NU Online News Service, Aug. 17, 10:51 a.m.EDT

In what is being called one of the biggest insurance-relatedenvironmental coverage rulings to come out of California indecades, the state's highest court says policyholders can seekrecoveries up to the policy limits and can stack multiple policieson long-tail claims.

“This is really a big deal—a blow to the insurance industry,”says Robert M. Horkovich, managing partner with Anderson Kill &Olick, which represented the state in the case. The case involvesthe Stringfellow Acid Pits site—one of the most contaminated sitesin the Unites States.

“This is a big decision that is a benefit to the taxpayers andthe clean-up of our environment,” Horkovich adds.

Forty years ago Stringfellow, a toxic waste dump, was closedafter it was found to be seeping waste into ground water. The statein the late 1990s was found liable and was ordered to clean-up thesite—a project estimated to cost $700 million.

Horkovich says the state has collected about $150 million ininsurance but was looking to collect $60 million more with afavorable ruling against Continental Insurance Co., ContinentalCasualty Co., Yosemite Insurance Co., Horace Mann Insurance Co.,Employers Insurance of Wassau, and Stonebridge Life Insurance Co.,which provided excess commercial general liability policies toCalifornia between 1964 and 1976.

The ruling also provides about $54 million in defense costs, headds.

Simple addition concludes the total amount to be received frominsurers is far less than the total cost of the clean-up, butHorkovich says the ruling is far-reaching.

“It fully clarifies how much insurance is available,” he says.Many eyes were on this case, Horkovich notes, because it provides aprecedent for other long-tail insurance cases involving asbestosand other toxic sites, for instance.

In the past in California cases like this one were complicatedby complex calculations with liability insurers to determine whenproperty damage and bodily injury occurred in order to assesspayment pro-rata—according to what the policy covered during aspecific time period.

“It was so difficult to ascertain damages for each year,”Horkovich says. “Now you don't have to.”

That's because the ruling says insurers must pay for all damagesup to the policy limits even if the damages happened before orafter the policy was in effect. Additionally, an insured can stackpolicies over multiple years.

“This is certainly far from an insurer-friendly decision,”observes Michael L Zigelman, a partner with Kaufman, Dolowich,Voluck & Gonzo. “It creates an 'uber-policy,' with the maximumamount of insurance available to the state.”

However, he says, the state Supreme Court ruled insurers canlimit exposure by including anti-stacking language inpolicies—something the industry has done since the mid-1980s.

Therefore, the ruling from the state's highest court couldprimarily apply to cases involving property damage or bodily injuryclaims before that time. But anti-stacking language “doesn't ruleout ambiguity,” adds Zigelman.

“It's not a 100 percent bar to potential claims but it's anuphill battle [for policyholders],” Zigelman says. “The decision ismuch more difficult to overcome for insurers who wrote policiesearlier pre mid-1980s.”