In Truck Insurance Exchange v. Kaiser Cement, the Supreme Court today expands insureds’ options in tapping excess insurance policies to cover liability incurred — in this case, for manufacturing asbestos-containing products — over a number of years and various policy periods. It does so by answering a question of policy interpretation . The ruling also benefits, to a point, a primary insurance carrier seeking contribution from excess insurers, but the court leaves it to the Court of Appeal to finally resolve that equitable issue.
The court’s unanimous opinion by Justice Joshua Groban addresses an issue the court left unresolved in Montrose Chemical Corp. v. Superior Court (2020) 9 Cal.5th 215 (see here). It holds that, under the policy language in issue, “an insured [can] access a first-level excess insurance policy upon exhaustion of underlying primary insurance obtained for the same policy period,” known as vertical exhaustion, rather than having to first “exhaust all primary policies issued during the continuous period of damage,” known as horizontal exhaustion. The court does, however, give excess insurers permission “to write their future excess policies in a manner that expressly requires horizontal exhaustion.”
That court’s interpretation of language in excess insurance policies is a win for insured companies in general, but it removes just one obstacle to the claim of the case’s primary insurer for contribution from excess insurers. The opinion explains that “the terms of the insurers’ policies comprise only one of the factors courts may consider when evaluating whether contribution would ‘ “accomplish ultimate justice” ’ in a particular case [citations omitted].” The primary insurer must still overcome the argument, as the court phrased it, that “it would . . . remain unfair as a matter of equity” to allow contribution, including because, “under the specific circumstances of this case . . . it would effectively allow [the primary insurer] to pay less insurance than it had promised to [the insured], while leaving [the insured] and injured asbestos claimants with less overall coverage.”
The court reverses the Second District, Division Four, Court of Appeal’s unpublished opinion. It also disapproves the Second District, Division Three, opinion in Community Redevelopment Agency v. Aetna Casualty & Surety Co. (1996) 50 Cal.App.4th 329 [authored by the late insurance law expert Justice Walter Croskey], the Fourth District, Division Three, opinion in Padilla Construction Co., Inc. v. Transportation Ins. Co. (2007) 150 Cal.App.4th 984, and the Second District, Division Seven, opinion in Stonewall Ins. Co. v. City of Palos Verdes Estates (1996) 46 Cal.App.4th 1810. On the other hand, the court gives props to the First District, Division Four, decision in SantaFe Braun, Inc. v. Insurance Company of North America (2020) 52 Cal.App.5th 19, with which the Court of Appeal in the present case disagreed.
There was no petition for review in Community Redevelopment or in Padilla, but the court did deny a depublication request in Padilla. The Stonewall decision came after the Supreme Court had granted review and remanded the case to Division Seven for reconsideration in light of Montrose. The Supreme Court denied petitions for review and a depublication request regarding the second Stonewall opinion it today disapproves. The court denied review in SantaFe Braun.