Opinion ID: 1213751
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Heading: Various practical and policy considerations further support adoption of the continuous injury trigger of coverage for the third party claims of continuous or progressively deteriorating damage or injury brought under the CGL policies in this case.

Text: Our foregoing review of the standard CGL policy language, as incorporated into Admiral's policies, as well as the relevant cases and authorities that have construed that language, lead us to conclude that the continuous injury trigger of coverage should be adopted for claims of continuous or progressively deteriorating damage or injury under the third party CGL policies in issue in this case. We have shown why Admiral's express policy language supports application of the continuous injury trigger of coverage. We have explained that, contrary to Admiral's arguments in its briefs, it has long been understood that the standard form CGL policy provides liability coverage for damage or injury occurring during the policy period which results from an accident, or from continuous or repeated exposure to injurious conditions. There is no requirement that the sudden, accidental damage-causing act or event, or the conditions giving rise to the damage or injury, themselves occur within the policy period in order for potential liability coverage to arise. We have also explained how retention of the term accident within the standard definition of occurrence in the occurrence-based policies drafted after 1966 was intended to serve the one-occurrence rule, and was never intended to impose a requirement that the damage-causing accident, event, or conditions occur within the policy period. We have noted the settled rule that an insurer on the risk when continuous or progressively deteriorating damage or injury first manifests itself remains obligated to indemnify the insured for the entirety of the ensuing damage or injury. And we have reviewed the rationale of California Union, supra, 145 Cal. App.3d 462, and the decisions cited and relied on therein, which, together with the weight of more recent authorities, [22] conclude that where successive CGL 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. Lastly, we have explained how first party insurance differs from third party liability insurance in many fundamental respects, and why the rationale of our holding in Prudential-LMI, supra, 51 Cal.3d 674, adopting the manifestation trigger of coverage for first party cases, would be inapposite if applied in the context of third party liability insurance coverage. (9) Our conclusion that the continuous injury trigger of coverage should be applied to the third party CGL policies in this case is also in conformity with several important policy considerations. In Prudential-LMI, supra, 51 Cal.3d at page 699, we observed, as one policy reason favoring adoption of the manifestation trigger of coverage in first party property insurance cases, that the underwriting practices of the insurer can be made predictable because the insurer is not liable for a loss once its contract with the insured ends unless the manifestation of loss occurred during its contract term. Admiral here suggests that the general policy favoring the predictability of underwriting practices and reserves will be negatively affected by adoption of a continuous injury trigger in the third party CGL insurance context. We disagree. A number of factors undercut Admiral's concerns. First, leaving aside the availability of excess (multiple) policies or other insurance clauses, and absent express policy language decreeing the manner of apportionment of contribution among successive liability insurers, the courts will generally apply equitable considerations to spread the cost among the several policies and insurers. (See, e.g., CNA Casualty of California v. Seaboard Surety Co. (1986) 176 Cal. App.3d 598, 619-620 [222 Cal. Rptr. 276]; Olympic Ins. Co. v. Employers Surplus Lines Ins. Co. (1981) 126 Cal. App.3d 593, 601-602 [178 Cal. Rptr. 908].) Second, in establishing reserves for the standard form occurrence-based CGL policies which replaced accident-based policies in 1966, the insurance industry, as we have shown, was fully aware of the intended scope of coverage of the new policies, coupled with the specific provision providing coverage for continuous or repeated exposure to conditions causing property damage or bodily injury. Indeed, the drafting history of the standard occurrence-based CGL policy reflects that not only did the drafters understand the term occurrence to mean an accident or exposure to injurious conditions resulting in the occurrence of damage or injury during the policy period, they specifically considered and rejected the suggestion that language establishing a manifestation or discovery trigger of coverage be incorporated into the standard form CGL policy. Among the reasons relied on for rejecting the incorporation of such limitations into the standard definitions in the coverage clauses were several stated equitable concerns: the difficulty of applying such limitations or requirements in cases of continuing damage or injury over the course of successive policy periods, the uncertainty of who would bear the burden of a discovery requirement (i.e., the insured or third party claimants), the arbitrariness, from the carrier's perspective, of telescoping all damage in a continuing injury case into a single policy period, and the fear that policyholders could be disadvantaged by such an approach. (See American Home Prod. v. Liberty Mut. Ins. Co., supra, 565 F. Supp. 1485, 1501-1502, affd. as mod., supra, 748 F.2d 760 [surveying joint committee hearings and drafting materials].) In short, the insurance industry is on record as itself having identified several sound policy considerations favoring adoption of a continuous injury trigger of coverage in the third party liability insurance context. [23] Finally, we agree with Montrose that application of a manifestation trigger of coverage to an occurrence-based CGL policy would unduly transform it into a claims made policy. Claims made policies were specifically developed to limit an insurer's risk by restricting coverage to the single policy in effect at the time a claim was asserted against the insured, without regard to the timing of the damage or injury, thus permitting the carrier to establish reserves without regard to possibilities of inflation, upward-spiraling jury awards, or enlargments of tort liability after the policy period. [24] The insurance industry's introduction of claims made policies into the area of comprehensive liability insurance itself attests to the industry's understanding that the standard occurrence-based CGL policy provides coverage for injury or damage that may not be discovered or manifested until after expiration of the policy period. That understanding is clearly reflected in the higher premiums that must be paid for occurrence-based coverage to offset the increased exposure. ( Pacific Employers Ins. Co. v. Superior Court, supra, 221 Cal. App.3d at pp. 1359-1360.) We agree with the conclusion of the Court of Appeal below that to apply a manifestation trigger of coverage to Admiral's occurrence-based CGL policies would be to effectively rewrite Admiral's contracts of insurance with Montrose, transforming the broader and more expensive occurrence-based CGL policy into a claims made policy. (Accord, Harford County v. Harford Mut. Ins., supra, 610 A.2d at pp. 294-295.) We therefore conclude that the continuous injury trigger of coverage should be applied to the underlying third party claims of continuous or progressively deteriorating damage or injury alleged to have occurred during Admiral's policy periods. Where, as here, successive CGL policy periods are implicated, bodily injury and property damage which is continuous or progressively deteriorating throughout several policy periods is potentially covered by all policies in effect during those periods.