In a long running suit regarding thousands of asbestos bodily injury claims brought against Kaiser Cement and Gypsum Corporation, the California appellate court held that the excess carrier's indemnity obligation did not attach until all collectible primary policies were exhausted. Kaiser Cement and Gypsum Corp. v. Ins. Co. of the State of Pennsylvania, 215 Cal. App.4th 210 (Cal. Ct. App. April 8, 2013).
Kaiser manufactured a variety of asbestos-containing products from 1944 through the 1970's. Truck Insurance Company provided primary insurance to Kaiser from 1964 to 1983, through four CGL policies covering 19 annual policy periods. The policy in effect from 1974 to 1981 contained a $500,000 "per occurrence" liability limit. Kaiser was insured by three other primary carriers between 1947 and 1987. ICSOP issued a first layer excess policy to Kaiser from 1974 through 1976.
Kaiser tendered numerous claims for bodily injury to Truck. By October 2004, Truck's indemnity payments exceeded $50 million and included at least 39 claims that resulted in payments in excess of $500,000. For claims alleging bodily injury in 1974, Kaiser selected Truck's 1974 policy to respond to each of the claims.
Truck filed for a declaratory judgment, arguing its primary policies had been exhausted and it had no further obligation to defend or indemnify Kaiser. Kaiser cross-claimed against its excess insurers, including ICSOP. Kaiser argued once the 1974 primary policy exhausted, the first level excess policy issued by ICSOP became liable for the claim once Truck had exhausted its $500,000 per-occurrence limit for that year. The trial court granted summary judgment to Kaiser on its cross-claim against ISCOP.
On appeal, the court held that ICSOP's policy language required horizontal exhaustion. Therefore, ICSOP was not responsible to indemnify Kaiser until all primary policies were exhausted. ICSOP's policy provided that Kaiser's retained limit was equal to the limits of liability indicated in the schedule of underlying policies, "plus the applicable limit(s) of any other underlying insurance collectible by the Insured."
ICSOP then argued that its 1974 excess policy required the exhaustion of all primary insurance before the excess policy was triggered. ICSOP argued that all primary insurers had to pay policy limits for each year in which coverage existed. The court disagreed. Under Truck's primary policy, it was responsible to pay policy limits only once per occurrence, not once per occurrence per year or once per occurrence per policy.
Finally, the court determined that Truck's policy language did not permit "stacking" of various Truck policies over several years. The Truck policy contained a "per occurrence" limit. This language meant Kaiser was not permitted to recover from Truck more than the occurrence limit for a single occurrence. (In a prior appeal, the court held that the relevant occurrence was not Kaiser's design, manufacture, and distribution of asbestos produces, but the injurious exposure of claimants to asbestos products.) Truck was liable up to the per occurrence limit, and no more. The trial court correctly determined that Kaiser could not "stack" the liability limits of Truck's primary policies, but rather could recover only up to the "per occurrence" limit of one policy. Having chose the 1974 primary policy, Kaiser could recover from ICSOP to the extent that a claim exceeded the $500,000 per occurrence limit specified in the 1974 primary policy.
The case was remanded for a determination on whether the other primary insurers' policies would also have to be exhausted before the excess policy attached.
