Continuous Injury Trigger In Insurance Claim
In Montrose Chemical Corp. v. Admiral Ins. Co., supra, 10 Cal. 4th 645 (Montrose), the high court considered the circumstances triggering coverage under the standard provisions of a general liability insurance policy for bodily injury and property damage that is continuous or progressively deteriorating throughout several policy periods.
The insured, Montrose Chemical Corp., was sued for damage caused by leakage from dump sites where it had deposited toxic by-products of the production of DDT.
Admiral Insurance Company insured Montrose after it had ceased production of DDT but while the leakage was continuing.
Holding that Admiral was obligated to defend Montrose, the court adopted the theory of "continuous injury" as a trigger of coverage under which "bodily injuries and property damage that are continuous or progressively deteriorating throughout successive policy periods are covered by all policies in effect during those periods." (Id. at p. 675).
Apart from its holding, the Montrose opinion contains dicta that has shaped subsequent Court of Appeal decisions. First, it appeared to say that each insurer sharing coverage with other successive insurers is individually liable for the full amount of the loss up to its policy limits.
Thus, it relied on a Washington decision, Gruol Construction Co. v. Insurance Co. of No. Amer. (1974) 11 Wn.App. 632 524 P.2d 427, holding that "an insurer would become liable at any point in the process for the entire loss up to the policy limits, even though the continuing injury or progressively deteriorating damage may extend over several policy periods." (Montrose, supra, 10 Cal. 4th at p. 678; see also pp. 665, 681, 686-687).
Second, Montrose specifically disapproved the holding of California Union Ins. Co. v. Landmark Ins. Co. (1983) 145 Cal. App. 3d 462, 478 193 Cal. Rptr. 461, to the effect that successive insurers sharing coverage of a loss would incur joint and several liability:
"We do not endorse that aspect of the California Union court's holding that both insurers in that case were jointly and severally liable for the full amount of damage occurring during the successive policy period. Citation.
Allocation of the cost of indemnification once several insurers have been found liable to indemnify the insured for all or some portion of a continuing injury or progressively deteriorating property damage requires application of principles of contract law to the express terms and limitations of the various policies of insurance on the risk." ( Montrose, supra, 10 Cal. 4th at p. 681, fn. 19).
Shortly after Montrose, in Armstrong World Industries, Inc. v. Aetna Casualty & Surety Co., supra, 45 Cal. App. 4th 1, this court considered the liability of successive insurers for bodily injury caused by asbestos contamination. We approved the trial court's conclusion that "each policy triggered by an asbestos-related bodily injury claim has an independent obligation to respond 'in full' to a claim," ( id. at p. 49) and quoted a federal case stating that " '. . . the primary duty of the insurers whose coverage is triggered by exposure or manifestation is to ensure that Keene the insured is indemnified in full.' " ( Id. at p. 51, citing Keene Corp. v. Ins. Co. of North America (D.C. Cir. 1981) 667 F.2d 1034, 1050 215 App.D.C. 156, cert. den. (1982) 455 U.S. 1007 71 L. Ed. 2d 875, 102 S. Ct. 1644.)
At the same time, we affirmed the trial court's order apportioning liability among all the liability insurers whose policies covered the asbestos-related injury. Following Montrose, we rejected joint and several liability among the successive insurers and noted that " '. . . the "other insurance" provisions of each policy provide a scheme by which the insurers' liability is to be apportioned. . . .' " ( Armstrong World Industries, Inc. v. Aetna Casualty & Surety Co., supra, at p. 51, again citing Keene).
The decision in Stonewall Ins. Co. v. City of Palos Verdes Estates (1996) 46 Cal. App. 4th 1810 54 Cal. Rptr. 2d 176 concerned the liability of successive insurers for erosion damage caused by the faulty construction of a municipal drainage system.
The City of Palos Verdes Estates paid a claimant the sum of $ 350,000 as part of a settlement and then sued its liability insurers to recover this amount. the trial court held that two insurers, Jefferson and Admiral, were jointly and severally liable for $ 297,000, a sum equal to the $ 350,000 payment less a deductible of $ 3,000 and a self-insurance retention of $ 50,000. Treating the case as involving successive insurers for a loss continuing throughout their respective policy periods, the court found error only in the imposition of joint and several liability.
The Stonewall court begins with the premise: "With one important qualification, all primary carriers on the risk are liable to the City (up to the limits of their respective policies, less any applicable deductibles or retentions) for the full $ 350,000." ( Stonewall Ins. Co. v. City of Palos Verdes Estates, supra, 46 Cal. App. 4th at p. 1855).
The qualification was based on the criticism of joint and several liability of successive insurers in the Montrose decision. the error in imposing such liability, according to the court, is that it fails "to take 'the express terms and limitations' of the policies into account." ( Stonewall Ins. Co. v. City of Palos Verdes Estates, supra, at p. 1856).
Such express terms and limitations relate "not only to any deductible and retention provisions of the policies but also to any 'other insurance' clauses in the policies." (Ibid).
The record on appeal in Stonewall revealed that the policies of both insurers contained other-insurance clauses but the application of these clauses had not been briefed. Remanding the case to the trial court, the court directed that the lower court fashion a pro rata formula of liability to the insured whereby neither insurer would be held liable for all the loss:
"the $ 297,000 portion of its payout to the claimant remaining after deducting the $ 3,000 in Jefferson deductibles and the $ 50,000 Admiral retention should be imposed partly upon Jefferson severally and partly upon Admiral severally." (Stonewall Ins. Co. v. City of Palos Verdes Estates, supra, 46 Cal. App. 4th at p. 1857.)