The recent decision by the California Supreme Court in the case of Truck Insurance Exchange v. Kaiser Cement and Gypsum Corporation has provided important guidance on how policyholders can access excess liability coverage for continuous injury claims that span multiple policy periods. The court reaffirmed that policyholders only need to exhaust the directly underlying primary policy to obtain the benefits of first-level excess liability coverage, known as “vertical exhaustion.” This decision is significant as it rejects the insurer’s attempt to require the exhaustion of all primary policies on the risk during alleged continuous injuries, known as “horizontal exhaustion.”
The court’s ruling clarifies the rights of policyholders when addressing long-tail claims that trigger numerous policy periods. It also helps policyholders resist attempts by excess insurers to avoid their coverage obligations. This decision marks a win for policyholders seeking coverage for continuous injury claims.
In the case at hand, Truck Insurance Exchange, a primary insurer for Kaiser Cement and Gypsum Corporation, filed an equitable contribution claim against several of Kaiser’s first-level excess insurers. The trial court initially denied Truck’s request for contribution, citing the “other insurance” provision in Kaiser’s excess policies, which required horizontal exhaustion of all primary insurance. However, the California Supreme Court’s decision clarified that vertical exhaustion was sufficient to access first-level excess policies, providing relief to policyholders like Kaiser.
The court’s decision builds upon prior precedent set in Montrose Chemical Corp. of California v. Superior Court, affirming that once all primary policies are exhausted, excess policies can be accessed through vertical exhaustion. This ruling ensures that policyholders have the flexibility to utilize their available insurance assets strategically.
In conclusion, policyholders facing continuous injury claims spanning multiple policy periods should carefully review their policy language and consider their strategic options to maximize their coverage rights. The California Supreme Court’s decision reinforces the ability of policyholders to access excess liability coverage efficiently and effectively in such complex situations.