Key Decisions

May 2013 – Primary Policy Limits Do Not Stack

(filed under: Key Decisions Archive | May 20, 2013)

Primary Policy Limits Do Not Stack

Kaiser Cement and Gypsum Corporation v. Insurance Company of the State of Pennsylvania
(Cal. Ct. of App., 2d Dist.), filed April 8, 2013

Truck Insurance Exchange provided liability insurance to Kaiser Cement and Gypsum Corporation over a period of years. Other insurers also provided liability coverage at different points in time. Insurance Company of the State of Pennsylvania (ISOP) provided liability coverage on an excess basis at certain times.

Kaiser was the subject of many claims by individuals claiming to have been injured by asbestos containing materials made by Kaiser.

In London Market Insurers v. Superior Court, 146 Cal.App.4th 648 (2007), the court considered whether thousands of asbestos bodily injury claims brought against Kaiser Cement constituted a single annual “occurrence” or multiple “occurrence” within the meaning of Truck’s policies. It ruled each claim was a separate “occurrence” such that Truck was obligated to pay up to its policy limits on each one.

The decision left open the question of payment when the amount of a claim exceeded the limits on the Truck policy.

In Montrose Chemical Corp. v. Admiral Ins. Co., 10 Cal.4th 645 (1995), the California Supreme Court adopted a “‘continuous injury’ trigger of coverage” approach to continuing injury claims. Under that approach, bodily injuries and property damage that occur in several insurance policy periods were potentially covered by all policies in effect during those periods.

Montrose did not apportion liability among insurers in continuing injury cases when a claim exceeded the policy limits.

Based on that open question, Kaiser and Truck took the position that ISOP, which issued a first-level excess policy to Kaiser in 1974, was responsible to pay claims over $500,000. ISOP disagreed It took the position that primary insurance limits must be “stacked,” such that all available primary insurance policies — that is, all Truck policies issued to Kaiser between 1964 and 1983, as well as primary policies issued to Kaiser by three other carriers between 1947 and 1987 — had to be exhausted before any excess insurer had to indemnify Kaiser for asbestos bodily injury claims.

The court concluded that the policies Truck issued to Kaiser cannot be stacked and that as a result ISOP and other excess insurers covered sums in excess of the primary limits.