Stringfellow - A Continuing Coverage Saga
While it is often difficult these days to pay attention to any thing other than the upcoming elections and the roller-coaster economy, judges keep making decisions and lawyers keep lawyering.
On November 6, 2008, after the election results are in, the California appellate court, 4th district (appeal from Riverside County), will hear oral argument on one aspect of the ongoing litigation between the State of California and its insurers relating to the the Stringfellow site. Part of the case is before the California Supreme Court (as we mention below). The appellate court hearing next week is on several issues including, importantly, “all sums” and “stacking.”
The Stringfellow litigation started as a pollution lawsuit in 1983, with the State of California being found in part responsible for the pollution in 1988. The coverage litigation started in 1993.
In an unusual move, in this latest phase of the case, the appellate court sent the parties an 88 page “tentative decision” in anticipation of the oral argument, thereby providing the parties with the court’s leanings so the parties could better prepare for each sides’ 30 minute arguments.
According to the tentative, the court is leaning towards confirming California follows an “all sums” approach to an individual insurer’s liability (once its policy is proven to provide cover) for property damage that continues over many years. The court is also inclined to rule the insured can “stack” the insurance policies. That is, the insured is permitted to stack policies across policy periods. The appellate court opined that FMC Corp. v. Plaisted & Cos. (1998) 61 Cal.App.4th 1132(which held multiple policies’ occurrence limits could not be stacked) was not well-reasoned. While not criticizing the trial court for feeling it was bound by the FMC decision, the appellate court intends (unless persuaded otherwise) to hold FMC was wrong.
On other issues, the appellate court appears inclined to rule for the insurers. The court’s tentative indicates it agrees with the trial court’s finding of only one occurrence and that policy limits for multi-year policies were per occurrence not annual.
Meanwhile, briefing has been completed on other important pollution-coverage issues pending before the California Supreme Court in the Stringfellow case. Before the Supremes are the following issues: (1) Does application of the pollution exclusion clause turn on when waste material was discharged from the Stringfellow Acid Pits waste disposal site or when the waste was initially deposited into the site? (2) If pollution is caused by both uncovered intentional actions and covered accidents, does the insured have the burden at trial to prove that all of the damages it seeks to recover were caused by a covered event, or is there a duty to indemnify when two concurrent causes are responsible for an injury even if one of the causes is an uncovered act?
The Court of Appeal had rejected the insurers' contention, based on Standun, Inc. v. Fireman's Fund Ins. Co. (1998) 62 Cal.App.4th 882, that the relevant release for purposes of applying the "sudden and accidental" pollution exclusion was the deposit of waste into the site. The Court distinguished Standun because the insured in Standun was held strictly liable as a waste generator that purposefully and regularly disposed of waste at the site. Here, the court held, the State's liability for the negligent design, construction and operation of the Stringfellow Site shifted the focus from the initial deposit to subsequent releases from the site.
The Court of Appeal also concluded Golden Eagle Refinery Co. v. Associated Internat. Ins. Co. (2001) 85 Cal.App.4th 1300 and Lockheed Corp. v. Continental Ins. Co. (2005) 134 Cal.App.4th 184 are incompatible with the California Supreme Court's decision in State Farm Mut. Auto. Ins. Co. v. Partridge (1973) 10 Cal.3d 94. The court held, applying Partridge, that the State would be entitled to full coverage even if damage was partially caused by an excluded event and the damage was indivisible.
We will report further as these courts issue final rulings on the various aspects of the case.
