By John Newman
The California Supreme Court affirmed the court of appeals and adopted an “all-sums-with-stacking” indemnity principle in the context of a large hazardous waste site cleanup. The court employed this principle because of the plain language of the policies at issue, the expectations of parties to the insurance contracts, and because of the complexity of “long-tail” environmental injuries. The court held the “all-sums” indemnity provisions applied to continuous injuries both beginning when coverage applied and continuing after policy expiration, as well as beginning prior to coverage but continuing into a new policy period. Further, the court supported stacking of multiple insurers’ policies within any single policy period because doing so affords long-tail insureds increased protection through coverage they have already purchased. The court deemed the adopted principle fair because insurers can expect to indemnify insureds while on the risk in a particular situation, and are free to include contractual terms avoiding all-sums coverage and prohibiting stacking. Given similar factual circumstances and equivalent state insurance statutory schemes, the court’s reasoning in this case may prove relevant in jurisdictions other than California.