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Patricia O'Connell
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Laura Foggan Discusses California Supreme Court Ruling in ‘Stacking’ Case

Business Insurance
August 24, 2012

Laura Foggan, chair of Wiley Rein’s Insurance Appellate Group, was interviewed by Business Insurance after the California Supreme Court ruled earlier this month in a toxic waste dump case that policyholders with long-tail environmental liabilities can collect more from their insurers.

The article reported that the court “ruled unanimously in State of California v. Continental Insurance Co. et al. in favor of the ‘all sums with stacking’ default allocation rule regarding commercial general liability policies purchased by the state of California from several insurers over several years.” Observers noted that under the ruling, policyholders involved in long-tail environmental claims can ‘stack’ coverage limits over multiple policy years, while not being limited to a single year and that insurers are obligated to pay under the ‘all sums’ language in the policy.  The California ruling stands in stark contrast to the approach other prominent state high courts have taken, where pro rata allocation has been applied to limit an insurer's liability to the time period of the insurance policies it issued.  

Ms. Foggan said the California court’s decision is a “distortion” of how insurance works.  “Contrast a policyholder that only buys one insurance policy in a 10-year period to another policyholder that pays premiums and carefully insures itself each year for 10 years, and under an all-sums result, both policyholders get exactly the same coverage,” said Ms. Foggan, who filed an amicus brief in the California case on behalf of two insurer organizations. “It’s really a fallacy to suggest that an insurance policy is written to cover all sums that may take place in any number of years.”  Recognizing that the law has developed in contrast to this ruling even while the California case was pending in the courts, she added that “this case has come fairly late in the game in a time when allocation questions have been litigated by policyholders and insurers around the country.”