Insurance law: interpretation, all sums, stacking, excess liability insurance: 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, 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); 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.)’ ” (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at p. 18.)
“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.); ‘Language 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, 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.); 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; (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.); we noted that “the ‘settled rule’ of the case law” is that “ ‘an insurer on the 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.); the fact that all policies were covering the risk at some point during the property loss is enough to trigger the insurers’ indemnity obligation; as the Court of Appeal observed, each insurer is severally liable on its own policy up to its policy limits; 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, “this 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 nor 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. . . .”; 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 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.)
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. 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 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 (Cal. S. Ct., 09.08.12., State of Cal. v. Continental Insurance, S170560).
Droit des assurances (application du droit californien) : assurance de couverture subsidiaire (excess liability insurance) : ce type d’assurance n’intervient qu’après le versement intégral des prestations d’une assurance de couverture primaire, conformément aux termes des conditions contractuelles telles que figurant dans la police d’assurance. De manière générale, une police d’assurance s’interprète selon les règles d’interprétation des contrats. L’interprétation des conditions d’assurance est une question de droit. Le but fondamental de l’interprétation des contrats est de donner effet à l’intention mutuelle des parties. Une telle intention doit être déduite, si possible, uniquement des dispositions écrites du contrat. Si les dispositions du contrat sont claires et explicites, elles contrôlent. La notion de « clair et explicite » signifie que les dispositions du contrat sont interprétées dans leur sens ordinaire, dans le sens que leur attribue une personne ordinaire non spécialisée, sauf si les parties ont utilisé des termes dans leur sens technique ou dans un sens spécial, conformément à un usage. Une disposition d’une police d’assurance est considérée comme ambigüe lorsqu’elle est capable de deux ou plusieurs interprétations, toutes raisonnables. Un terme n’est pas ambigu du seul fait que la police d’assurance ne le définit pas. Les dispositions d’un contrat doivent être interprétées dans le contexte du contrat considéré comme un tout, et dans le contexte des circonstances du cas. Elles ne peuvent être considérées comme ambigües dans l’abstrait. Si une ambigüité n’est pas éliminée par le langage et le contexte du contrat d’assurance, les Tribunaux recourent au principe selon lequel les ambiguïtés sont généralement interprétées contre la partie qui est la cause de l’incertitude (ici l’assureur) pour protéger l’assuré qui s’attend de manière raisonnable à ce qu’une couverture soit accordée.
Dans une affaire de dommage à la propriété qui se produit progressivement, il est souvent impossible pour un assuré de prouver quels dommages spécifiques se sont produits pendant la durée de chacune des diverses polices consécutives. Il est dès lors opportun de considérer qu’un tel dommage progressif ou continu est couvert par chacune des différentes polices d’assurance successives couvrant le risque. En outre, si ces diverses polices sont émises par plusieurs assureurs, chacun d’eux est responsable pour le tout, bien entendu jusqu’au maximum de la somme assurée par chacune des polices. Il parait certes plus équitable d’envisager une solution au prorata, chaque assureur participant pour une part. Cette solution ne sera adoptée que si la police d’assurance la prévoit. Si elle se contente d’indiquer que la couverture s’étend à l’ensemble du dommage (all sums), l’assureur qui libelle ainsi son contrat d’assurance est obligé pour le tout. De même, si l’assureur veut éviter d’être responsable pour la part du dommage survenue avant la conclusion de la police ou pour la part du dommage survenue après la conclusion de la police, il doit l’inscrire expressément dans la police ou dans ses conditions générales. Par ailleurs, en toute hypothèse, les assureurs ont un droit de recours les uns contre les autres. Pour ce qui le concerne, le principe du « stacking » est admis : l’assuré peut faire appel à la limite maximale de couverture de chacune de ses polices, jusqu’à ce que la totalité de sa perte soit indemnisée (exemples dans des cas de dommages à l’environnement ou à la santé (amiante)). Le contrat d’assurance peut toutefois prévoir une disposition qui écarte le « stacking », ce qui n’était pas le cas dans la présente affaire. Rien n’est inéquitable ou imprévu dans le principe du « stacking » s’appliquant aux pertes sur une longue durée. Il est utile de rappeler que cette affaire porte sur des pertes qui s’étalent dans le temps.