State of California v. Continental Insurance Co.

The State of California (California) (plaintiff) operated the Stringfellow industrial waste disposal site for nearly 20 years. Several insurance companies, including Continental Insurance Co., (collectively, the insurance companies) (defendants) provided California with comprehensive general liability (CGL) insurance. The insurance contracts contained provisions known as all-sums provisions that required the companies to pay “all sums which the Insured shall become obligated to pay by reason of liability imposed by law . . . .” The policies contained limits of the amount of money the insurance company must pay for the “ultimate net loss [of] each occurrence.” In turn, the policies defined occurrence as “an accident or continuous or repeated exposure to conditions which result in . . . damage to property during the policy period.” A federal court ordered California to conduct a cleanup of property damage at the site that had accumulated over decades, known as long-tail property damage. California sued the insurance companies in state court for indemnification of the cleanup costs. The state trial court held that California could not aggregate—or stack—multiple policies to cover the entire cleanup cost. On appeal, the intermediate appellate court reversed the trial court on the stacking issue. The appellate court held that California could stack the policies to cover the cleanup costs. The insurance companies appealed.