Title: State v. Cont'l Ins. Co.
Citation: N/A
Docket Number: S170560
State: California
Issuer: California Supreme Court
Date: August 9, 2012

Filed 8/9/12 
 
 
 
IN THE SUPREME COURT OF CALIFORNIA 
 
 
 
THE STATE OF CALIFORNIA, 
) 
 
 
) 
 
Plaintiff, Cross-Defendant 
) 
 
and Appellant, 
) 
 
 
) 
S170560 
 
v. 
) 
 
 
) 
CONTINENTAL INSURANCE  
) 
Ct. App. 4/2 
COMPANY et al., 
) 
E041425 
 
 
) 
Riverside County 
 
Defendants, Cross- 
) 
 
Complainants and Appellants; ) 
 
 
) 
EMPLOYERS INSURANCE OF 
) 
WAUSAU,  
)  
Super. Ct. No. 239784 
 
 
) 
 
Defendant, Cross- 
) 
 
Complainant and Respondent. ) 
 
____________________________________) 
 
This case considers complex questions of insurance policy coverage 
interpretation in connection with a federal court-ordered cleanup of the state‟s 
Stringfellow Acid Pits waste site.  We initially address the “ „continuous injury‟ 
trigger of coverage,” as that principle was explained in Montrose Chemical Corp. 
v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 655 (Montrose) and the “all sums” rule 
adopted in Aerojet-General Corp. v. Transport Indemnity Co. (1997) 17 Cal.4th 
38, 55-57 (Aerojet), and conclude that the principles announced in those cases 
apply to the insurers‟ indemnity obligations in this case, so long as the insurers 
insured the subject property at some point in time during the loss itself. 
 
2 
Because we conclude that the continuous injury trigger and all sums rule 
apply to the duty to indemnify here, we must also determine how best to allocate 
the indemnity duty among the insurers responsible for covering the property loss.  
As we explain, we conclude that the Court of Appeal below correctly applied the 
“all-sums-with-stacking” allocation rule.  We therefore affirm the judgment of the 
Court of Appeal. 
 
FACTUAL AND PROCEDURAL BACKGROUND 
The State of California (State) seeks indemnity from several of its insurers 
in connection with a federal court-ordered cleanup of the State’s Stringfellow Acid 
Pits waste site.1  The site was an industrial waste disposal facility that the State 
designed and operated from 1956 to 1972.  Each insurer that is party to this appeal 
issued one or more excess commercial (also known as comprehensive) general 
liability (CGL) insurance policies to the State between 1964 and 1976.2  The site 
was uninsured before 1963, and after 1978. 
                                              
1 
Insurers are Continental Insurance Company (Continental), successor in 
interest to Harbor Insurance Company (Harbor); Continental Casualty Company 
(Casualty), successor by merger to CNA Casualty Company of California (CNA); 
Yosemite Insurance Company (Yosemite); Stonebridge Life Insurance Company 
(Stonebridge), successor of Beneficial Fire & Casualty Company (Beneficial) (see 
post, fn. 3); Horace Mann Insurance Company (Horace Mann); and Employers 
Insurance of Wausau (Wausau). 
2 
Excess liability insurance is coverage “whereby, under the terms of the 
policy, liability attaches only after a predetermined amount of primary insurance 
has been exhausted.”  (2 Cal. Insurance Law & Practice (Matthew Bender 1986) 
The Insurance Contract, § 14.02[1], p. 14-4.)  Frequently there are several layers 
of secondary coverage, sometimes referred to as “excess insurance.”  (Ibid.; see 
Ins. Code, § 676.6, subd. (b).) 
 
3 
In 1955, a state geologist determined that a Riverside County quarry was a 
suitable location for the disposal of industrial waste.  According to the geologist’s 
report, the site was a canyon lined on its bottom with impermeable rock.  The 
geologist advised the State to build a concrete barrier dam to close a 250-foot gap 
in the canyon’s natural walls.  He claimed that, once the dam was in place, “the 
operation of the site for industrial wastes [would] not constitute a threat of 
pollution.”  The State subsequently developed the facility, which went into 
operation in 1956, and eventually received more than 30 million gallons of 
industrial waste. 
In reality, the site suffered from three major flaws that made it ill-suited to 
serve as an industrial waste facility.  First, the state geologist had failed to identify 
an underground aquifer located 70 feet below the canyon floor that facilitated the 
movement of groundwater into and out of the site.  Second, the rock underlying 
the canyon floor was fractured, so it allowed waste to leak into the groundwater 
system and escape the facility.  Third, the barrier dam proved ineffective.  It 
permitted contaminants to escape the facility during heavy rains in 1969 and again 
in 1978.  The severity of the latter event forced the State to conduct a “controlled 
discharge” of contaminants into Pyrite Channel.  The ensuing plume of waste 
extended for miles.  The State closed the facility in 1972 after discovering the 
groundwater contamination. 
In 1998, a federal court found the State liable for, inter alia, negligence in 
investigating, choosing, and designing the site, overseeing its construction, failing 
to correct conditions at it, and delaying its remediation.  The State was held liable 
for all past and future cleanup costs.  The State claims costs associated with the 
Stringfellow site remediation could reach $700 million.  The insurers stipulate that 
the State is liable for at least $50 million.  The State filed an action against several 
 
4 
of its insurers in September 1993, seeking indemnification for its liability in the 
federal action. 
The pertinent language of all the policies at issue is essentially identical.  
Under the heading “Insuring Agreement,” insurers agreed “[t]o 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.”  Limits on liability in the agreements were 
stated as a specified dollar amount of the “ultimate net loss [of] each occurrence.”  
“Occurrence” was defined as meaning “an accident or a continuous or repeated 
exposure to conditions which result in . . . damage to property during the policy 
period . . . .”  In addition, “ ‘ultimate net loss’ [was] 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 . . . .” 
The trial was conducted in multiple phases.  At the conclusion of a June 
1999 bench trial, the court ruled that the policy limits under policies with multiple-
year periods applied “per occurrence” and not annually.  Following this, in April 
2002, the trial court held that the State’s failure to remediate and its delay in 
remediating the site was not a breach of any duty to mitigate the insurers’ 
damages.  In September 2002, the State brought a second suit, asserting related 
claims against additional insurers, including those which are parties to this appeal.  
This case was consolidated with the first action, and defendant insurers in the 
second suit agreed to be bound by all prior rulings in the original action.  All 
parties stipulated that the property damage that the Stringfellow site’s selection, 
design, and construction caused took place continuously throughout the defendant 
insurers’ multiple consecutive policy periods from 1964 to 1976. 
 
5 
The trial court held that each insurer was liable for damages, subject to its 
particular policy limits for the total amount of the loss.  The court based this ruling 
on the “all sums” language in the insuring agreements.  (Ante, at p. 4.)  It also held 
that the State could not recover the policy limits in effect for every policy period, 
and could not “stack,” or combine, policy periods to recover more than one 
policy’s limits for covered occurrences.  The court then concluded that the State 
had to choose a single policy period for the entire loss coverage, and it could 
recover only up to the specific single policy limit in effect at the time the loss 
occurred.  The court based its ruling on the decision in FMC Corp. v. Plaisted & 
Companies (1998) 61 Cal.App.4th 1132 (FMC), which prevented an insured from 
stacking multiple consecutive policies in a case in which the insured had caused 
toxic contamination “over a period of many years” (id. at p. 1142). 
In May 2005, a jury in phase three of the trial rendered special verdicts 
finding the insurers had breached their policies.  By that time, the State had 
already entered into settlement agreements totaling approximately $120 million 
with several other insurers.  The trial court required that these settlements reduce 
the insurers’ liability as setoffs.  Therefore, “[u]nder the trial court’s one-
occurrence, no-annualization and no-stacking rulings, the most the State could 
recover [from all insurers] was $48 million.”  Because the State had already 
recovered $120 million, the court entered judgment nominally in the State’s favor, 
but in the amount of “$0.” 
The State filed an appeal and, with the exception of Wausau, all of the 
insurers filed cross-appeals.  The Court of Appeal affirmed in part and reversed in 
part the trial court’s ruling.  The Court of Appeal, like the trial court, rejected the 
insurers’ contention that they could not be liable for property damage occurring 
outside their respective policy periods.  It held that once coverage was triggered, 
all of the insurers had to indemnify the insured for the loss.  However, the Court of 
 
6 
Appeal reversed the trial court’s ruling that prohibited the State from stacking the 
total policy limits in effect for any one policy period.  In doing so, the Court of 
Appeal rejected the holding of FMC, supra, 61 Cal.App.4th 1132, characterizing 
that antistacking decision as “flawed and unconvincing.” 
Our grant of review followed the insurers’ petitions for review. 
DISCUSSION 
A.  Background 
 
1.  Standard of Review and Insurance Law Principles 
In general, interpretation of an insurance policy is a question of law that is 
decided under settled rules of contract interpretation.  (E.M.M.I. Inc. v. Zurich 
American Ins. Co. (2004) 32 Cal.4th 465, 470; Waller v. Truck Ins. Exchange, Inc. 
(1995) 11 Cal.4th 1, 18.)  “ ‘While insurance contracts have special features, they 
are still contracts to which the ordinary rules of contractual interpretation apply.’  
(Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264; see AIU [Ins. Co. 
v. Superior Court (1990)] 51 Cal.3d [807,] at pp. 821-822.)”  (Foster-Gardner, 
Inc. v. National Union Fire Ins. Co. (1998) 18 Cal.4th 857, 868.)  “The 
fundamental goal of contractual interpretation is to give effect to the mutual 
intention of the parties.”  (Bank of the West v. Superior Court, supra, 2 Cal.4th at 
p. 1264; Civ. Code, § 1636.)  “Such intent is to be inferred, if possible, solely from 
the written provisions of the contract.”  (AIU, supra, 51 Cal.3d at p. 822; Civ. 
Code, § 1639.)  “If contractual language is clear and explicit, it governs.”  (Bank 
of the West v. Superior Court, supra, 2 Cal.4th at p. 1264.)  “ ‘The “clear and 
explicit” meaning of these provisions, interpreted in their “ordinary and popular 
sense,” unless “used by the parties in a technical sense or a special meaning is 
given to them by usage” ([Civ. Code,] § 1644), controls judicial interpretation.  
(Id., § 1638.)’  [Citations.]”  (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th 
at p. 18.) 
 
7 
“A policy provision will be considered ambiguous when it is capable of two 
or more constructions, both of which are reasonable.”  (Waller v. Truck Ins. 
Exchange, Inc, supra, 11 Cal.4th at p. 18, citing Bay Cities Paving & Grading, 
Inc. v. Lawyers’ Mutual Ins. Co. (1993) 5 Cal.4th 854, 867.)  A term is not 
ambiguous merely because the policies do not define it.  (Bay Cities Paving, 
supra, 5 Cal.4th at p. 866; Bank of the West v. Superior Court, supra, 2 Cal.4th at 
pp. 1264-1265; Castro v. Fireman’s Fund American Life Ins. Co. (1988) 206 
Cal.App.3d 1114, 1120.)  Nor is it ambiguous because of “[d]isagreement 
concerning the meaning of a phrase,” or “ ‘the fact that a word or phrase isolated 
from its context is susceptible of more than one meaning.’ ”  (Castro v. Fireman’s 
Fund American Life Ins. Co., supra, 206 Cal.App.3d at p. 1120.)  “ ‘[L]anguage in 
a contract must be construed in the context of that instrument as a whole, and in 
the circumstances of that case, and cannot be found to be ambiguous in the 
abstract.’ ”  (Bank of the West v. Superior Court, supra, 2 Cal.4th at p. 1265, italics 
omitted, quoting Producers Dairy Delivery Co. v. Sentry Ins. Co. (1986) 41 Cal.3d 
903, 916, fn. 7.)  “If an asserted ambiguity is not eliminated by the language and 
context of the policy, courts then invoke the principle that ambiguities are 
generally construed against the party who caused the uncertainty to exist (i.e., the 
insurer) in order to protect the insured’s reasonable expectation of coverage.”  (La 
Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co. (1994) 9 Cal.4th 27, 
37.)  We now apply these principles to the present case. 
 
2.  “Long-tail” Claims 
Disputes like the one here frequently occur in the context of environmental 
damage and toxic exposure litigation.  The kind of property damage associated 
with the Stringfellow site, often termed a “long-tail” injury, is characterized as a 
series of indivisible injuries attributable to continuing events without a single 
unambiguous “cause.”  Long-tail injuries produce progressive damage that takes 
 
8 
place slowly over years or even decades.  Traditional CGL insurance policies, 
including those drafted before such environmental suits were common, are 
typically silent as to this type of injury.  (Hickman & DeYoung, Allocation of 
Environmental Cleanup Liability Between Successive Insurers (1990) 17 N. Ky. 
L.Rev. 291, 292 (Hickman & DeYoung).)  Because of this circumstance, many 
insurers are unwilling to indemnify insureds for long-tail claims.  Their refusal to 
indemnify often causes insureds to sue for coverage.  As the present case 
highlights, these suits tend to be complex.  Typically they involve dozens of 
litigants and even larger numbers of insurance policies covering multiple time 
periods that stretch back over many years. 
It is often “virtually impossible” for an insured to prove what specific 
damage occurred during each of the multiple consecutive policy periods in a 
progressive property damage case.  (Hickman & DeYoung, supra, at p. 292.)  If 
such evidence were required, an insured who had procured insurance coverage for 
each year during which a long-tail injury occurred likely would be unable to 
recover.  “While CGL policies [such as the ones at issue here] limit coverage to 
their policy period, the policies . . . require only that some damage occur during 
the policy period. . . .  Unfortunately, CGL policies leave unanswered the crucial 
question for long-tail injuries:  when does a continuous condition become an 
‘occurrence’ for the purposes of [triggering] insurance coverage?”  (Bratspies, 
Splitting the Baby:  Apportioning Environmental Liability Among Triggered 
Insurance Policies (1999) 1999 B.Y.U. L.Rev. 1215, 1228-1229, fn. omitted 
(Bratspies).) 
B.  Montrose and Aerojet 
While the term “trigger of coverage” does not appear in the language of the 
CGL insurance policies here, it is a term of “convenience used to describe that 
which, under the specific terms of an insurance policy, must happen in the policy 
 
9 
period in order for the potential of coverage to arise.  The issue is largely one of 
timing — what must take place within the policy’s effective dates for the potential 
of coverage to be ‘triggered’?”  (Montrose, supra,10 Cal.4th at p. 655, fn. 2.)  In 
Montrose, we held that in the context of a third party liability policy “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.)  In that case, the dispute centered on a series of successive liability 
policies that seven insurers issued covering a 26-year period.  (Id. at p. 656.)  At 
issue was whether an insurer whose policy covered only the last four years of this 
period had a duty to defend suits alleging continuous and progressive property 
damage and bodily injury that resulted from hazardous chemicals that the insured 
manufactured beginning before, but continuing during, the insurer’s policy period.  
This court held that “ ‘[p]roperty damage’ ” was “ ‘physical injury to or 
destruction of tangible property which occurs during the policy period . . . .’ ”  (Id. 
at p. 668.)  The policy defined “ ‘occurrence’ ” as “ ‘an accident, including 
continuous or repeated exposure to conditions, which results in . . . property 
damage . . . .’ ”  (Id. at p. 669; see also id. at pp.  671-673.)  Under the insurance 
policy language at issue in Montrose, we determined that a continuous condition 
becomes an occurrence for the purposes of triggering insurance coverage when 
“ ‘property damage’ ” results from a causative event consisting of “the accident or 
‘continuous and repeated exposure to conditions.’ ” (Id. at p. 669.)  The limitation 
on potential indemnity was that the damage must “ ‘occur’ during the policy 
period, and ‘. . . result[]’ from the accident or ‘continuous and repeated exposure 
to conditions.’ ”  (Ibid.) 
In 1997, this court again was asked to interpret the all sums insurance 
policy language in determining an insurer’s defense duties under a similar CGL 
policy.  We noted that “the ‘settled rule’ of the case law” is that “ ‘an insurer on the 
 
10 
risk when continuous or progressively deteriorating [property] damage or [bodily] 
injury first manifests itself remains obligated to indemnify the insured for the 
entirety of the ensuing damage or injury.’ ”  (Aerojet, supra, 17 Cal.4th at p. 57, fn. 
10, italics added by the Aerojet court.)  Although Aerojet, like Montrose, 
principally involved the duty to defend, the issue the court addressed included the 
question whether the insurers could require the insured to pay any part of the 
defense costs.  (Id. at pp. 55-56.)  Aerojet reasoned that the insurers would be 
liable to indemnify the insured against all claims that resulted from some 
triggering harm during the respective policy periods, even if the claims arose after 
the policy period expired.  (Id. at p. 71.)  Therefore, the insurers were responsible 
for defending the insured for all claims that involved the triggering damage.  
(Ibid.)  Aerojet understood Montrose as extending insurers’ indemnity obligations 
beyond the expiration of the policy period where there has been a continuous loss.  
In other words, under Aerojet, as long as the property is insured at some point 
during the continuing damage period, the insurers’ indemnity obligations persist 
until the loss is complete, or terminates.  (Ibid.)3  As the present Court of Appeal 
observed, Aerojet’s “all sums” approach to the duty to indemnify was essential to 
its holding regarding the duty to defend. 
Similar reasoning applies to the indemnity question presented here.  Neither 
the State nor the insurers dispute that progressive damage to property at the 
Stringfellow site “occurred” during numerous policy periods.  In addition, the 
insurers concede that in cases such as this it is impossible to prove precisely what 
                                              
3  
My concurring and dissenting opinion in Aerojet (Aerojet, supra, 17 
Cal.4th at pp. 88-92 (conc. & dis. opn. of Chin, J.)) related to the allocation of 
defense costs to one insurer‟s limited cash flow and self-insurance policy at issue 
in that case, and is not relevant to the present facts or decision. 
 
11 
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. 
The insurers rely on footnote 19 in Montrose, supra, 10 Cal. 4th at page 
681, which generally noted that the court could not endorse a holding that insurers 
are “jointly and severally liable for the full amount” of a long-tail loss.  (Italics 
omitted.)  Aerojet explained the Montrose footnote.  “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, supra, 17 Cal.4th at p. 57, fn. 10, italics added, quoting 
Montrose, supra, 10 Cal.4th at pp. 686-687, 681, fn. 19.)  Rather, as the Court of 
Appeal observed, each insurer is severally liable on its own policy up to its policy 
limits. 
The insurers advocate that we adopt an alternative allocation scheme — a 
pro rata rule for indemnity allocation.  Pro rata (or apportionment) allocation 
“assigns a dual purpose to the phrase „during the policy period‟ in the CGL 
policy‟s definition of „occurrence.‟  The phrase serves both as a trigger of 
coverage and as a limitation on the promised „all sums‟ coverage [language in the 
„Insuring Agreement‟].”  (Bratspies, supra, 1999 B.Y.U. L.Rev. at p. 1234.)  
Courts apportioning coverage on a pro rata basis require the allocation of loss to a 
particular policy be “proportionate to the damage suffered during that policy‟s 
term.”  (Interim 23, Appleman on Insurance 2d (Holmes ed. 2003) 
 
12 
§ 145.4[A][2][b], p. 25 & fn. 109 [citing cases].)  “This approach emphasizes that 
part of a long-tail injury will occur outside any particular policy period.  Rather 
than requiring any one policy to cover the entire long-tail loss, [pro rata] allocation 
instead attempts to produce equity across time.” (Bratspies, supra, 1999 B.Y.U. 
L.Rev. at p 1232.)  Of states addressing similar questions concerning 
indemnification for long-tail injuries involving multiple consecutive CGL policies, 
several have adopted some variation of the pro rata allocation approach.4 
Under the most basic scheme of pro rata allocation, an equal share of the 
amount of damage is assigned to each year over which a long-tail injury occurred.  
The amount owed under any one policy is calculated by dividing the number of 
years an insurer was “on the risk” by the total number of years that the progressive 
damage took place.  The resulting fraction is the portion of the liability owed by 
that particular insurer.  Some states, most notably New Jersey, utilize more 
complicated systems of pro rata allocation allowing for the “weighing” of each 
insurer‟s liability to compensate for an insured‟s increased perception of risk over 
time.  (See Owens-Illinois, Inc. v. United Ins. Co., supra, 650 A.2d 974.)  
                                              
4 
See, e.g., Owens-Illinois, Inc. v. United Ins. Co. (N.J. 1994) 650 A.2d 974 
(adopting pro rata approach to continuous loss); see also Public Serv. Co. of Colo. 
v. Wallis & Cos. (Colo. 1999) 986 P.2d 924, 935; Security Ins. Co. v. Lumbermens 
Mut. Cas. Co. (Conn. 2003) 826 A.2d 107;  Atchison, Topeka & Santa Fe Ry. v. 
Stonewall Ins. Co. (Kan. 2003) 71 P.3d 1097;  Aetna Cas. & Sur. Co. v. 
Commonwealth (Ky. 2005) 179 S.W.3d 830, 842; Southern Silica of Louisiana, 
Inc. v. Louisiana Insurance Guarantee Association (La. 2008) 979 So.2d 460; 
Boston Gas Co. v. Century Indem. Co. (Mass. 2009) 910 N.E.2d 290; Domtar, Inc. 
v. Niagara Fire Ins. Co. (Minn. 1997) 563 N.W.2d 724, 732; EnergyNorth 
Natural Gas, Inc. v. Certain Underwriters at Lloyd's (N.H. 2007) 934 A.2d 517; 
Consolidated Edison Co. of N.Y. v. Allstate Ins. Co. (N.Y. 2002) 774 N.E.2d 687; 
Sharon Steel Corp. v. Aetna Cas. & Sur. Co. (Utah 1997) 931 P.2d 127, 140-142; 
Towns v. Northern Sec. Ins. Co. (Vt. 2008) 964 A.2d 1150, 1167. 
 
13 
Significantly, all pro rata allocation methods assign liability to the insureds for 
those years of the continuous injury that the insureds chose not to purchase 
insurance.  Although some states have concluded, as the insurers urge in this case, 
that pro rata coverage would be more fair and equitable when compared to all 
sums allocation, we are constrained by the language of the applicable policies here 
(as noted ante, at p. 4), which supports adoption of the all sums coverage 
principles, as it does not differ in any meaningful way from the Montrose and 
Aerojet policies.  (Aerojet, supra, 17 Cal.4th at p. 49.)  Under the CGL policies 
here, the plain “all sums” language of the agreement compels the insurers to pay 
“all sums which the insured shall become obligated to pay . . . for damages . . . 
because of injury to or destruction of property . . . .”  (Ante, at p. 4.)  As the State 
observes, “[t]his grant of coverage does not limit the policies‟ promise to pay „all 
sums‟ of the policyholder‟s liability solely to sums or damage „during the policy 
period.‟ ”  
The insurers contend that it would be “objectively unreasonable” to hold 
them liable for losses that occurred before or after their respective policy periods.  
But as the State correctly points out, the “during the policy period” language that 
the insurers rely on to limit coverage, does not appear in the “Insuring Agreement” 
section of the policy and therefore is neither “logically [n]or grammatically related 
to the „all sums‟ language in the insuring agreement.”  The insurers‟ claim that 
their indemnity responsibility is limited to damage occurring “during the policy 
period” would unduly restrict their agreement to pay “all sums” the insured is 
obligated to pay for damages due to “injury to or destruction of property. . . .”  The 
CGL policy language does not contemplate such a limited result once there is a 
property damage occurrence that triggers the insurers‟ indemnity responsibilities 
 
14 
for the entirety of the loss, and a growing number of states have similarly adopted 
this interpretation of the all sums language.5 
We therefore conclude that the policies at issue obligate the insurers to pay 
all sums for property damage attributable to the Stringfellow site, up to their 
policy limits, if applicable, as long as some of the continuous property damage 
occurred while each policy was “on the loss.”  The coverage extends to the 
entirety of the ensuing damage or injury (Montrose, supra, 10 Cal.4th at p. 686), 
and best reflects the insurers‟ indemnity obligation under the respective policies, 
the insured‟s expectations, and the true character of the damages that flow from a 
long-tail injury. 
C.  Stacking Considerations 
As we have explained, the all sums indemnity coverage that the Court of 
Appeal below adopted under Montrose and Aerojet envisions that each successive 
insurer is potentially liable for the entire loss up to its policy limits.  When the 
entire loss is within the limits of one policy, the insured can recover from that 
insurer, which may then seek contribution from the other insurers on the risk 
during the same loss.  Recognizing, however, that this method stops short of 
satisfying the coverage responsibilities of the policies covering a continuous long-
tail loss, and potentially leaves the insured vastly uncovered for a significant 
portion of the loss, the present Court of Appeal allowed the insured to stack the 
                                              
5 
See, e.g., Hercules, Inc. v. AIU Ins. Co. (Del. 2001) 784 A.2d 481, 494; 
Allstate Ins. Co. v. Dana Corp. (Ind. 2001) 759 N.E.2d 1049, 1058; Goodyear 
Tire & Rubber Co. v. Aetna Cas. & Sur. Co. (Ohio 2002) 769 N.E.2d 835; J.H. 
France Refractories Co. v. Allstate Ins. Co. (Pa. 1993) 626 A.2d 502; American 
Nat’l Fire Ins. Co. v. B & L Trucking & Constr. Co. (Wn. 1998) 951 P.2d 250; 
Plastics Engineering Co. v. Liberty Mut. Ins. Co. (Wis. 2009) 759 N.W.2d 613, 
616. 
 
15 
consecutive policies and recover up to the policy limits of the multiple plans.  
“Stacking” generally refers to the stacking of policy limits across multiple policy 
periods that were on a particular risk.  In other words, “Stacking policy limits 
means that when more than one policy is triggered by an occurrence, each policy 
can be called upon to respond to the claim up to the full limits of the policy.”  
(Colon, Pay It Forward:  Allocating Defense and Indemnity Costs in 
Environmental Liability Cases in Cal. (Feb. 2002) 24 Ins. Litig. Rptr. 43, 53.)  
“When the policy limits of a given insurer are exhausted, [the insured] is entitled 
to seek indemnification from any of the remaining insurers [that were] on the 
risk . . . .”  (J.H. France Refractories Co. v. Allstate Ins. Co., supra, 626 A.2d at p. 
509 [adopting all sums allocation and serial stacking of policies in Pennsylvania 
for continuous bodily injuries caused by asbestos manufacturer]; see also Koppers 
Co. v. Aetna Cas. & Sur. Co. (3d Cir 1996) 98 F.3d 1440 [adopting all sums and 
stacking for environmental cleanup liability].)  The all-sums-with-stacking 
indemnity principle properly incorporates the Montrose continuous injury trigger 
of coverage rule and the Aerojet all sums rule, and “effectively stacks the 
insurance coverage from different policy periods to form one giant „uber-policy‟ 
with a coverage limit equal to the sum of all purchased insurance policies.  Instead 
of treating a long-tail injury as though it occurred in one policy period, this 
approach treats all the triggered insurance as though it were purchased in one 
policy period.  The [insured] has access to far more insurance than it would ever 
be entitled to within any one period.”  (Bratspies, supra, 1999 B.Y.U. L.Rev. at p. 
1245.)  The all-sums-with-stacking rule means that the insured has immediate 
access to the insurance it purchased.  It does not put the insured in the position of 
receiving less coverage than it bought.  It also acknowledges the uniquely 
progressive nature of long-tail injuries that cause progressive damage throughout 
multiple policy periods.  (Ibid.) 
 
16 
In adopting the all-sums-with-stacking rule, the Court of Appeal rejected 
the FMC court‟s antistacking ruling because it “disregarded the policy language 
entirely.”  The Court of Appeal noted that, as in this case, the policies in FMC did 
not include antistacking provisions, so the FMC court resorted to “judicial 
intervention” in order to avoid stacking.  As the Court of Appeal recognized, 
absent antistacking provisions, statutes that forbid stacking, or judicial 
intervention, “standard policy language permits stacking.”  We agree with the 
Court of Appeal, and find that the policies at issue here, which do not contain 
antistacking language, allow for its application.  In so holding, we disapprove 
FMC Corp. v. Plaisted & Companies, supra, 61 Cal.App.4th 1132.6 
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.  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 
                                              
6 
There is precedent in the Court of Appeal for adopting the stacking rule, 
although the insurers correctly point out that stacking was allowed in the presence 
of a stipulation only.  (See Stonewall Ins. Co. v. City of Palos Verdes Estates 
(1996) 46 Cal.App.4th 1810, 1853 [adopting “horizontal” approach to excess 
liability coverage, meaning that if limits of liability of each primary insurance 
policy adequately cover the occurrences, there is no excess coverage expectation].)  
This case is the first in our court to consider the stacking of excess policies in the 
continuous property loss scenario. 
 
17 
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.  There is 
nothing unfair or unexpected in allowing stacking in a continuous long-tail loss.  
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.  Of course, in the future, contracting parties 
can write into their policies whatever language they agree upon, including 
limitations on indemnity, equitable pro rata coverage allocation rules, and 
prohibitions on stacking. 
CONCLUSION 
In the present case, consistent with this court‟s precedent, principles of 
equity, and sound insurance policy interpretation considerations, we conclude that 
the all sums approach to insurance indemnity allocation applies to the State‟s 
successive property or long-tail first party property loss.  In addition, we conclude 
that allocation of the cost of indemnification under these circumstances should be 
determined with stacking.  Consequently, we affirm the Court of Appeal‟s 
judgment. 
 
 
CHIN, J. 
WE CONCUR: 
CANTIL-SAKAUYE, C. J. 
KENNARD, J. 
BAXTER, J. 
WERDEGAR, J. 
CORRIGAN, J. 
LIU, J.
 
 
See last page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion State of California v. Continental Insurance Company 
__________________________________________________________________________________ 
 
Unpublished Opinion 
Original Appeal 
Original Proceeding 
Review Granted XXX 170 Cal.App.4th 160 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S170560 
Date Filed: August 9, 2012 
__________________________________________________________________________________ 
 
Court: Superior 
County: Riverside 
Judge: Sharon J. Waters, Stephen D. Cunnison and Erik Michael Kaiser 
 
__________________________________________________________________________________ 
 
Counsel: 
 
Edmund G. Brown, Jr., Attorney General, Darryl L. Doke and Jill Scally, Deputy Attorneys General; 
Cotkin & Collins, Joan Cotkin; Law Offices of Roger W. Simpson, Roger W. Simpson; Law Offices of 
Daniel J. Schultz, Daniel J. Schultz; Anderson Kill & Olick, Robert M. Horkovich, Edward J. Stein, Robert 
Chung and Cort Malone for Plaintiff, Cross-defendant and Appellant. 
 
Gauntlett & Associates, David A. Gauntlet, James A. Lowe; Orrick, Herrington & Sutcliffe, Barry S. Levin 
and Darren S. Teshima for United Policyholders and Center for Community Action and Environmental 
Justice as Amici Curiae on behalf of Plaintiff, Cross-defendant and Appellant. 
 
Winston & Strawn, Scott P. DeVries, Yelitza V. Dunham and Gene C. Schaerr for the League of California 
Cities as Amicus Curiae on behalf of Plaintiff, Cross-defendant and Appellant. 
 
Latham & Watkins, David L. Mulliken, Kristine L. Wilkes, Johanna S. Schiavoni and Drew T. Gardiner for 
Montrose Chemical Corporation of California as Amicus Curiae on behalf of Plaintiff, Cross-defendant and 
Appellant. 
 
Heller Ehrman, Proskauer Rose, Pillsbury Winthrop Shaw Pittman, Reynold L. Siemens and David A. 
Thomas for Aeorojet-General Corporation and Whittaker Corporation as Amici Curiae on behalf of 
Plaintiff, Cross-defendant and Appellant. 
 
Epstein, Turner & Song and David B. Epstein for Consumer Federation of America as Amicus Curiae on 
behalf of Plaintiff, Cross-defendant and Appellant. 
 
Berkes Crane Robinson & Seal, Steven M. Crane, Barbara S. Hodius; Berman & Aiwasian, Aiwasian & 
Associates, Deborah A. Aiwasian, Steven M. Haskell; Woolls & Peer, John E. Peer and H. Douglas Galt 
for Defendants, Cross-complainants and Appellants Continental Insurance Company, Continental Casualty 
Company, Horace Mann Insurance Company and Yosemite Insurance Company. 
 
 
 
 
 
 
 
 
 
Page 2 – counsel continued – S170560 
 
Counsel: 
 
Wilson, Elser, Moskowitz, Edelman & Dicker, Patrick M. Kelly, Carey B. Moorehead, Craig C. Hunter, 
Robert Cooper; Sonnenschein Nath & Rosenthal, SNP Denton US, Paul E. B. Glad and Katherine J. Evans 
for Defendant, Cross-complainant and Appellant Stonebridge Life Insurance Company. 
 
Duane Morris, Philip R. Matthews, Andrew K. Gordon and William J. Baron for Certain London Market 
Insurers as Amicus Curiae on behalf of Defendants, Cross-complainants and Appellants. 
 
Gibson, Dunn & Crutcher and Scott R. Hoyt for Truck Insurance Exchange as Amicus Curiae on behalf of 
Defendants, Cross-complainants and Appellants. 
 
Barber Law Group, Bryan M. Barber and Steven D. Meier Defendant, Cross-complainant and Respondent. 
 
Wiley Rein, Laura A. Foggan, Gregory J. Langlois; Sinnott Dito Moura & Puebla and Randolph P. Sinnott 
for Complex Insurance Claims Litigation Association and American Insurance Association as Amici 
Curiae on behalf of Defendants, Cross-complainants and Appellants and Defendant, Cross-complainant and 
Respondent. 
 
 
 
 
 
 
 
 
 
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
Roger W. Simpson 
Law Offices of Roger W. Simpson 
18441 Santa Eugenia Street 
Fountain Valley, CA  92708 
(714) 968-8521 
 
Steven M. Crane 
Berkes Crane Robinson & Seal 
515 South Figueroa Street, Suite 1500 
Los Angeles, CA  90071 
(213) 955-1150