974 (Policy No. 4174-5841) by failing to pay to Kaiser all amounts that Kaiser has been forced to incur to make settlement payments for ABIC that exceed the Truck 'per occurrence' coverage limits for the primary policy incepting January 1, 1974. Kaiser has complied with all conditions precedent to obtain ICSOP's performance under its Excess Policy No. 4174-5841, or such performance has been excused.

"73. As a direct and proximate result of ICSOP's breach of its Excess Policy No. 4174-5841, Kaiser has been damaged in an amount which cannot be fully ascertained at this time, but which currently totals in excess of $15 million, and in an amount to be proven at trial."

III. Truck's Motion for Summary Adjudication

In October 2004, Truck moved for summary adjudication, seeking a declaration that its policies had been exhausted and it had no further duty to defend or indemnify Kaiser. According to Truck, under the plain language of its policies, all asbestos-related claims in any given year arose out of a single annual "occurrence" because all had the same underlying cause--"'the design, manufacture and distribution by Kaiser and its subsidiaries of asbestos-bearing products.'" Truck contended, therefore, that its total liability for asbestos bodily injury claims for all policy years was $8.3 million and its policies were exhausted as of January 1999. (LMI, supra, 146 Cal.App.4th at pp. 652-653.)

The trial court initially denied the summary adjudication motion. Several months later, however, on its own motion the court ordered reconsideration and supplemental briefing. It then granted summary adjudication for Truck, finding that Truck and Kaiser reasonably intended to treat all asbestos bodily injury claims as a single annual occurrence under the policies. (LMI, supra, 146 Cal.App.4th at pp. 653-654.)

We reversed. We concluded that the plain language of the policies was not susceptible of the conclusion that Kaiser's design, manufacture, and distribution of asbestos products was an "occurrence." (LMI, supra, 146 Cal.App.4th at p. 672.) Rather, the relevant "occurrence" was injurious exposure to asbestos products. Thus, we held that the trial court erred in granting summary adjudication for Truck.

IV. Truck's Motion for Determination of Threshold Coverage Issues

Following our ruling, Truck moved for a determination of the number of "occurrences" at issue in the underlying asbestos bodily injury claims. Specifically, Truck asked the trial court to find that: (1) with regard to the "one lot" claims in Truck's policies from 1964 to 1974, all claims arising from exposures to products produced at the same Kaiser manufacturing facility could be aggregated and deemed a single occurrence; and (2) with regard to the "same general conditions" claims in Truck's policies from 1974 to 1983, all claims arising from exposures to products produced at the same Kaiser manufacturing facility could be deemed a single occurrence, or, alternatively, all claims resulting from the same corporate decision to place asbestos into products, or from multiple corporate decisions made at the same location, could be deemed a single occurrence. Truck stipulated that if the court denied all of the legal rulings it sought, then each asbestos bodily injury claim should be treated as a separate occurrence.

In a January 24, 2008 order, the court noted that Truck had stipulated to a number of key facts, including that there was no evidence proffered in support of any asbestos bodily injury claim that connected any claimant's alleged injurious asbestos exposure to any particular asbestos purchase, manufacture, or sale. Claims, therefore, could not be aggregated by product line or manufacturing plant. The court concluded that for purposes of further proceedings in the case, "the claim of each asbestos bodily injury claimant ...

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