The Fourth Appellate District affirmed a judgment. The court held that the trial court properly found that an excess insurer’s policies were triggered as soon as the insured exhausted its retention for the specified policy period.
The State of California engaged in lengthy litigation to recover from various insurers the costs of cleaning up the Stringfellow hazardous waste site. In 2015, Continental Insurance Company paid the State its full policy limits of $12 million. The trial court ruled, among other things, that the State was entitled to mandatory prejudgment interest on that amount at seven percent, dating back to 1998, and thus totaling $13,914,082.09.
Continental appealed, arguing, among other things, that the award of mandatory prejudgment interest was erroneous because it was premised on the trial court’s erroneous ruling as to when Continental’s policies attached. According to Continental, its policies did not attach until all of the State’s other coverage, both primary and excess, across all policy periods, was exhausted.
The court of appeal affirmed, holding that the language of Continental’s policies defeated its claim. Under the policies, Continental’s liability attached upon an “Ultimate Net Loss” that is in excess of the specified ($16 or $25 million) retention. Continental relied, however, on the definition of “Ultimate Net Loss,” and also on the “Other Insurance” clause. These both provided, essentially, that Continental’s policy was excess to any other insurance. However, there were two problems with this. First, and most glaringly, these clauses were not limited to lower-layer insurance. As written, they purported to provide that Continental simply was not liable as long as there was any other unexhausted insurance — including policies in the same layer. There was no language in Continental’s policies that would make them excess to lower-layer policies for other policy periods, but not to same-layer policies for other policy periods. Thus, the policy language simply did not support Continental’s proposed “rising bathtub” approach. Second, other-insurance clauses are intended to apply in contribution actions between insurers, not in coverage litigation between insurer and insured. When multiple policies are triggered on a single claim, the insurers’ liability is apportioned pursuant to the “other insurance” clauses of the policies. That apportionment, however, has no bearing upon the insurers’ obligations to the policyholder. A pro rata allocation among insurers does not reduce their respective obligations to their insured. The insurers’ contractual obligation to the policyholder is to cover the full extent of the policyholder’s liability (up to the policy limits). Third, under Continental’s approach, a court could not determine the amount any insurer owes without first determining what every insurer owes. This would deprive the insured of the timely indemnity it bargained for. Continental’s remaining arguments were similarly unavailing.