Horizontal exhaustion bumps up against anti-stacking

Asbestos claims coverage litigation pits policyholders against insurers, and insurers against insurers, and raises novel issues and complex interaction between insurance concepts, policy language, and common sense.

In the latest from the ongoing saga of Kaiser Cement and Truck Insurance – Kaiser Cement & Gypsum Corp. v. Ins. Co. of the State of PA / Truck (Los Angeles County B222310), the court of appeal issued a ruling grappling with the situation when horizontal exhaustion bumps up against “anti-stacking” language.


This litigation has been before the appellate court several times. This case provided the ruling that all asbestos claims were not one occurrence. London Market Insurers v. Super. Ct. (2007) 146 Cal.App.4th 648.

Following that, Kaiser decided to “spike” one year in which Truck had $500,000 in primary limits in order to reach the ICSOP excess policy.

The court of appeal finds California’s horizontal exhaustion rule applies based on the nature of excess and primary insurance, and the language of the excess policy (including its limits of liability and other insurance clause).  All applicable primary insurance has to be paid before the excess attaches.


However, the court found Truck’s primary policy provided that the "company" only had to pay one occurrence limit.  The policy did not refer to paying annually, or per policy.  Thus, the court concluded, all of Truck's primary policies could not be stacked for that one occurrence.  The court held this was consistent with horizontal exhaustion because the only applicable primary insurance issued by Truck was that one primary policy.


The court did not reach, because the information was not in the record before it, whether there were other primary insurers' policies that also would first have to be exhausted before the excess policy attached.


This is not yet a final decision by the appellate court. Further, the parties could seek review from the California Supreme Court.

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