SAN FRANCISCO - The California Supreme Court has reversed a lower court decision involving the pesticide DDT and liability insurance policies held by Montrose Chemical Company.
Montrose manufactured DDT at a facility in Torrance from 1947 to 1982, the Supreme Court ruling said. The U.S. government and the state of California sued Montrose in 1990 for environmental contamination at the Torrance plant. Montrose spent more than $100 million on environmental cleanup.
The company is seeking to recover some of those costs from its liability insurance policies. The California Court of Appeal sided with the insurance companies in a dispute over the sequencing of how Montrose would tape the various policies.
The Supreme Court sided with Montrose.
“Montrose is not required to exhaust excess insurance at lower levels for all periods triggered by continuous injury before obtaining coverage from higher level excess insurance in any period,” the Supreme Court ruled. “We reverse the judgment of the Court of Appeal and remand for further proceedings consistent with this opinion.”
Montrose was seeking “vertical exhaustion,” of its insurance policies while the insurers wanted “horizontal exhaustion.”
Vertical exhaustion would allow Montrose to “access any excess policy once it has exhausted other policies with lower attachment points in the same policy period,” the Supreme Court said. With horizontal exhaustion, Montrose could only access a policy only “after it has exhausted other policies with lower attachment points from every policy period in which the environmental damage resulting in liability occurred,” the court said.
The Court of Appeal ruled in favor of horizontal exhaustion and the Supreme Court voted for vertical.
“Reading the relevant policy language in light of background principles of insurance law and considering the parties’ reasonable expectations, we conclude that a rule of vertical exhaustion is appropriate,” the Supreme Court ruling said.
Montrose Chemical Corporation of California v. The Superior Court of Los Angeles County, California Supreme Court S244737.