Continental Casualty Co. v. Rohr, Inc.

Full title: CONTINENTAL CASUALTY COMPANY in its Own Capacity, and as Successor in…

Court: Superior Court of Connecticut

Date published: Mar 19, 2018

HHDCV166066502S (Conn. Super. Ct. Mar. 19, 2018)

Opinion

HHDCV166066502S

03-19-2018

CONTINENTAL CASUALTY COMPANY in its Own Capacity, and as Successor in Interest to Certain Harbor Insurance Company Policies and as Successor by Merger to CNA Casualty of California, Certain Underwriters at Lloyd’s London, et al. v. ROHR, INCORPORATED, et al.

PECK, J.T.R.

UNPUBLISHED OPINION

PECK, J.T.R.

I. FACTS & PROCEDURAL HISTORY

The plaintiff excess insurers brought this action for declaratory judgment against the defendants, Rohr, Incorporated (Rohr), certain primary insurers, and other excess insurers in connection with various underlying environmental property damage claims. The underlying claims have been brought against Rohr and seek recovery for the costs of investigation and remediation at seven sites in California and one in Missouri (Chula Vista, Riverside, Agricultural Park, Casmalia Resources Hazardous Waste Facility, BKK Landfill, Basin By-Products, Gibson Environmental, and Hayford Bridge). The complaint in the present action alleges that the underlying claims arise from Rohr’s manufacturing operations at the sites over several decades, which resulted in the continuous release of various hazardous wastes and materials, including PCBs, into the environment. The continuous release of those hazardous materials allegedly caused continuous environmental damage. Rohr has sought defense and indemnity from the plaintiffs for the costs it has incurred, and will continue to incur, in the remediation of the sites.

In count one of the complaint, the plaintiffs seek a declaration that they have no obligation to defend Rohr in connection with the underlying claims; in count two, the plaintiffs seek a declaration that they have no obligation to indemnify Rohr in connection with the underlying claims; in count three, the plaintiffs seek a declaration that, if the court finds that the plaintiffs are obligated to defend and/or indemnify Rohr, the plaintiffs are entitled to contribution from the defendant primary, umbrella, and excess insurers.

Rohr maintains that it is entitled to insurance coverage under its excess comprehensive general liability (CGL) policies with respect to the underlying claims. On July 13, 2016, the parties filed a joint motion to stay the contribution claims alleged in count three of the plaintiffs’ complaint. The motion to stay was granted by the court, Peck, J., on September 26, 2016. At the same time, pursuant to the court’s scheduling order dated September 26, 2016, the litigation was divided into two phases. Phase one is limited to the determination of the following question: " At what point will the obligations of the excess insurers, if any, arise, in light of the limits of the underlying primary policy or policies?" All other issues are scheduled to be decided in phase two, if necessary.

On December 16, 2016, the plaintiffs Continental Casualty Company (Continental)¹ and Certain Underwriters at Lloyd’s, London (Lloyd’s)² filed a motion for partial summary judgment (# 299). Specifically, Continental and Lloyd’s seek a declaration that, as a matter of law, their excess CGL policies are not implicated to respond to the underlying claims because the primary policies issued to Rohr by the Royal Indemnity Company (Royal policies)³ carry combined limits of $24 million in coverage, which have not been exhausted.

1 Continental Casualty Company (Continental) is the alleged successor in interest to certain Harbor Insurance Company policies as successor by merger to CNA Casualty of California; see paragraph 5 of the plaintiff’s complaint. For purposes of this memorandum, the court shall refer to " the Harbor excess policies," which comprise: Harbor CGL, 102211; Harbor CGL, 103152; Harbor CGL, 106597; Harbor CGL, 103633; Harbor CGL, 108053; Harbor CGL, 108908; Harbor CGL, 108909.

2 Lloyd’s, Scottish Lion, Ocean Marine, Winterthur Swiss, Yasuda, Nissan, and NRG are the issuers of the London excess policies; see paragraph 159 of the plaintiff’s complaint and Rohr’s answer (# 137). For purposes of this memorandum, the court shall refer to " the London excess policies," which comprise: London CGL, V20620; London CGL, V20621; London CGL, V20622; Certificate LA 41019; London CGL, V23801; London CGL, V23802.

3 Paragraph 235 of the plaintiffs’ complaint identifies six policies issued by defendant Arrowood Indemnity Company (Arrowood), formerly known as Royal Indemnity Company: " RLP144014; RTS902235; RTS902220; RTS902222; PLX120077; RTS902223; and PTS902224, as identified on Attachment B." For purposes of this memorandum, two Royal primary policies are directly at issue: RLP144014, in force between August 1, 1959, and August 1, 1965; and RTS902235, in force between August 1, 1965, August 1, 1971. Affidavit of Kelly M. Wolfe (# 301, pp. 4-11).

On January 6, 2017, the defendants Federal Insurance Company (Federal) and Century Indemnity Company (Century) filed motions (# 306 & # 310, respectively) joining in Continental and Lloyd’s motion for summary judgment. Federal’s and Century’s motions are accompanied by memoranda of law and rely on all moving papers submitted by Continental and Lloyd’s. Because their positions on the issues relevant to the present motions are substantially aligned, Continental, Lloyd’s, Federal, and Century, will hereinafter be referred to as " the excess insurers" when discussed collectively.

On January 23, 2017, Rohr filed its own motion for partial summary judgment (# 315) against Continental and Lloyd’s, as well as a separate motion for partial summary judgment against Federal and Century (# 317). Accompanying each of these motions is a memorandum of law both supporting the motion and in opposition to the respective motion for summary judgment asserted against Rohr. Rohr seeks a declaration that obligations under Continental’s and Lloyd’s excess policies arise once Rohr collects $2 million under its primary policies for any one occurrence. Rohr also seeks a declaration that Federal’s and Century’s policies do not include provisions that require Rohr to actually collect any particular sum from any underlying insurer, and, accordingly, that the obligations of Federal and Century may arise once Rohr’s losses reach the attachment points of Federal’s and Century’s policies.

The parties, including the defendant Transport Insurance Company, have filed various supplemental and reply briefs in support of or in opposition to the motions for summary judgment. The parties appeared before the court on April 18, 2017, to argue their respective positions. At that time, the parties agreed that California law is applicable to the substantive issues presented in this action.

While the court was preparing its decision, Continental and Lloyd’s filed a motion for permission to file supplemental authority with an accompanying memorandum of law on September 8, 2017.⁴ The purpose of the motion was to draw the court’s attention to the relevance of the recently decided Montrose Chemical Corp. of California v. Superior Court, 14 Cal.App. 5th 1306, 222 Cal.Rptr.3d 748 (2017), petition for review granted, 406 P.3d 327, 225 Cal.Rptr.3d 796 (2017),⁵ which states principles directly applicable to this action. The other parties to the motions for summary judgment subsequently filed their own memoranda addressing the new opinion.

4 On August 11, 2017, the parties had waived the 120-day period in which the court may issue its decision on the motions for summary judgment, agreeing to a 60-day extension.

5 The petition for review granted by the California Supreme Court presents the following issue: " When continuous property damage occurs during several periods for which an insured purchased multiple layers of excess insurance, does the rule of ‘horizontal exhaustion’ require the insured to exhaust excess insurance at lower levels for all periods before obtaining coverage from higher level excess insurance in any period?" The court notes that the California Judicial Branch website cautions that the California Supreme Court case summaries listed therein do not necessarily define the specific issues that will be addressed by the court.

II. LEGAL STANDARD- SUMMARY JUDGMENT

" [S]ummary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law ... In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party." (Internal quotation marks omitted.) Stuart v. Freiberg, 316 Conn. 809, 820-21, 116 A.3d 1195 (2015).

" [T]he genuine issue aspect of summary judgment requires the parties to bring forward before trial evidentiary facts, or substantial evidence outside the pleadings, from which the material facts alleged in the pleadings can warrantably be inferred ... A material fact has been defined adequately and simply as a fact which will make a difference in the result of the case." (Citation omitted; internal quotation marks omitted.) Buell Industries, Inc. v. Greater New York Mutual Ins. Co., 259 Conn. 527, 556, 791 A.2d 489 (2002). " In ruling on a motion for summary judgment, the court’s function is not to decide issues of material fact ... but rather to determine whether any such issues exist." (Internal quotation marks omitted.) RMS Residential Properties, LLC v. Miller, 303 Conn. 224, 233, 32 A.3d 307 (2011).

For purposes of the present motions for summary judgment, there is no real dispute regarding the relevant facts. Specifically, none of the parties to these motions dispute the language of the relevant insurance policies or the fact that the underlying claims arise from alleged damages resulting over the course of decades from the gradual or continuous release of toxic chemicals into the environment. Nor do the parties disagree regarding the fact that Rohr reached a settlement with its primary insurer and the dollar amount of that settlement.⁶

6 Pursuant to motions to seal filed by the parties and, after a hearing held on the motions pursuant to the requirements of Practice Book § 11-20A, certain documents, on file, reflecting her actual dollar amount and terms of the settlement, were ordered sealed. Thereafter, the documents in questions were refiled with redactions of the limited information subject to the sealing order.

The issues before the court, therefore, are purely questions of law, namely, the interpretation of the terms of the various insurance policies issued to Rohr by the excess insurers, and the legal effect, if any, of the settlement on the excess insurers’ liability to Rohr in light of that interpretation. Central to the resolution of these issues is the court’s interpretation of language in Rohr’s primary and excess CGL policies. A key point of disagreement is the interpretation of provisions in Rohr’s primary CGL policies defining the limits of liability under those policies. The excess insurers maintain that the $2 million " per occurrence" and " aggregate" limits in the primary policies, under the circumstances of this case, effectively provide $2 million of coverage per year that the policies were in effect, for a total effective limit of $24 million that must be exhausted before the excess policies may be accessed. Rohr, on the other hand, takes the position that the primary policy limits are exhausted once $2 million have been paid out for any one occurrence, and that the excess policies become accessible at that point.

Resolving this stark difference in interpretation requires the correct application and understanding of various technical concepts and terms that appear throughout California’s case law governing this case. Accordingly, before specifically resolving the conflict between the parties, an introduction and discussion of these concepts and terms is necessary.

III. DISCUSSION

A. Primary v. Excess Insurance

The present case involves the relationship between two different types of CGL policies: primary and excess. A CGL policy is a third-party liability policy- that is, a policy that " provides coverage for liability of the insured to a ‘third party’ ... In the typical third-party liability policy, the carrier assumes a contractual duty to pay judgments the insured becomes legally obligated to pay as damages because of bodily injury or property damage caused by the insured." Montrose Chemical Corp. of California v. Admiral Ins. Co., 10 Cal.4th 645, 663, 913 P.2d 878, 42 Cal.Rptr.2d 324 (1995).

" Primary coverage is insurance coverage whereby, under the terms of the policy, liability attaches immediately upon the happening of the occurrence that gives rise to liability ... Primary insurers generally have the primary duty of defense.

" ‘Excess’ or secondary coverage is coverage whereby, under the terms of the policy, liability attaches only after a predetermined amount of primary coverage has been exhausted. It is not uncommon to have several layers of secondary insurance ... Secondary insurance is sometimes referred to as ‘umbrella’ insurance. When secondary insurance is written to be excess to identified policies, it is said to be ‘specific excess.’ " (Citation omitted; footnote omitted.) Olympic Ins. Co. v. Employers Surplus Lines Ins. Co., 126 Cal.App.3d 593, 597-98, 178 Cal.Rptr. 908 (1981); accord Qualcomm, Inc. v. Certain Underwriters at Lloyd’s, London, 161 Cal.App.4th 184, 194, 73 Cal.Rptr.3d 770 (2008).

" [W]hen a policy which provides excess insurance above a stated amount of primary insurance contains provisions which make it also excess insurance above all other insurance which contributes to the payment of the loss together with the specifically stated primary insurance, such clause will be given effect as written." (Internal quotation marks omitted.) Olympic Ins. Co. v. Employers Surplus Lines Ins. Co., supra, 126 Cal.App.3d 600, citing Peerless Casualty Co. v. Continental Casualty Co., 144 Cal.App.2d 617, 626, 301 P.2d 602 (1956). " [L]iability under a secondary policy will not attach until all primary insurance is exhausted, even if the total amount of primary insurance exceeds the amount contemplated in the secondary policy." Olympic Ins. Co. v. Employers Surplus Lines Ins. Co., supra, 126 Cal.App.3d 600; accord Qualcomm., Inc. v. Certain Underwriters at Lloyd’s, London, supra, 161 Cal.App.4th 194.

B. " Long-Tail" Cases and the Continuous Injury Trigger of Coverage

" The relationship between primary and excess insurance (or multiple layers of excess insurance) is particularly complex in environmental injury cases where harm is alleged to have occurred over many years and many policy periods. Injuries of this kind, termed ‘long-tail’ injuries, are a series of indivisible injuries attributable to continuing events without a single unambiguous ‘cause’ and produce progressive damage that takes place slowly over years or even decades." (Internal quotation marks omitted.) Montrose Chemical Corp. of California v. Superior Court, supra, 14 Cal.App. 5th 1322-23.

The term " ‘trigger of coverage’ has been used by insureds and insurers alike to denote the circumstances that activate the insurer’s defense and indemnity obligations under the policy. The term ‘trigger of coverage’ should not be misunderstood as a doctrine to be automatically invoked by a court to conclusively establish coverage in certain categories of cases, or under certain types of policies. The word ‘trigger’ is not found in the CGL policies themselves ... Instead, ‘trigger of coverage’ is a term of convenience used to describe that which, under the specific terms of an insurance policy, must happen in the policy period in order for the potential of coverage to arise. The issue is largely one of timing- what must take place within the policy’s effective dates for the potential of coverage to be ‘triggered’? Whether coverage is ultimately established in any given case may depend on the consideration of many additional factors, including the existence of express conditions or exclusions in the particular contract of insurance under scrutiny, the availability of certain defenses that might defeat coverage, and a determination of whether the facts of the case will support a finding of coverage." (Emphasis omitted.) Montrose Chemical Corp. of California v. Admiral Ins. Co., supra, 10 Cal.4th 655 n.2.

In Montrose Chemical Corp. of California v. Admiral Ins. Co., supra, 10 Cal.4th 645, the California Supreme Court adopted the " continuous injury" trigger of coverage as the trigger relevant to long-tail cases such as the present one. Under this trigger of coverage, " [t]he timing of the accident, event, or conditions causing the bodily injury or property damage ... is largely immaterial to establishing coverage; it can occur before or during the policy period ... It is only the effect - the occurrence of bodily injury or property damage during the policy period, resulting from a sudden accidental event or the ‘continuous or repeated exposure to conditions’- that triggers potential liability coverage." (Emphasis in original.) Id., 675.

The rationale behind the continuous injury trigger is based " primarily on the expectations of the parties and the ambiguities ... inherent in the standard CGL policy language." Id., 682. " [I]t has long been understood that the standard form CGL policy provides liability coverage for damage or injury occurring during the policy period which results from an accident, or from continuous or repeated exposure to injurious conditions. There is no requirement that the sudden, accidental damage-causing act or event, or the conditions giving rise to the damage or injury, themselves occur within the policy period in order for potential liability coverage to arise." (Emphasis in original.) Id., 686. " [T]he standard occurrence-based CGL policy provides coverage for injury or damage that may not be discovered or manifested until after expiration of the policy period. That understanding is clearly reflected in the higher premiums that must be paid for occurrence-based coverage to offset the increased exposure." Id., 689.

Under the continuous injury trigger, as applied to continuous loss or long-tail cases such as the present dispute, all insurers whose policies are in force during any portion of a period of continuing injury cover the loss arising out of that damage. Stonewall Ins. Co. v. Palos Verdes Estates, 46 Cal.App.4th 1810, 1825, 54 Cal.Rptr.2d 176 (1996); accord Montrose Chemical Corp. of California v. Admiral Ins. Co., supra, 10 Cal.4th 689. " Once an injury triggers coverage, according to ... the standard CGL policy ... the insurer must indemnify the insured for ‘all sums’ which the insured becomes obligated to pay, whether during the period of the policy issued by that insurer or after; the policy language does not limit the insurer’s liability to ‘all sums which the insured becomes liable to pay during the policy period .’ ... Under a continuing injury trigger, coverage for a manifested loss is not terminated by the expiration of the policy; coverage continues until the damage is complete." (Citation omitted; emphasis in original.) Stonewall Ins. Co. v. Palos Verdes Estates, supra, 46 Cal.App.4th 1855.

C. Horizontal and Vertical Exhaustion

As previously stated, liability under excess policies generally does not attach until all primary policies have been exhausted. " The California general rule that all primary insurance must be exhausted before a secondary insurer will have exposure favors and results in what is called ‘horizontal exhaustion.’ This is contrasted with ‘vertical exhaustion’ where coverage attaches under an excess policy when the limits of a specifically scheduled underlying policy are exhausted and the language of the excess policy provides that it shall be excess only to that specific underlying policy." (Emphasis in original; footnote omitted.) Community Redevelopment Agency v. Aetna Casualty & Surety Co., 50 Cal.App.4th 329, 339-40, 57 Cal.Rptr.2d 755 (1996).

" Absent a provision in the excess policy specifically describing and limiting the underlying insurance, a horizontal exhaustion rule should be applied in continuous loss cases ... In other words, all of the primary policies in force during the period of continuous loss will be deemed primary policies to each of the excess policies covering that same period. Under the principle of horizontal exhaustion, all of the primary policies must exhaust before any excess will have coverage exposure." (Emphasis in original.) Id., 340.

" [T]he ‘horizontal’ approach seems far more consistent with [the] continuous trigger approach. That is, if ‘occurrences’ are continuously occurring throughout a period of time, all of the primary policies in force during that period of time cover these occurrences, and all of them are primary to each of the excess policies; and if the limits of liability of each of these primary policies is adequate in the aggregate to cover the liability of the insured, there is no ‘excess’ loss for the excess policies to cover." Stonewall Ins. Co. v. Palos Verdes Estates, supra, 46 Cal.App.4th 1853.

D. Stacking Considerations

" ‘Stacking’ generally refers to the stacking of policy limits across multiple policy periods that were on a particular risk. In other words, [s]tacking policy limits means that when more than one policy is triggered by an occurrence, each policy can be called upon to respond to the claim up to the full limits of the policy ... When the policy limits of a given insurer are exhausted, [the insured] is entitled to seek indemnification from any of the remaining insurers [that were] on the risk ..." (Citation omitted; internal quotation marks omitted.) California v. Continental Ins. Co., 55 Cal.4th 186, 200, 281 P.3d 1000, 145 Cal.Rptr.3d 1 (2012).

Moreover, in the context of long-tail environmental claims, this stacking principle applies to allow an insured to stack the policy limits for multiple policy periods with the same insurer. See id., 200-02. This approach " ‘effectively stacks 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. Instead of treating a long-tail injury as though it occurred in one policy period, this approach treats all the triggered insurance as though it were purchased in one policy period. The [insured] has access to far more insurance that it would ever be entitled to within any one period.’ [This] rule means that the insured has immediate access to the insurance it purchased. It does not put the insured in the position of receiving less coverage than it bought. It also acknowledges the uniquely progressive nature of long-tail injuries that cause progressive damage throughout multiple policy periods." (Citation omitted; emphasis in original.) Id., 201, quoting R. Bratspies, " Splitting the Baby: Apportioning Environmental Liability Among Triggered Insurance Policies," 1999 BYU L.Rev. 1215, 1245 (1999).

E. Contract Construction

In addition to the foregoing concepts of substantive insurance law, the principles of interpretation of insurance policies under California law are well established. " Insurance policies are contracts and, therefore, are governed in the first instance by the rules of construction applicable to contracts. Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs its interpretation ... Such intent is to be inferred, if possible, solely from the written provisions of the contract ... The clear and explicit meaning of these provisions, interpreted in their ordinary and popular sense, controls judicial interpretation unless used by the parties in a technical sense, or unless a special meaning is given to them by usage ... If the meaning a layperson would ascribe to the language of a contract of insurance is clear and unambiguous, a court will apply that meaning." (Citations omitted; internal quotation marks omitted.) Community Redevelopment Agency v. Aetna Casualty & Surety Co., supra, 50 Cal.App.4th 338, citing Montrose Chemical Corp. of California v. Admiral Ins. Co., supra, 10 Cal.4th 666-67.

" A policy provision is ambiguous when it is susceptible of two or more reasonable constructions ... Language in an insurance policy is interpreted as a whole and in the circumstances of the case, and cannot be found to be ambiguous in the abstract." (Internal quotation marks omitted.) Qualcomm, Inc. v. Certain Underwriters at Lloyd’s, London, supra, 161 Cal.App.4th 192.

" [I]nsurance coverage is interpreted broadly so as to afford the greatest possible protection to the insured, [whereas] ... exclusionary clauses are interpreted narrowly against the insurer ... Provisions which purport to exclude coverage or substantially limit liability must be set forth in plain, clear and conspicuous language." (Citations omitted; footnote omitted; internal quotation marks omitted.) California v. Continental Ins. Co., 170 Cal.App.4th 160, 183, 88 Cal.Rptr.3d 288, 305 (2009), aff’d, 55 Cal.4th 186, 200, 281 P.3d 1000, 145 Cal.Rptr.3d 1 (2012).

IV. CONTINENTAL AND LLOYD’S MOTION FOR SUMMARY JUDGMENT (# 299)

A. The Parties’ Arguments

Continental and Lloyd’s move for summary judgment as to Rohr’s occurrence-based primary and excess insurance coverage available from August 1, 1959, to August 1, 1971. Their motion is accompanied by a memorandum of law (# 300), the Affidavit of Kelly M. Wolfe and multiple exhibits (# 301, # 302). Continental and Lloyd’s argue that Royal Indemnity and Royal Globe Insurance, the predecessors to the defendant Arrowood Indemnity Company, issued two primary polices to Rohr effective from August 1, 1959, to August 1, 1965, (RLP 144014) and from August 1, 1965, to August 1, 1971, (RTS 902235). Each of these two policies was originally for a three-year policy term, and was extended for an additional three-year term. The Royal policies set forth both " per occurrence" and " aggregate" limits of $2 million and promised to defend and indemnify Rohr for property damage taking place during the policy period. A main point of contention between the parties is whether the terms of the Royal policies provide annual limits in the amount of $2 million for each of the twelve years that the policies were in force, for a total of $24 million, or whether the policies limit coverage to a total of $2 million per occurrence for the entire twelve-year period. A closely related disagreement between the parties is whether Rohr was required to exhaust the Royal policies in the amount of $2 million or $24 million before having access to excess coverage.

Specifically, Continental and Lloyd’s move for summary judgment on the grounds that Rohr settled for less than the full limits under both policies and argue that, as a matter of law, the limits of the Harbor and London excess policies are not triggered given the specific policy language and controlling law which dictate: (1) that in cases involving continuous environmental damage, the rule of horizontal exhaustion requires all of the primary policies for each year that damage occurred to be exhausted before excess policies are implicated; (2) that the stacking of the Royal primary policy per-occurrence limits results in combined limits of $24 million in available coverage; and (3) that there has not been horizontal exhaustion in this case because the primary insurers have not paid, or been held liable to pay, the full limits, either by judgment or settlement (lack of underlying exhaustion).

Conversely, Rohr proffers multiple alternative theories that it argues permit it to proceed against the Harbor and London excess policies after collecting a single year’s primary per occurrence limit of $2 million. Pursuant to California v. Continental Ins. Co., supra, 55 Cal.4th 200-02, Rohr asserts that it may employ a " pick-and-choose" method allowing it immediate access to all of the insurance it purchased. Under this method, the insured can select and recover the full amount of the loss from any applicable policy up to its limits, then stack multiple years of coverage until it is made whole.

Rohr further argues that under California’s " all sums rule," property damage implicating successive CGL policy periods permits the policyholder to assign a claim to a single year’s triggered primary policy, then proceed against the directly overlying excess policies for that year without having to exhaust any other year’s primary policy. Rohr reasons that mandatory horizontal exhaustion across multiple triggered policies is inconsistent with California’s " all-sums" allocation rule as well as the language of the policies at issue here. To this end, Rohr argues that, because the excess policies identify the Royal policies by name, they are considered " specifically excess" to the Royal policies for the same time periods. As a result, Rohr maintains, the excess policies’ own terms contemplate vertical exhaustion. Under the vertical exhaustion theory, Rohr argues, it need only vertically exhaust primary coverage for a particular policy year, after which the overlying excess policies for that year become accessible.

Lastly, Rohr argues that the damage alleged arises from a single occurrence, and that the excess insurers seek to conflate the Royal policy aggregate limits, which can be stacked, with the per occurrence limits, which Rohr maintains cannot be stacked. In support of this argument, Rohr asserts that the Royal policies demonstrate an intention to treat the two limits differently by employing limiting language as to the per-occurrence limits, but not to the aggregate limits.

B. Supplemental Briefing

The parties sought the court’s permission to file supplemental memoranda after the California Court of Appeal issued its decision in Montrose Chemical Corp. of California v. Superior Court, supra, 14 Cal.App. 5th 1306. Continental and Lloyd’s contend that this recent decision provides direct support for the arguments that they previously set forth. Rohr asserts that the decision supports its argument that horizontal exhaustion is not the default rule in California. Furthermore, Rohr argues that the new opinion emphasizes there is no " default rule" of exhaustion in California, and that the express language of the policies will control how the policies shall be exhausted in response to the claims. Rohr also argues that the new decision is not dispositive of issues before this court, as the policy language at issue in that case is substantially different from the language at issue here.

C. Analysis

Whether the excess policies are triggered must be resolved on the facts of this particular case, and the plain language of the primary and excess insurer’s policies. " The precise question, of course, is what result follows under the language of the policies of insurance to which the parties agreed, including the standardized definitions that were incorporated into those policies." (Emphasis omitted.) Montrose Chemical Corp. of California v. Admiral Ins. Co., supra, 10 Cal.4th 677. To address this question, the court first examines the relevant excess policies to determine what they require in terms of exhaustion of primary insurance and then turns to construing the terms of the primary policies.

1. The Harbor and London Excess Policies

The Harbor and London excess policies contain substantially similar language. For purposes of this memorandum, the court discusses one Harbor policy and one London policy in detail, as the slight differences between individual policies are of no significance.⁷ The Harbor " umbrella" policy in force between December 1969, and June 1973; see # 302, exhibit 9; however, will be addressed separately.

7 There is an apparent discrepancy in the exhibits filed by Continental and Lloyd’s. The affidavit of Kelly Wolfe (affidavit) (# 301), identifies the first London policy involved in this motion for summary judgment as London CGL v20620, and states that it is provided as exhibit 10. The policy actually submitted as exhibit 10, however, bears certificate number 40839. See Entry No. 302.

The Harbor CGL policy 102211 (# 301, exhibit 3) carries coverage limits of up to $5 million per occurrence and $5 million in the aggregate per policy year. " Policy year" is defined to mean " a period of one calendar year." (# 301, exhibit 3, p. 132.) The policy is excess to Royal policy 144014. (# 301, exhibit 3, pp. 119 & 131.)

" Occurrence" and " Occurrences," as defined in Harbor 102211, are " deemed to have the same meaning in this policy as is attributed to them in the policy(ies) of the primary insurers but, notwithstanding the foregoing, for the purposes of this policy all occurrences arising out of one event shall be treated as one occurrence." (# 301, exhibit 3, p. 116.)

The policy’s schedule page identifies one of the underlying primary insurance policies as " Policy RLP 144014 issued by Royal Indemnity Company" offering limits of " $2 million any one accident and $2 million aggregate bodily injury and property damage combined." (# 301, exhibit 3, p. 119, endorsement # 5.)

The policy further provides that " the words ‘ultimate net loss’ shall be understood to mean the amount payable in settlement of the liability of the Assured after making deductions for all recoveries and for other valid and collectible insurances, excepting however the policy/ies of the Primary and Underlying Excess Insurers, and shall exclude all expenses and Costs." (Emphasis added.) (# 301, exhibit 3, p. 132.) The policy " shall not attach unless and until the primary and Underlying Excess Insurers shall have admitted liability for the Primary and Underlying Excess Limit(s) or unless and until the Assured has by final judgment been adjudged to pay an amount which exceeds such Primary and Underlying Excess Limit(s) and then only after the Primary and Underlying Excess Insurers have paid or have been held liable to pay the full amount of the Primary and Underlying Excess Limit(s) ." ⁸ (Emphasis added.) (# 301, exhibit p. 132.)

8 Substantially similar language may be found in the following Harbor and London excess policies: Harbor CGL, 103152 (# 301, exhibit 4, p. 169); Harbor CGL, 106597 (# 301, exhibit 5, p. 208); Harbor CGL, 103633 (# 301, exhibit 6, p. 236); Harbor CGL, 108053 (# 302, exhibit 7, p. 252); Harbor CGL, 108908 (# 302, exhibit 8, p. 302); London CGL, V20620 (# 302, exhibit 10, p. 330); London CGL, V20622 (# 302, exhibit 12, p. 372); London Certificate LA 41019 (# 302, exhibit 13, p. 392); London CGL, V23801 (# 303, exhibit 14, p. 422); London CGL, V23802 (# 303, exhibit 15, p. 449).

The London Excess CGL policy V20620 provides excess limits of $5 million per occurrence, and $5 million in the aggregate per policy year. (# 302, exhibit 10, p. 329.) The policy defines " policy year" to mean " a period of one calendar year." (# 302, exhibit 10, p. 329.) London V20620 sits higher up in the coverage " tower," scheduled after Harbor CGL 103633, Harbor CGL 106597, Harbor CGL 103152, Harbor CGL 102211, and Royal Primary Policy 144014.

The policy defines " Ultimate Net Loss" as: " the amount payable in settlement of the liability of the Assured after making deductions for all recoveries and for other valid and collectible insurances ..." (Emphasis added.) (# 302, exhibit 10, p. 328.) As a condition to coverage, the London policy " shall not attach unless and until the primary and Underlying Excess Insurers shall have admitted liability for the Primary and Underlying Excess Limit(s) or unless and until the Assured has by final judgment been adjudged to pay an amount which exceeds such Primary and Underlying Excess Limit(s) and then only after the Primary and Underlying Excess Insurers have paid or have been held liable to pay the full amount of the Primary and Underlying Excess Limit(s) ." (Emphasis added.) (# 302, exhibit 10, p. 330.) The London excess policy utilizes a definition of " occurrence" substantially similar to the Harbor policies, and also provides that " the words ‘occurrence’ or ‘occurrences’ shall be deemed to have the same meaning in this certificate as is attributed to them in the policy(ies) of the Primary Insurers ..." Similar to the Harbor policy, the London policy schedule page identifies " RLP 144014 issued by the Royal Indemnity Company" as the underlying primary insurance. (# 302, exhibit 10, p. 329.)

Whether the Harbor and London excess policies are triggered will depend, in part, upon whether the court determines that the excess policies are " specific excess" or " general excess." In this case, while the schedule pages of the excess policies reference the Royal primary policy RLP 144014, the excess policies specifically provide that the policies will attach " only after the Primary and Underlying Excess Insurers have paid or have been held liable to pay the full amount of the Primary and Underlying Excess Limit(s) ." (Emphasis added.) Based upon this language, the Harbor and London policies provide for the upper layer excess policies to pay their respective limits only once the insured has recovered all proceeds from all valid and collectible underlying insurance, including all primary policies.

That the excess policies make reference to the Royal primary policy in the schedule or declaration is not enough, in and of itself, to warrant a conclusion that the policies are " specific excess" and subject to a vertical exhaustion allocation scheme; as previously stated, horizontal exhaustion is the rule in California in long-tail cases unless specific policy language both describes and limits the underlying policies. Community Redevelopment Agency v. Aetna Casualty & Surety Co., supra, 50 Cal.App.4th 340. Moreover, there are no other specific references here to the Royal primary policies which, when read in conjunction with the " ultimate net loss" and " other insurance" provisions, would overcome the usual presumption requiring exhaustion of all primary coverage policies in effect during the period of continuing damage. Liability under the Harbor and London policies, therefore, attaches only after all primary policies have been exhausted. Accordingly, the Harbor and London policies, construed in their entirety, are general excess policies, and liability under these contracts will not attach before all primary insurance has been exhausted. See Stonewall Ins. Co. v. Palos Verdes Estates, supra, 46 Cal.App.4th 1850; Olympic Ins. Co. v. Employees Surplus Lines Ins. Co., supra, 126 Cal.App.3d 600.

There is one exception to the conclusion that the Harbor and London policies are general excess policies, namely, the London excess policy identified as " CGL v20621." Policy v20621 was " subscribed to on the same terms, conditions, definitions and exclusions applicable to London CGL policy v20620." (Affidavit of Kelly Wolfe, # 301, paragraphs 39, 40.) London CGL v20621 sits directly above London CGL v20620 in the coverage " tower." The language of London CGL v20621 plainly provides that this particular excess policy attaches to and forms part of London CGL v20620. (See # 302, exhibit 11, p. 350, 353.)

This language specifically describes the relationship between policies v20620 and v20621, and sufficiently overcomes the general presumption that all underlying insurance must be exhausted before v20621 responds to the claim. See Community Redevelopment Agency v. Aetna Casualty, supra, 50 Cal.App.4th 340 n.6. Instead, the language permits a natural conclusion that it is the intention of the parties for these two specific policies to be linked in such a manner so as to form one policy. Accordingly, the court concludes that London CGL v20621 is specifically excess to London CGL v20620, and the policy limits provided under London CGL v20621 will be immediately triggered in accordance with its terms and upon exhaustion of London CGL v20620. Nevertheless, because v20620 itself, as previously concluded, cannot be exhausted or even accessed prior to exhaustion of all primary policies, v20621 will likewise be inaccessible prior to the exhaustion of all primary policies.

2. Harbor " Umbrella" Policy

The Harbor CGL 108909, which was in force between December 1969, and June 1973, and which the parties reference as an " umbrella policy," ⁹ contains some terms which vary from the other Harbor excess policies. (See # 302, exhibit 9.) This policy is excess to Royal primary policy No. 902235, Harbor excess policy No. 108908, and Harbor excess policy No. 108907. (Affidavit of Kelly M. Wolfe, # 301, p. 14.) The excess limits provided in the declarations are $3 million per occurrence, and $3 million in the aggregate.

9 " Umbrella policies are designed to provide coverage only when the amount of the insured loss reaches a predetermined level, such as in the event of a catastrophe ... Because such policies are not an attempt by a primary insurance company to limit a portion of its risk by labeling it ‘excess’ nor a device to escape responsibility, they are regarded as a true excess over and above any type of primary coverage, excess provisions arising in regular policies in any manner, or escape clauses.

In the policy’s " Insuring Agreements," subsection L provides: " If other valid and collectible coverage with any other Insurer is available to the Assured covering a loss also covered by this Insurance, other than coverage that is in excess of the Insurance afforded hereunder, the Insurance afforded hereunder shall be in excess of and shall not contribute with such other Insurance. Nothing herein shall be construed to make this Insurance subject to the terms, conditions and limitations of other Insurances."

The policy’s " Limit of Liability" section provides in relevant part: " In the event of reduction or exhaustion of the aggregate limits of liability under said underlying insurance by reason of losses paid thereunder, this Insurance shall (1) in the event of reduction pay the excess of the reduced underlying limit; (2) in the event of exhaustion continue in force as underlying insurance." The policy’s " Loss Payable" provision provides that " Liability under this Insurance with respect to any occurrence shall not attach unless and until the Assured, or the Assured’s Underlying Insurer, shall have paid the amount of the underlying limits on account of such occurrence."

The umbrella policy’s language thus provides that, in the event that a loss is not fully covered under the underlying insurances, the umbrella policy itself will continue to provide coverage as though it were an underlying insurance policy. The policy’s plain language also provides that if a loss is covered by the underlying insurance, then the policy shall not contribute with the underlying insurance policy. Additionally, the language plainly provides that in the event the underlying insurance is exhausted, then the Harbor umbrella policy has the capacity to continue on as underlying insurance, or act as an excess insurance policy.

In these circumstances, there exists valid and collectible insurance in the form of the Royal primary policy 902235. According to its plain terms, the Harbor umbrella policy shall not contribute with the Royal primary policy. Additionally, if the Royal primary policy has exhausted its limits, then the Harbor umbrella policy will continue as underlying insurance, or act as excess insurance. Both options under the Harbor policy contemplate that the underlying primary insurer shall have paid its underlying limits before liability attaches under the policy. If the underlying primary insurance has not been exhausted, then liability shall not attach under the Harbor umbrella policy. See Stonewall Ins. Co. v. Palos Verdes Estates, supra, 46 Cal.App.4th 1850; Olympic Ins. Co. v. Employees Surplus Lines Ins. Co., supra, 126 Cal.App.3d 600; Qualcomm., Inc. v. Certain Underwriters at Lloyd’s, London, supra, 161 Cal.App.4th 194.

3. The Royal Primary Policy

a. The Applicable Policy Provisions

i. Royal Primary Policy, RLP 144014

Having determined that the plain terms of the Harbor and London excess policies provide coverage after the underlying primary insurers have paid their limits,¹⁰ the court now seeks to construe the plain language of the Royal primary policies to determine how much primary coverage is available to Rohr. This determination is necessary before the court can conclude whether the primary policies have been exhausted through payment of their full limits, thus potentially triggering any excess policies.

10 It should be noted that the court makes no determination at this time that the primary policies are the only policies that must be exhausted before the Harbor and London policies will provide coverage. As previously noted, some of the policies may have other levels of coverage intervening between them and the primary policies. The present motions, however, seek only a determination of whether coverage under the Harbor and London policies is unavailable because the primary policies have not been exhausted . Accordingly, the court is not called upon at this time to determine whether any additional policies within Rohr’s insurance coverage portfolio must also be exhausted before coverage is available under the Harbor and London policies.

The policy’s insuring agreement identifies the three types of coverage available: Coverage A, Personal Injury Liability; Coverage B, Property Damage Liability; and Coverage C, Malpractice. (# 301, exhibit 1, p. 29.) The " policy applies only to occurrences which occur during the policy period anywhere in the world ..." (# 301, exhibit 1, p. 30.)

Occurrence

The policy defines " occurrence" as " an event or continuous or repeated exposure to conditions, which unexpectedly cause injury or damage during the policy period . All such exposure to substantially the same general conditions or arising from the same cause shall be deemed one occurrence." (Emphasis added.) (# 301, exhibit 1, p. 32.)

Limits of Liability

The policy defines its " limits of liability" as follows: " The limit of liability stated in the declarations as applicable to ‘each occurrence’ is the limit of the Company’s liability for all damages ... including ... damages arising out of injury to or destruction of all property ... as a result of any one occurrence, regardless of whether such damages are payable under one or more coverages. Subject to the limit of liability with respect to ‘each occurrence,’ the limit of liability stated in the declarations as ‘aggregate’ is the total limit of the Company’s liability with respect to all occurrences taking place during any annual term of this policy." (# 301, exhibit 1, p. 33.)

Declarations

The policy’s declarations page identifies the name, address, and business of the insured. It identifies that the policy is effective from August 1, 1959, to August 1, 1962. The declarations page further provides that the policy’s limits of liability for all coverages are $2 million for each occurrence, and $2 million in the aggregate. (# 301, exhibit 1, p. 36.)

Three-Year Policy Period

The policy provides that " (1) The policy period stated in the declaration is comprised of three consecutive annual periods. (2) Rates for this policy are subject to amendment for the second and third annual periods in accordance with the Company’s rules and rating plans. (3) Interim adjustment of premium shall be made quarterly." (# 301, exhibit 1, p. 37.)

Renewal Certificate

Attached to the policy is a certificate dated August 1, 1962, extending the terms of the policy for " a period of three years: August 1, 1962 to August 1, 1965. It is further agreed that all coverages now provided by the policy; with the same insuring agreements, conditions, exclusions and provisions of retrospective premium endorsement, continue in full force and effect." The endorsement also sets forth a different rate schedule effective August 1, 1962. (# 301, exhibit 1, p. 53.)

ii. Royal Primary Policy, RTS 902235

The policy’s insuring agreement identifies the three types of coverage available: Coverage A, Personal Injury Liability; Coverage B, Property Damage Liability; and Coverage C, Malpractice. (# 301, exhibit 2, p. 61.) The " policy applies only to occurrences which occur during the policy period anywhere in the world ..." (# 301, exhibit 2, p. 63.)

Occurrence

The policy defines " occurrence" as " an event or continuous or repeated exposure to conditions, which unexpectedly cause injury or damage during the policy period . All such exposure to substantially the same general conditions or arising from the same cause shall be deemed one occurrence." (Emphasis added.) (# 301, exhibit 2, p. 64.)

Limits of Liability

The policy defines its " limits of liability" as follows: " The limit of liability stated in the declarations as applicable to ‘each occurrence’ is the limit of the Company’s liability for all damages ... including ... damages arising out of injury to or destruction of all property ... as a result of any one occurrence, regardless of whether such damages are payable under one or more coverages. Subject to the limit of liability with respect to ‘each occurrence,’ the limit of liability stated in the declarations as ‘aggregate’ is the total limit of the Company’s liability with respect to all occurrences taking place during any annual term of this policy." (# 301, exhibit 2, p. 65.)

Declarations

The declarations page identifies the name, address, and business of the insured, and identifies that the policy is effective from August 1, 1965, to August 1, 1968. The policy’s limits of liability for all coverages are $2 million for each occurrence, and $2 million in the aggregate. (# 301, exhibit 2, p. 68.)

Rate Schedule

Endorsement No. 1 provides that the policy period is comprised of " three consecutive annual periods." (# 301, exhibit 2, p. 70.)

Renewal

By an attached certificate, the policy was extended for " a second three-year term effective August 1, 1968 to August 1, 1971" for an additional increased premium, and increased rate schedule. (# 301, exhibit 2, p. 87.)

iii. Construction of the Relevant Policy Terms

Of particular importance in this case is the fact that each policy period under the Royal primary policies provides coverage for one three-year period. Additionally, the " limits of liability" clause defines the limits of the coverage which the Royal policies provide. In their briefs, and at oral argument, the parties shared very different interpretations of what the " limits of liability" clause means. Continental and Lloyd’s argue that the limits of liability clause should be construed to mean that both the per occurrence and aggregate limits under the policies are annual limits of $2 million. Rohr, on the other hand, points out that the aggregate limit is defined with reference to " any annual term of this policy," while the per occurrence limit makes no reference to an annual term, and concludes that this demonstrates an intent to treat the two limits differently. For the reasons that follow, the court agrees with Rohr that the two limits are treated differently because of the inclusion of the reference to an annual term.

According to the policies’ declarations, $2 million in coverage is available on a per occurrence basis, and $2 million in the aggregate. Both policies at issue define the " limits of liability" as follows: " The limit of liability stated in the declarations as applicable to ‘each occurrence’ is the limit of the Company’s liability for all damages ... including ... damages arising out of injury to or destruction of all property ... as a result of any one occurrence, regardless of whether such damages are payable under one or more coverages. Subject to the limit of liability with respect to ‘each occurrence,’ the limit of liability stated in the declarations as ‘aggregate’ is the total limit of the Company’s liability with respect to all occurrences taking place during any annual term of this policy."

The first sentence of the clause defines the limits of what the policy will pay for one occurrence, whether the damages " are payable under one or more coverages." The insuring agreements defines the three types of coverage provided under the policy: Coverage A (bodily injury), Coverage B (property damage), and Coverage C (malpractice). The plain meaning of this language is that if one occurrence results in more than one type of injury as defined under the available coverages, the policy limit for one occurrence is a total of $2 million for the combined injuries. The natural, unstrained reading of the clause is that if one occurrence results in both bodily injury and property damage, the policy’s limits do not provide coverage in the amount of $2 million for bodily injury and an additional $2 million for property damage. Instead, the combined bodily injury and property damage arising from that occurrence are subject to a limit of $2 million per occurrence.

The second sentence under the limits of liability clause defines the policies’ aggregate limits. The language provides that the aggregate limit is " subject to" the per occurrence limit, and that the aggregate limit is the total amount of coverage that the policy will provide for all occurrences " during any annual term." The Royal policies do not define " aggregate." Accordingly, critical to construction of the policies’ terms is the meaning of the word " aggregate" as interpreted in its ordinary and popular sense.¹¹ " Aggregate," as an adjective, is defined to mean " formed by the collection of units or particles into a body, mass, or amount." Merriam-Webster’s Collegiate Dictionary (10th Ed. 2000). As a noun, " aggregate" means " the whole sum or amount: SUM TOTAL." (Emphasis in original.) Id. Thus, the most natural reading of the clause is that, regardless of the number of occurrences causing injury within one annual term (one year) of the policy, the greatest amount of coverage that the policy will provide in that year is $2 million. Therefore, if one occurrence had already resulted in payment of $500,000 in claims, and a second occurrence within that annual term yields $2 million in claims, the greatest amount of coverage that the policy will provide for the second occurrence is $1.5 million.

11 See Qualcomm, Inc. v. Certain Underwriters at Lloyd’s, London, supra, 161 Cal.App.4th 195 (words must be interpreted in their ordinary and popular sense and not as an attorney or insurance expert).

It is of particular importance that the aggregate limit of liability clause references " any annual term," as it is the first and only reference to such a time period within the contract. The inclusion of such a phrase is a clear indication that the parties both intended the reference, and intended to treat the two limits differently, as the placement of " any annual term" only in the sentence defining the aggregate limit necessarily means that it applies only to the aggregate limit. See London Market Insurers v. Superior Court, supra, 146 Cal.App.4th 662 (disfavoring contract construction rendering clauses superfluous); Community Redevelopment Agency v. Aetna Casualty & Surety Co., supra, 50 Cal.App.4th 338 (" If the meaning a layperson would ascribe to the language of a contract of insurance is clear and unambiguous, a court will apply that meaning" ). As a result, a natural unstrained reading of the limits of liability clauses compels an interpretation that the first sentence sets a per occurrence limit for the three-year policy period, while the second sentence establishes an aggregate limit for multiple occurrences during any annual term .

This interpretation of these two policy limit provisions is consistent with the decisions of other courts. In Uniroyal, Inc. v. American Re-Insurance Co., No A- 6718-02TI, 2005 WL 4934215 (N.J.Super.App.Div. Sept. 13, 2005), cert. denied, 186 N.J. 363, 895 A.2d 450 (2006), the court considered similar language in a multi-year policy setting forth a limit " in respect to each occurrence," which was made " subject to" a limit " in the aggregate for each annual period during the currency of this Policy." The court determined that the language was clear and unambiguous, and that, had the parties intended for the " annual period" language to apply to both policy limit provisions, they would have used the language in both provisions. Id., *15.

The court concluded: " Applying the clear and unambiguous policy language, the per-occurrence limits may not be annualized within the multi-year policies. Because the policy language is clear and unambiguous, it is not necessary to resort to case law from other jurisdictions for interpretive assistance. Nevertheless, we note that the majority of the published decisions cited by the parties also supports the result we reach. Courts have been consistent in holding that annualized liability limits will not be read into multi-year insurance policies where the policy language itself does not support such an interpretation. See, e.g., CSX Transp., Inc. v. Commercial Union Ins. Co., 82 F.3d 478, 483 (D.C.Cir. 1996); Soc’y of the Roman Catholic Church of the Diocese of Lafayette & Lake Charles, Inc. v. Interstate Fire & Cas. Co., 26 F.3d 1359, 1366 (5th Cir. 1994); Hercules, Inc. v. AIU Ins. Co., 784 A.2d 481, 495-96 (Del. 2001) ... Finally, one commentator cited by the parties agrees, noting in particular that multi-year policies cannot be read to include separate annual per-occurrence limits in the absence of express language in the policy. See Barry R. Ostrager & Thomas R. Newman, Handbook on Insurance Coverage Disputes § 9.04(d) (9th ed. 1998)." (Citation omitted.) Id., *16. Notably, the authorities cited by the New Jersey court are also in line with a decision of the Court of Appeal of California determining that a policy limit in a multi-year policy did not apply annually in the absence of specific language so specifying. California v. Continental Ins. Co., supra, 170 Cal.App.4th 198-200.

In the present case, it appears that the underlying claims relate to multiple occurrences resulting in property damage during the years that the Royal policies were on the risk. The terms of the Royal primary policies provide coverage in such circumstances. The parties do not appear to dispute, at least for purposes of the present motions, that the property damage occurred continuously throughout each policy period in which the Royal policies were in force. As stated previously, the policy here defines " occurrence" as " an event or continuous or repeated exposure to conditions, which unexpectedly cause injury or damage during the policy period ." (Emphasis added.) Pursuant to California law, when such language is present, it is not the timing of the occurrence itself which triggers policy coverage, but the resulting damage within the policy period. See Montrose Chemical Corp. of California v. Admiral Ins. Co., supra, 10 Cal.4th 675. Moreover, in California, conditions such as those alleged in the plaintiffs’ complaint sufficiently trigger multiple policy periods pursuant to the continuous trigger theory. Under the continuous trigger theory, so long as there are continuous or progressively deteriorating conditions resulting in property damage during the policy period, liability coverage is triggered and the insurer is liable for all property damage up to the policy limits. See California v. Continental Ins. Co., supra, 55 Cal.4th 197; Montrose Chemical Corp. of California v. Admiral Ins. Co., supra, 689; California v. Continental Ins. Co., supra, 170 Cal.App.4th 188 (reasoning that there is nothing unfair or unexpected in insured paying premiums for multiple policy periods and recovering combined total of policy limits for those periods).

*16 In addition, the court concludes that the limits of liability clause is naturally susceptible of only one meaning: pursuant to the plain language of the Royal policies, the aggregate limits may be annualized. In this case, the aggregate limits under the policies are triggered for each annual term that the Royal policies were in force, and, accordingly, Rohr was entitled to stack the aggregate limits for each annual term during the twelve-year period. Given that the Royal policies provide aggregate limits of $2 million for each of twelve annual terms, the total coverage potentially available in the aggregate under the Royal policies is $24 million.

Furthermore, the policies in the present case arc distinguishable from those in which California courts have determined that stacking/annualization is not permitted. Indeed, the cases set up a rule that policies are on the risk for all damages unless the contract contains explicit language limiting the policy’s potential liability. For example, in California v. Continental Ins. Co., supra, 170 Cal.App.4th 199, the trial court concluded that the policy’s limits could not be " annualized" due to the fact that the primary policy did not contain aggregate limits, and extrinsic evidence established that the policy limits were applied on a strictly per-occurrence basis. Id. Additionally, the " anti-stacking" provision examined by St. Paul Fire and Marine Ins. Co. v. Ins. Co. of the State of Pennsylvania, United States District Court, Docket No. 15-CV-02744-LHK (N.D.Cal. March 7, 2017), was found to be enforceable by the District Court because the language unambiguously stated that when multiple policies applied to a particular occurrence, the policy’s " maximum limit" under " all Coverage Forms or policies shall not exceed the highest applicable Limit of Insurance under any one Coverage Form or policy." Id., 13. The Royal policies, however, do not contain such limiting language, and it is well settled that, in California, " [p]rovisions which purport to exclude coverage or substantially limit liability must be set forth in plain, clear and conspicuous language." (Internal quotation marks omitted.) California v. Continental Ins. Co., 170 Cal.App.4th 183.

In reaching these conclusions, the court also concludes that the plain language of the policies at issue in this motion do not demonstrate that Rohr has, to borrow the words of the Court of Appeal in Montrose Chemical Corp. of California v. Superior Court, supra, 14 Cal.App. 5th 1323, " an absolute right to select which policy(ies) to access for indemnification in the manner they deem most efficient and advantageous." (Internal quotation marks omitted.) While Rohr is correct that the operation of each policy must be determined based on its own language, not general per se rules, that means that Rohr’s interpretation must be based on policy language, and there is no evidence in the record demonstrating that any of the policies are susceptible of such a " pick and choose" approach under the California case law.¹² See id., 1330.

12 Rohr also relies heavily on the case of Kaiser Cement & Gypsum Corp. v. Ins. Co. of the State of Pennsylvania, 215 Cal.App.4th 210, 155 Cal.Rptr.3d 283 (2013). In denying review of that opinion, however, the Supreme Court of California ordered that it not be published. Accordingly, pursuant to Cal. Rules of Court, Rule 8.1115, the opinion may not be cited in the courts of California. This court, in order to reach a conclusion consistent with the courts of California on this question of California law, likewise will not consider that opinion.

In the present case, Rohr maintains that a single occurrence is at issue and that, accordingly, $2 million exhausts the per-occurrence limit of the policies. The court reaches no conclusion as to the number of occurrences at issue, and the record is insufficient at this time for a definitive determination of that question. Nevertheless, the court concludes, for the reasons that follow, that the Royal policies have not been exhausted, regardless of the number of occurrences at issue.

*17 Royal Primary Policy, RLP 144014, was first executed on August 1, 1959, for a three-year policy period from August 1, 1959, to August 1, 1965. The policy was later extended for a second three-year policy period from August 1, 1962, to August 1, 1965. Royal Primary Policy, RTS 902235, was first executed on August 1, 1965, for a three-year policy period effective from August 1, 1965, to August 1, 1968. The policy was subsequently renewed for a second, three-year policy period from August 1, 1968, to August 1, 1971. As the court has already concluded, the policies unambiguously provide a per occurrence limit that applies per policy period, which in turn " is comprised of three consecutive annual periods." Accordingly, the Royal policies were in force for a total of four consecutive policy periods, each providing $2 million in coverage per occurrence for a total of $8 million per occurrence for the years that the Royal policies were in force.

Arrowood, the successor in interest to Royal, settled with Rohr for a dollar amount less than $8 million. Accordingly, regardless of whether the case involves one occurrence, which would limit coverage under the policies to $8 million, or several occurrences, for which coverage, under the per occurrence and annual aggregate limits, might be as much as $24 million, the settlement amount did not exhaust the Royal policies.

D. Conclusion

In summary, the court concludes that the terms of the primary and excess policies support the application of the continuous injury trigger to this case given the continuous exposure to conditions causing property damage. Given the time frame, multiple policy periods have been triggered, and all of the insurers are potentially liable for all property damage up to their policies’ aggregate limits. The plain language of the Harbor and London excess policies demonstrates that they are general excess policies, requiring all underlying insurance to exhaust their limits before the excess policies contribute to the loss.

The court concludes that horizontal allocation is applicable to this case, and the Royal primary policies are primary to each of the excess policies at issue in the present motions. The Royal policies’ aggregate limits apply for each annual term that the policies were on the risk. Thus, the aggregate limits of $2 million each annual term, may potentially be annualized, or " stacked," for a total of $24 million. The per occurrence limits of the Royal policies, however, apply per three-year policy period, and thus provide up to $8 million coverage per occurrence when the limits of the four three-year policies are stacked.

In this case, Arrowood paid less than per occurrence limits of its policies to Rohr. Because the limits have not been paid in full, the exhaustion necessary before the Harbor and London excess policies may be triggered remains unsatisfied. Pursuant to Stonewall Ins. Co. v. Palos Verdes Estates, supra, 46 Cal.App.4th 1850, the Harbor and London general excess policies are not triggered. Accordingly, Continental and Lloyd’s have met their burden in demonstrating that they are entitled to judgment as a matter of law, and their motion for summary judgment is granted; Rohr’s motion for summary judgment is denied.

VI. FEDERAL’S MOTION FOR SUMMARY JUDGMENT (# 306)

Federal issued three excess policies to Rohr effective from August 1, 1982, through August 1, 1985. Federal argues that, pursuant to the principle of horizontal exhaustion, all policies in effect during any part of the period of continuous loss potentially are liable up to their limits. Federal reasons that the present case involves claims of property damage beginning in the 1940s and continuing past 1985 and that the Royal policies and the Federal policies were both on the risk for portions of that period. Accordingly, it argues that all primary policies are deemed primary to any excess policies covering any part of the period of continuous loss. Community Redevelopment Agency v. Aetna Casualty, supra, 50 Cal.App.4th 339. Federal concludes that, accordingly, although its policies were issued to cover later policy periods than the Royal policies, they cannot be reached until all primary policies have been exhausted.

*18 In support of its assertion that all underlying policies have not been exhausted, Federal relies on the fact that Rohr entered into settlement agreements for less than the full limits with Arrowood on the Royal primary policies, and also with First State Insurance Company (First State) and Twin City Fire Insurance Company (Twin City), which issued excess policies directly underlying the Federal policies during the August 1, 1982, to August 1, 1985 policy periods.

In its opposition, Rohr maintains that the Federal policies do not require it to collect any specific amount from any particular insurer as a condition to coverage, and that the Federal policies are liable towards the loss once Rohr’s damages meet the fixed attachment points of the Federal excess policies. Additionally, Rohr argues that Federal’s policies do not contain an exhaustion provision or a provision requiring full payment from any underlying policies before the Federal policies are triggered. In the absence of such a provision, Rohr asserts, settlement with underlying insurers does not forfeit Rohr’s coverage under the Federal policies. In such circumstances, Rohr asserts that it becomes " self-insured" for the loss until the amount of the claims reach the Federal policies excess layer. Moreover, Rohr argues that the Federal policies do not clearly and unequivocally inform Rohr that they intend to be in excess of all primary insurance and all excess insurance, and, accordingly, do not require horizontal exhaustion.¹³

13 In opposition to both Federal’s and Century’s motions, Rohr also posits that its burden to demonstrate whether all policies in any given time period have been exhausted is a matter which has been specifically reserved for phase two of these proceedings. The court concludes, however, that its resolution of the motions for summary judgment involving Federal and Century ultimately turns on the lack of exhaustion of the Royal primary policies, an issue squarely within the phase one issue: " At what point will the obligations of the excess insurers, if any, arise, in light of the limits of the underlying primary policy or policies?"

A. Federal Excess Policy 7936-07-90

The declarations applicable to policy 7936-07-90 for the period August 1, 1982, to August 1, 1983, identify it as an " excess liability policy" providing $10 million in excess coverage above the First State policy, which in turn provides $10 million above an additional $40 million in other underlying insurance. (See # 307, exhibit A, items 3-6.) The insuring agreement provides: " [T]he Company agrees to pay on behalf of the insured loss resulting from any occurrence insured by the terms and provisions of the First Underlying Insurance policy scheduled in Item 6 of the Declarations ... The insurance afforded by this policy shall apply only in excess of and after all underlying insurance ... has been exhausted." (# 307, exhibit A, p. 1.) Underlying insurance is defined to mean " all policies scheduled in Item 6." (# 307, exhibit A, p. 1.) The Federal policy " adopts and follows all the terms, conditions and provisions of Policy 103926 issued by Twin City Fire ..." (# 307, exhibit A, endorsement # 3.)

The court concludes that there is a specific relationship between the Federal and Twin City policies. This conclusion is underscored by the fact that the Federal policy " adopts and follows" the terms, conditions and provisions of the Twin City policy. Accordingly, a natural, unstrained reading of the language permits the court to conclude that the Federal policy is specifically excess to the Twin City policy.

The relevant provisions of the Twin City policy are as follows:

Limit of Liability

" The total liability of the Company for all ultimate net loss as the result of any once occurrence shall not exceed the limit of liability stated in the declarations as applicable to each occurrence ... [T]he total liability of the Company for all ultimate net loss because of ... property damage to which this policy applies ... shall not exceed the limit of liability stated in the declarations as aggregate." (# 307, exhibit E, section IV, Limits of Liability.)

Ultimate Net Loss

" The total of the following amounts ... (1) all sums which the insured ... shall become legally obligated to pay as damages, whether by reason of adjudication or settlement, because of ... property damage ..." (# 307, exhibit E, section V, Definitions.)

Other Insurance

" The insurance afforded by this policy shall be excess insurance over any other insurance ... available to the insured, whether or not described in the Schedule of Underlying Insurance Policies, and applicable to any part of ultimate net loss, whether such other insurance is stated to be primary, contributing, excess or contingent ..." (# 307, exhibit E, Conditions.)

The court previously concluded that horizontal exhaustion of the primary policies is applicable to this case in which continuing property damage has been alleged across several decades, triggering multiple policy periods. The Royal policies, which are considered primary to all excess policies, have not paid their full limits. Additionally, the directly underlying Twin City policy has settled with the insured for less than its full limits. The fact that the Federal policy is specifically excess to, and follows, the Twin City policy creates a sequential expectation as to when the Federal policy pays its limits, because the Federal limits shall immediately follow the Twin City limits. The Twin City policy’s other insurance clause provides, however, that its coverage is excess over any other valid and collectible insurance available to the insured. Moreover, the terms of the Federal policy expressly contemplate that a specified amount of coverage within the policy period will be exhausted, including the limits of the Twin City policy, before its own limits are triggered.

Construing the terms of the Federal and Twin City polices together and as a whole, the court acknowledges that, although horizontal exhaustion generally is being applied to the collective policy limits and policy periods in this case, the specific relationship between the Federal and Twin City policies would ordinarily require a vertical allocation scheme between the two policies, and the limits of the Federal policy would be immediately triggered once Twin City paid its limits. Montrose Chemical Corporation of California v. Superior Court, supra, 14 Cal.App. 5th 1310 (" the sequence in which policies may be accessed must be decided on a policy-by-policy basis, taking into account the relevant provisions of each policy" ). In the present case, however, the court cannot conclude that the limits of this Federal excess policy are triggered, because the Twin City excess policy, and the Royal primary policies, which settled for less than their specified limits, constitute other valid insurance collectible by the insured. Therefore, the plain terms of the policies must be given effect as written. As an excess insurance policy providing coverage above a stated amount, the Federal policy must be considered excess insurance above all other available insurance; Community Redevelopment Agency v. Aetna Casualty, supra, 50 Cal.App. 339; and cannot be expected to pay its limits until the applicable limits of any other underlying insurance collectible by the insured, including primary coverage which is still available, have been paid. Montrose Chemical Corporation of California v. Superior Court, supra, 14 Cal.App. 5th 1335 (holding that insureds must exhaust lower layers of coverage before accessing higher layers of coverage if language of the excess policies so requires).

B. Federal Excess (84) 7936-07-90 and (85) 7936-07-90

Unlike Federal 7936-07-90, Federal policies (84) 7936-07-90 and (85) 7936-07-90 do not follow form to a directly underlying insurance policy; however, the insuring agreements for both policies require that the first designated underlying insurance and all underlying insurance pay their limits before the Federal policies pay their own limits. Federal policy (84) 7936-07-90 provides $10 million in excess coverage above the Twin City policy, which in turn provides $10 million above an additional $40 million in other underlying insurance. (See # 307, exhibit B, Declarations, Items 3-6.) The declarations page for Federal policy (84) 7936-07-90 provides that coverage " shall apply only in excess of and after all underlying insurance (as scheduled in Item 6 of the Declarations) has been exhausted ." (Emphasis added.) (# 307, exhibit B.) Item 6 of the Declarations identifies the Twin City policy as the first underlying insurance, in addition to various other underlying policies " on file with company." (# 307, exhibit B.)

Federal policy (85) 7936-07-90 provides $10 million in excess coverage above the First State policy, which in turn provides $10 million excess coverage. (See # 307, exhibit C, Declarations, Items 3-6.) The terms of Federal (85) 7936-07-90 includes the same substantive language as Federal (84) 7936-07-90, except that it identifies the First State policy as the first underlying insurance. (See # 307, exhibit C, Declarations, Item 6.)

Pursuant to their plain language, the court concludes that Federal policy (84) 7936-07-90 and (85) 7936-07-90 are general excess policies. In this case, the terms of the policies specify that coverage is intended to be " in excess of and after all underlying insurance." The Royal policies, which are considered primary to all excess policies covering the claims, and the directly underlying First State and Twin City excess policies, are " underlying insurance."

The terms of the Federal policies expressly contemplate that a specified amount of underlying coverage will be exhausted, including the limits of the First State and Twin City policies. These policies have not paid their full limits, and, additionally, primary coverage under the Royal policies also remains available to the insured. The plain terms of the Federal policies must be given effect as written. As excess insurance policies providing coverage above a stated amount, the Federal policies must be considered excess insurance above all other available insurance; Community Redevelopment Agency v. Aetna Casualty, supra, 50 Cal.App. 341; and cannot be expected to pay their respective limits until the applicable limits of any other underlying insurance, including primary coverage, have been paid. Montrose Chemical Corporation of California v. Superior Court, supra, 14 Cal.App. 5th 1335 (holding that insureds must exhaust lower layers of coverage before accessing higher layers of coverage if language of the excess policies so requires).

Accordingly, Federal has demonstrated that it is entitled to summary judgment as a matter of law, and its motion for summary judgment is granted.

VI. CENTURY’S MOTION FOR SUMMARY JUDGMENT (# 310)

Century issued four excess policies to Rohr from August 1, 1984, up through August 1, 1986. The first policy was issued from August 1, 1984, to August 1, 1985. Thereafter, Century issued three successive excess policies to Rohr providing varying coverage amounts for the period of August 1, 1985, to August 1, 1986. Century argues for summary judgment essentially on the same grounds as those set forth by Federal.

Rohr likewise sets forth arguments essentially the same as those it makes in opposition to Federal’s motions, citing settlement agreements for less than the full limits of the Royal primary policies, and also with First State Insurance Company (First State), which issued an excess policy directly underlying a Century policy issued from August 1, 1984, to August 1, 1985.

A. Century Excess Policy 00 73 01

The declarations applicable to policy 00 73 01 for the period August 1, 1984, to August 1, 1985, identify it as a " policy of excess insurance," providing $5 million in excess coverage above $25 million. (See # 311, exhibit A, p. 1.) Item 3 of the declarations specifies that the $5 million policy limit is in " excess of limits specified in Item 2." Item 2 identifies the designated underlying insurance as a First State Insurance with limits of $25 million " excess of primary limits." (See # 311, exhibit A, p. 1.) The policy further provides: " This is a policy of excess insurance ... The insurance afforded by this Policy shall follow that of the designated underlying insurance ..." (Emphasis added.) (# 311, exhibit A, p. 2, paragraph C.) Additionally, it provides that " [t]his policy indemnifies the insured in accordance with the applicable insuring agreements, conditions ... of the designated underlying insurance for excess loss ..." (# 311, exhibit A, p.2, paragraph B.) The court concludes that there is a specific relationship between the Century and First State policies. This conclusion is underscored by the fact that the Century policy shares the same insuring agreements and conditions applicable to the First State policy. The Century policy also plainly provides that its coverage " shall follow" the First State policy. Accordingly, a natural, unstrained reading of the policy leads the court to conclude that the Century policy is specifically excess to the First State policy.

The relevant provisions of the First State policy are as follows:

Underlying Limit- Retained Limit

The Company shall be liable only for the ultimate net loss in excess of the greater of the insured’s: (A) Underlying Limit- an amount equal to the limits of liability indicated beside the underlying insurance listed in the Schedule A of underlying insurance, plus the applicable limits of any other underlying insurance collectible by the insured ...

Ultimate Net Loss

Means the sums paid as damages in settlement of a claim or in satisfaction of a judgment for which the insured is legally liable after making deductions for all other recoveries, salvages and other insurances whether recoverable or not, other than the underlying insurance and excess insurance purchased specifically to be in excess of this policy ... (Emphasis added.) (# 311, exhibit G.)

Other Insurance

If other collectible insurance with any other insurer is available to the insured covering a loss covered hereunder ... the insurance hereunder shall be in excess of, and not contribute with such other insurance ...

The court has already concluded that horizontal exhaustion is applicable to this case in which continuing property damage has been alleged across several decades, triggering multiple policy periods. The Royal policies, which are considered primary to all excess policies have not paid their full limits. Additionally, the directly underlying First State policy has settled with the insured for less than its full limits. The fact that the Century policy is specifically excess to, and follows, the First State policy creates a sequential expectation as to when the Century policy pays its limits, because the Century limits shall immediately follow the First State limits. The First State policy’s other insurance clause provides, however, that coverage " shall be in excess of, and not contribute with" other collectible insurance. The First State policy’s underlying limit-retained limit clause also requires " the applicable limits of any other underlying insurance collectible by the insured" to be paid before it will pay its own limits. Moreover, the terms of the Century policy expressly contemplate that a specified amount of coverage within the policy period will be exhausted, including the limits of the First State policy, before its own limits are triggered.

Construing the terms of the Century and First State polices together and as a whole, the court acknowledges that, although horizontal exhaustion is being applied as a general rule to the collective policy limits and policy periods in this case, the specific relationship between the Century and First State policies would ordinarily require a vertical allocation scheme between the two policies, and the limits of the Century policy would be immediately triggered once First State paid its limits. Montrose Chemical Corporation of California v. Superior Court, supra, 14 Cal.App. 5th 1310 (" the sequence in which policies may be accessed must be decided on a policy-by-policy basis, taking into account the relevant provisions of each policy" ). In the present case, however, the court cannot conclude that the limits of this Century excess policy are triggered, because the First State excess policy, and the Royal primary policies, which settled for less than their specified limits, constitute other valid insurance collectible by the insured. Therefore, the plain terms of the policies must be given effect as written. As an excess insurance policy providing coverage above a stated amount, the Century policy must be considered excess insurance above all other available insurance; Community Redevelopment Agency v. Aetna Casualty, supra, 50 Cal.App. 341; and cannot be expected to pay its limits until the applicable limits of any other underlying insurance collectible by the insured, including primary coverage which is still available, have been paid. Montrose Chemical Corporation of California v. Superior Court, supra, 14 Cal.App. 5th 1335 (holding that insureds must exhaust lower layers of coverage before accessing higher layers of coverage if language of the excess policies so requires).

B. Century Excess Policies ZCX8459, ZCX8609, ZCX8634

The terms of the three remaining Century policies issued for the time period August 1, 1985, to August 1, 1986, are substantially similar in content. From August 1, 1985, to August 1, 1986, Century issued three excess policies providing three layers of excess coverage: ZCX8459 providing $5 million in excess coverage above $6.5 million; ZCX8609 providing $2.5 million in excess coverage above $21.5 million; ZCX8634 providing $2.5 million in excess coverage above $26.5 million. All of these policies " indemnify the insured in accordance with the applicable insuring agreements, exclusions, and conditions of the designated underlying insurance." The designated underlying insurance is umbrella policy 15 71 09 issued by United Insurance Company (United policy). (# 311, exhibits B through D.)

The declarations of each respective policy plainly state that it is a " policy of excess insurance," and identifies the United policy as its designated underlying insurance. The Century policies clearly follow form to the United policy, as noted by the provision: " The insurance afforded by this Policy shall follow that of the designated underlying insurance." (# 311, Century’s Exhibits B-D.) Accordingly, the court concludes that the Century policies issued during this policy period are specifically excess to the United policy.

In the section entitled, " Retained Limit- Limit of Liability," the United policy specifically limits its ultimate net loss to " the total of the applicable limits of the underlying policies listed in Schedule A hereof, and the applicable limits of any other insurance collectible by the insured ..." (Emphasis added.) (# 331, exhibit H.)

The plain language of the Century excess policies communicate the highly specific nature of each Century policy’s relationship to a specifically identified underlying policy. The Century excess policy language also plainly provides that the limits are triggered once the specifically identified underlying policy has paid its limits. While the rule of horizontal exhaustion is generally applicable to policies covering claims involving a continuous long-tail loss, the Century policies, pursuant to their plain terms, are specific excess policies. This interpretation results from a natural, unstrained reading of the terms which provide that the Century limits are triggered once the designated underlying insurance pays its limits. In this circumstance, the language can only be interpreted as requiring a vertical exhaustion allocation scheme.

The Century excess policies, therefore, must pay their limits immediately once the designated underlying insurance policy pays its limits. The designated underlying insurance policy, pursuant its terms, is scheduled to pay its limits after " all other collectible insurance" has been paid to the insured. To the extent that the policies called upon involve the same occurrences covered by the Royal policies, the limits of the Century policies have not been triggered, given that all underlying " insurance collectible by the insured" has not been exhausted, as previously discussed in this memorandum. Montrose Chemical Corporation of California v. Superior Court, supra, 14 Cal.App. 5th 1335 (holding that insureds must exhaust lower layers of coverage before accessing higher layers of coverage if language of excess policies so requires).

Century has demonstrated that it is entitled to judgment as a matter of law, and, accordingly, Century’s motion for summary judgment is granted.

CONCLUSION

For all the foregoing reasons, Continental and Lloyd’s motion for summary judgment (# 299), Federal’s motion for summary judgment (# 306), and Century’s motion for summary judgment (# 310) are hereby granted. Rohr’s cross motions for summary judgment (# 315 & 317) are hereby denied.

Paragraph 159 of the complaint describes sixteen excess policies issued by London to Rohr between 1951 and 1973. One policy is identified as carrying the policy number " 564/v20620," and another is identified as carrying policy number " LA40839." Thus, both the policy number stated in the affidavit and the number that appears on exhibit 10 itself are alleged in the complaint as separate policies. A comparison of the dates and language set forth in exhibit 10 against those described in the affidavit reveals that the information contained in both documents appears to be identical. At this juncture, Continental and Lloyd’s have not attempted to amend either their pleadings, affidavit, or exhibits to correct or clarify this apparent discrepancy, and no party has objected to the facts alleged or the veracity of the affidavit or exhibit 10. Accordingly, given that there are no material differences between the policy language recited in the affidavit and the language of exhibit 10, the court concludes that it is not precluded from considering exhibit 10 in deciding the issues presently before it.

" An umbrella policy is not required to contribute to the payment of a settlement until all other applicable policies have been exhausted, regardless of the wording of those policies’ other insurance’ clauses." (Footnotes omitted.) 46 C.J.S., Insurance § 1618 (2007), pp. 518-19.