Montrose Chemical Corporation of California v. Superior Court

This matter arose after Montrose Chemical Corporation of California (Montrose) (plaintiff) faced litigation based on continuous environmental damage to the Los Angeles area between 1947 and 1982. Montrose entered into multiple consent decrees to resolve these matters and then sought reimbursement from the various liability insurers in play for the claims. Montrose had primary and multiple layers of secondary insurance (or excess-liability policies) for each year from 1961 to 1985. Under the theory of the continuous-injury trigger of coverage, all policies potentially in effect would provide stacked coverage. But the issue between Montrose and the multitude of differing insurance carriers was the order in which Montrose could legitimately access the excess-liability policies. As is typical, the various policies included “other insurance” clauses. Those clauses were historically designed to avoid conflicts and usually stated that all underlying insurance coverage must be exhausted before applying the policy. The policies were silent on the issue before the court and ambiguous rather than providing a definitive answer. Montrose argued in favor of a rule of vertical exhaustion or elective stacking, which is to say that Montrose could choose to access any excess policy once Montrose had exhausted the other policies with lower attachment points in the same policy period. In contrast, the various insurers argued for horizontal exhaustion, allowing Montrose to access an excess insurance policy only after Montrose had exhausted all other policies with lower attachment points from every policy period in which damage occurred. Montrose and the insurers filed summary judgment motions, and the lower court ruled for the insurers.