State of California v. Continental Ins. 1/5/09 CA4/2

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State: California

Court: 1st District Court of Appeal 1st District Court of Appeal

Docket No: E041425

Case Date: 03/18/2009

Preview:Filed 1/5/09

CERTIFIED FOR PARTIAL PUBLICATION*

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION TWO

STATE OF CALIFORNIA, Plaintiff, Cross-Defendant and Appellant, v. OPINION CONTINENTAL INSURANCE COMPANY et al., Defendants, Cross-Complainants and Appellants; EMPLOYERS INSURANCE OF WAUSAU, Defendant, Cross-Complainant and Respondent. APPEAL from the Superior Court of Riverside County. Sharon J. Waters, Stephen D. Cunnison, and Erik Michael Kaiser, Judges. Reversed with directions. E041425 (Super.Ct.No. 239784)

Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this opinion is certified for publication with the exception of parts V. and VIII.C.

*

Judge Waters ruled that there was no duty to mitigate damages. (See part
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VIII., post.)

1

Cotkin & Collins, Roger W. Simpson; Edmund G. Brown, Jr., Attorney General, Darryl L. Doke and Jill Scally, Deputy Attorneys General; Law Offices of Daniel J. Schultz, Daniel J. Schultz; Anderson Kill & Olick, Robert M. Horkovich, Edward J. Stein, Robert Chung, and Cort Malone for Plaintiff, Cross-Defendant, and Appellant. Berkes Crane Robinson & Seal, Steven M. Crane, Barbara S. Hodous; Berman & Aiwasian, Deborah A. Aiwasian, Steven M. Haskell; Woolls & Peer, John E. Peer and H. Douglas Galt for Defendants, Cross-Complainants, and Appellants Continental Insurance Company, Continental Casualty Company, Horace Mann Insurance Company and Yosemite Insurance Company. Barber Law Group, Bryan M. Barber, and Steven D. Meier for Defendant, CrossComplainant, and Respondent Employers Insurance of Wausau. Wilson, Elser, Moskowitz, Edelman & Dicker, Patrick M. Kelly, Carey B. Moorehead, Craig C. Hunter, Robert Cooper; Sonnenschein Nath & Rosenthal, Paul E.B. Glad and Katherine J. Evans for Defendant, Cross-Complainant, and Appellant Stonebridge Life Insurance Company. Gauntlett & Associates, David A. Gauntlett and James A. Lowe for the Center for Community Action & Environmental Justice and United Policyholders as Amici Curiae on behalf of Plaintiff, Cross-Defendant, and Appellant.
[footnote continued from previous page]

Judge Cunnison ruled that the policy limits under multi-year policies applied per occurrence, rather than per year. (See part V., post.) Judge Kaiser made all of the other challenged rulings.

2

Winston & Strawn, Scott P. DeVries and Yelitza V. Dunham for the League of California Cities as Amicus Curiae on behalf of Plaintiff, Cross-Defendant, and Appellant. Latham & Watkins, David L. Mulliken, Kristine L. Wilkes, Johanna S. Schiavoni and Drew T. Gardiner for Montrose Chemical Corporation of California as Amicus Curiae on behalf of Plaintiff, Cross-Defendant, and Appellant. Heller Ehrman, Reynold L. Siemens and David A. Thomas for Whittaker Corporation as Amicus Curiae on behalf of Plaintiff, Cross-Defendant, and Appellant. In this action, the State of California (the State) seeks to recover from its liability insurers the amounts that a federal court has ordered it to pay for the cleanup of the Stringfellow hazardous waste site. Some insurers were granted summary judgment; the propriety of that ruling is currently before the California Supreme Court in State of California v. Underwriters at Lloyds London (2006) 146 Cal.App.4th 851, review granted April 18, 2007, S149988. Other insurers settled with the State. By the time the trial court entered the judgment that is the subject of this appeal, there were only six insurers left standing: Continental Insurance Company (Continental), Continental Casualty Company (Casualty), Employers Insurance of Wausau (Wausau), Horace Mann Insurance Company (Horace Mann), Stonebridge Life Insurance Company (Stonebridge), and Yosemite Insurance Company (Yosemite) (collectively the Insurers). Each of them had issued to the State an excess corporate general liability policy covering a two- or three-year policy period.

3

The trial court ruled that every policy in effect for any policy period during which the loss was occurring covered the entire loss -- which was at least $50 million, and could be as much as $700 million -- subject to the policy limits. However, it also ruled that the State could not recover more than the total policy limits for any one policy period; this effectively limited the States recovery to $48 million. Finally, it ruled that the Insurers were entitled to a setoff for settlement amounts previously paid by other insurers. Because the State had already recovered approximately $120 million in settlements, the trial court entered a judgment awarding the State "$0" against the Insurers. The State has appealed; the Insurers (other than Wausau) have filed a protective cross-appeal. In the end, we will uphold (or find moot) all of the trial courts rulings, with two exceptions: The trial court did err by (1) ruling that the State could not recover more than the total policy limits in effect for any one policy period, and (2) admitting certain documents under the ancient documents exception to the hearsay rule (Evid. Code,

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