In an opinion filed on August 9, 2012, the California Supreme Court held that a party may obtain greater insurance coverage by combining multiple policies over a period of time, a practice known as "stacking." In California v. Continental Insurance Co. (2012) 55 Cal.4th 186, the Court wrote that stacking policies "acknowledges the uniquely progressive nature of long-tail injuries that cause progressive damage throughout multiple policy periods." Id. at 201 (emphasis in original).
The practice of stacking is particularly relevant in contaminated property litigation, where "occurrences" that give rise to insurance coverage can occur over long periods of time, encompassing multiple insurance policy periods. As stated by the Court, a party may "effectively stack . . . the insurance coverage from different policy periods to form one giant ‘uber-policy’ with a coverage limit equal to the sum of all purchased insurance policies." Id. (quoting Bratspies, Splitting the Baby: Apportioning Environmental Liability Among Triggered Insurance Policies (1999) 1999 B.Y.U. L.Rev. 1215, 1245).
The ruling may significantly benefit parties that are seeking insurance coverage to pay for the often very costly cleanup of contaminated property. Insurance companies, on the other hand, should take note in drafting their policies. The Court explained that in order to avoid the consequences of its ruling, an insurer should "specifically include . . . an ‘antistacking’ provision in its policy." Continental Insurance Co., 55 Cal.4th at 202.
Originally published in the Real Property Law Section E-Bulletin (September 2012 Edition)