California Supreme Court Adopts 'All-Sums-With Stacking' Rule Disapproves FMC Corp. v. Plaisted In The Process

In a long-awaited decision, the California Supreme Court unanimously held that in cases of continuous or progressive property damage, each insurer, including excess insurers, on the risk at any point when damage occurred is liable for indemnity up to its policy limit if its policy contains "all sums" language. The is true regardless of whether some of the damage occurred before or after the policy period. State of California v. Continental Ins. Co., California Supreme Court No. S170560 (August 9, 2012). The Court also held that an insured is entitled to stack policy limits across policy years in progressive loss cases absent anti-stacking language in the policy. In reaching this latter holding, the Court expressly disapproved of the Court of Appeal's decision in FMC Corp. v. Plaisted & Companies, 61 Cal. App. 4th 1132 (1998).

Background

The case arises from the decades-long Stringfellow Acid Pits saga. The State of California designed an industrial waste disposal facility in an abandoned quarry in 1956 which was owned and operated by the owners until it was closed in 1972. The State was uninsured before 1963 (when the California Tort Claims Act was enacted) and after 1978. In 1998 California was held all liable for all past and future cleanup costs, which the state estimated could reach $700 million. In the ensuing coverage suit, the State sought indemnity from its excess insurers whose policies covered the period between 1964 and 1976. This coverage suit was previously the subject of the California Supreme Court decision in State of California v. Allstate Ins. Co., 45 Cal.4th 1008 (2009), in which the Court held that the State was entitled to full indemnity for indivisible injury concurrently caused by covered and exclude events, even though the State could not allocate the cause of the injury between the covered "sudden and accidental" discharges of pollutants and excluded gradual discharges of pollutants.This appeal arose out of the trial court ruling that each insurer was liable up to its policy limits based on the "all sums" language of the policies, but the trial court further held that the State could not "stack" policies to recover more than one policy's limit for covered occurrences, relying on FMC Corp., 61 Cal.App.4th 1132. The Court of Appeal affirmed the trial court's "all sums" ruling, but reversed its "no stacking" ruling. The Court of Appeal found the no stacking analysis in FMC Corp. unpersuasive and "judicial...