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Stacking Policy Limits in Continuous Injury Losses in CA
Absent policy language stating otherwise, “stacking” of policy limits is now the rule in California. In an August 2012 decision, State of California v. Continental Insurance Company, 55 Cal. 4th 186 (2012), the California Supreme Court held that the policy limits of multiple liability insurance policies for the periods in which a continuous injury loss has occurred are to be “stacked,” allowing the insured to recover up to the sum of the policy limits of the multiple policies applicable to the loss. “Stacking” is “the ability of the insured, when covered by more than one insurance policy, to obtain benefits from a second policy on the same claim when recovery from the first policy would alone be inadequate to compensate for the actual damages suffered.” Wagner v. State Farm Mutual Auto Insurance Co., 40 Cal.3d 460, 463 (1985). “In other words, 'Stacking 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.'” State of California, 55 Cal. 4th at 200.
The dispute over whether policy limits may be stacked derives from a tension in the language of the Insuring Agreement clause and the policy limits language in the standard form general liability insurance policy. On the one hand, the Insuring Agreement affords coverage for “all sums” that the insured becomes obligated to pay as damages if there has been bodily injury or property damage during the policy period, while on the other hand, the Limits of Insurance clause of the policy limits the amount the insurer will pay because of all bodily injury and property damage arising out of any one occurrence. The issue of whether policy limits of multiple policies were to be stacked came to the fore in the mid-1990s, when the California Supreme Court in Montrose held that multiple policies, issued in seriatim, could be triggered by a continuing occurrence or continuing damage. Montrose Chemical Corp. v. Admiral Ins. Corp., 10 Cal. 4th 645 (1995).
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