In Montrose Chemical Corporation of California v. Superior Court, the Supreme Court today expands a company’s options in tapping its excess insurance policies to cover liability it incurred for DDT environmental contamination decades ago.  The case involves over 115 excess policies, issued by 40 insurance carriers over a nearly quarter-century period, that are expected to cover nine-figure past and future costs.

The court’s unanimous opinion — with two pro tems concurring — by Justice Leondra Kruger adopts a “vertical exhaustion” rule, concluding the insured company “is entitled to access otherwise available coverage under any excess policy once it has exhausted directly underlying excess policies for the same policy period.”  The court rejects the insurers’ “horizontal exhaustion” argument that the company “may access an excess policy only after it has exhausted other policies with lower attachment points from every policy period in which the environmental damage resulting in liability occurred.”

The court says it’s up to the insurance carriers to sort things out among themselves:  “An insurer called on to provide indemnification may . . . seek reimbursement from other insurers that would have been liable to provide coverage under excess policies issued for any period in which the injury occurred.”  The issue “is not whether a single disfavored excess insurer will be made to carry a disproportionate burden of indemnification, but instead whether the administrative task of spreading the loss among insurers is one that must be borne by the insurer instead of the insured.”

The court expressly leaves open the question “when or whether an insured may access excess policies before all primary insurance covering all relevant policy periods has been exhausted.”

The court reverses the Second District, Division Three, Court of Appeal.  A 2017 Fourth District, Division Two, opinion disagreed with the Court of Appeal Montrose decision.  The Supreme Court presaged today’s result when it denied review and depublication in the Fourth District case a month after granting review in Montrose.