In a prior post, we discussed the main holding in the California Court of Appeals decision, State of California v. Continental Insurance Co., which approves "stacking" of limits from multiple years of coverage. Digging deeper into the case, there are a number of additional interesting holdings. For one, the case helps clarify an important point regarding the scope of coverage under a given policy for a continuing loss. A number of cases have held that every policy in effect during the time of continuing damages is liable not only for the property damage during the policy period, but “all sums” of the insured’s liability. Most insurance carriers accept the fact this means that the carrier is responsible for property damage continuing after the policy period, but many contend they do not cover the property damage occurring before the policy period. The Continental case should put this issue to rest. The case clearly states that each carrier is liable for all damage “before or after” the policy period. Thus, insurers will no longer be able to contend they don’t cover the damage existing before policy inception.
This holding has interesting implications for products cases. Take the example of a defective construction product or defective medical device which gives rise to numerous claims. Frequently, those claims are all based on a common design defect and are all considered a single “occurrence.” Since each carrier must pay “all sums” arising out of the single “occurrence,” the carrier must pay all of the claims resulting from the one occurrence. This would include all claimants who first installed or implanted the defective product or device after the particular policy period, as well as all all claimants who had the product or device removed before the policy period. In both these cases, there was no damage to the particular claimant during the policy period, but there is nonetheless coverage since it is part of “all sums” of liability arising out of the covered occurrence that triggered the particular policy.