Calif. SC: Insurers must pay State in dispute over waste site cleanup

Jessica M. Karmasek Aug. 15, 2012, 3:15pm


SAN FRANCISCO (Legal Newsline) - The California Supreme Court ruled last week that the State should be able to collect up to the policy limit from each insurance company in a decades-long dispute over the cleanup of the Stringfellow Acid Pits.

Stringfellow is a toxic waste dump and Superfund site located in Riverside County, Calif., just north of Glen Avon.

It was shut down in 1972 after it was found that the pits were leaking into local groundwater.

In the 1980s, it was considered one of the most polluted sites in the state.

Currently, Stringfellow is managed by the California Department of Toxic Substances Control, or DTSC.

At issue in the case was the interpretation of insurance policy coverage in connection with a federal court-ordered cleanup of the waste site.

Insurers argued their liability should restricted to a share of the damage that occurred during the time each policy was in effect.

In its ruling Thursday, the state's high court sided with the State and affirmed the judgment of the California Court of Appeal.

The appeals court, Justice Ming Chin said, correctly applied the "all-sums-with-stacking" allocation rule.

"An all-sums-with-stacking rule has numerous advantages. It resolves the question of insurance coverage as equitably as possible, given the immeasurable aspects of a long-tail injury. It also comports with the parties reasonable expectations, in that the insurer reasonably expects to pay for property damage occurring during a long-tail loss it covered, but only up to its policy limits, while the insured reasonably expects indemnification for the time periods in which it purchased insurance coverage," the justice wrote in the Court's 17-page opinion.

Chin, pointing to the language of the applicable policies, explained that all-sums-with-stacking coverage allocation ascertains each insurer's liability with a "comparatively uncomplicated calculation" that looks at the long-tail injury as a whole rather than artificially breaking it into distinct periods of injury.

"As the Court of Appeal recognized, if an occurrence is continuous across two or more policy periods, the insured has paid two or more premiums and can recover up to the combined total of the policy limits," he wrote.

"There is nothing unfair or unexpected in allowing stacking in a continuous long-tail loss."

He added, "The most significant caveat to all-sums-with-stacking indemnity allocation is that it contemplates that an insurer may avoid stacking by specifically including an 'antistacking' provision in its policy."

Simply put, Chin said it was impossible -- even the insurers conceded -- to prove precisely what property damage occurred during any specific policy period.

"The fact that all policies were covering the risk at some point during the property loss is enough to trigger the insurers' indemnity obligation," he wrote.

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