In what is being called one of the biggest Environmental insurance coverage rulings to come out of California in decades, the state's highest court says policyholders can seek recoveries up to the policy limits and can stack multiple policies on 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 involves the Stringfellow Acid Pits site—one of the most contaminated sites in the United States.

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

Horkovich says the state has collected about $150 million in insurance but was looking to collect $60 million more with a favorable ruling against Continental Insurance Co., Continental Casualty Co., Yosemite Insurance Co., Horace Mann Insurance Co., Employers Insurance of Wassau and Stonebridge Life Insurance Co., which provided Excess Commercial General Liability policies to California between 1964 and 1976.

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

Simple addition concludes the total amount to be received from insurers is far less than the total cost of the cleanup, but Horkovich 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 a precedent for other long-tail insurance cases such as those involving asbestos and other toxic sites.

In similar California cases, determining damages has been confused by complex calculations with liability insurers to determine when property damage and bodily injury occurred in order to assess payment pro-rata—according to what the policy covered during a specific 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 damages up to the policy limits even if the damages happened before or after the policy was in effect. Additionally, an insured can stack policies 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 maximum amount of insurance available to the state.”

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

Special Reports /

Ruling Expands Environmental Insurance Exposure in California

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