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Montrose Chemical Corp. of California v. Superior Court

Supreme Court of California

April 6, 2020, Opinion Filed

S244737

Opinion

Kruger, J.—Montrose Chemical Corporation of California (Montrose) was sued for causing continuous environmental damage in the Los Angeles area between 1947 and 1982 and subsequently entered into partial consent decrees to resolve various claims. Montrose now seeks to tap its liability insurance to cover amounts it owes in connection with those claims. For each policy year from 1961 to 1985, Montrose had secured primary insurance and multiple layers of excess insurance. This case concerns the sequence in which Montrose may access the excess insurance policies covering this period.

CA(1)(1) Montrose argues it is entitled to coverage under any relevant policy once it has exhausted directly underlying excess policies for the same policy period. The insurers, by contrast, argue that Montrose may call on an excess policy only after it has exhausted every lower level excess policy covering the relevant years. Reading the insurance policy language in light of background principles of insurance law, and considering the reasonable [*5]  expectations of the parties, we agree with Montrose: ] It is entitled to access otherwise available coverage under any excess policy once it has exhausted directly underlying excess policies for the same policy period. An insurer called on to provide indemnification may, however, seek reimbursement from other insurers that would have been liable to provide coverage under excess policies issued for any period in which the injury occurred.

We have previously recounted the basic facts underlying this dispute. (See Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 292–294 [24 Cal. Rptr. 2d 467, 861 P.2d 1153].) To summarize, Montrose manufactured the insecticide dichloro-diphenyl-trichloroethane (DDT) at its facility in Torrance from 1947 to 1982. In 1990, the United States and the State of California sued Montrose for environmental contamination allegedly caused by Montrose's operation of this facility. Montrose entered into partial consent decrees in which it agreed to pay for environmental cleanup. To meet its obligations, Montrose has now expended millions of dollars—Montrose represents the total is more than $100 million—and asserts that its anticipated future liability could approach or exceed this amount.

CA(2)(2) Montrose purchased primary and excess comprehensive general liability [*6]  insurance to cover its operations at the Torrance facility from defendant insurers between 1961 and 1985. ] Primary insurance refers to the first layer of coverage, whereby “liability attaches immediately upon the happening of the occurrence that gives rise to liability.” (Olympic Ins. Co. v. Employers Surplus Lines Ins. Co. (1981) 126 Cal.App.3d 593, 597 [178 Cal. Rptr. 908].) Excess insurance, by contrast, “refers to indemnity coverage that attaches upon the exhaustion of underlying insurance coverage for a claim.” (County of San Diego v. Ace Property & Casualty Ins. Co. (2005) 37 Cal.4th 406, 416, fn. 4 [33 Cal. Rptr. 3d 583, 118 P.3d 607] (plur. opn.).) An excess insurer's coverage obligation begins once a certain level of loss or liability is reached; that level is generally referred to as the “‘attachment point’” of the excess policy. (Rest., Liability Insurance, § 39, com. d, p. 338.) Here, 40 insurers collectively issued more than 115 excess policies during the 1961 to 1985 period, which collectively provide coverage sufficient to indemnify Montrose's anticipated total liability.

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2020 Cal. LEXIS 2095 *

MONTROSE CHEMICAL CORPORATION OF CALIFORNIA, Petitioner, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; CANADIAN UNIVERSAL INSURANCE COMPANY, INC., et al., Real Parties in Interest.

Prior History:  [*1] Second Appellate District, Division Three, No. B272387.

Superior Court of Los Angeles County, No. BC005158.

Montrose Chemical Corp. v. Superior Court, 14 Cal. App. 5th 1306, 222 Cal. Rptr. 3d 748, 2017 Cal. App. LEXIS 759 (Aug. 31, 2017)

CORE TERMS

insured, exhaustion, policies, policy period, coverage, excess policy, underlying insurance, horizontal, insurance clause, attachment, excess insurance, layer, continuous injury, primary insurance, triggered, million policy, long-tail, vertical, indemnification, policyholder, insurance policy, terms, parties, limits, relevant policy, obligations, Italics, Travelers, covering, clauses

Insurance Law, Types of Insurance, Excess Insurance, Coverage, Triggers, Continuous Triggers, Excess Insurance, Subrogation, Torts, Procedural Matters, Multiple Defendants, Contribution, Claim, Contract & Practice Issues, Policy Interpretation, Contracts Law, Contract Interpretation, Ambiguities & Contra Proferentem, Policy Interpretation, Ambiguous Terms, Construction Against Insurers, Intent, Apportionment of Liability, Ambiguous Terms