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Wednesday, June 12, 2024 | Back issues
Courthouse News Service Courthouse News Service

Calif. Court Overturns Pollution Liability Ruling

(CN) - A California appellate court decision allows the state to "stack" insurance limits across policy periods in the $700 million cleanup of an industrial dump in Riverside County. The decision refutes an anti-stacking precedent set in FMC Corp. v. Plaisted & Companies.

In the mid-1950s, California selected an old quarry lying in a Riverside County canyon, owned by a Mr. Stringfellow, as an industrial waste dump. A state geologist reported that by damming a natural gap in the canyon walls, waste could be contained in the quarry - which was supposedly underlain by impermeable rock.

After dumping 30 million gallons of hazardous waste into unlined ponds, the bedrock was found to have fractures leading to an underground stream. In addition, flooding in the 1960s and 1970s breached the dam, causing a plume of toxic chemicals to extend several miles from the site.

The dump was closed in 1972. Several court decisions since 1993 adjudicated responsibility for the environmental cleanup, which could run from $50 million to $700 million.

The 4th Appellate Division of the California Court of Appeal examined numerous rulings in its consideration of recovery under insurance policies the state held.

Significantly, the court rejected FMC Corp. v. Plaisted & Companies, decided by the same court in 1998, which prevented limits from being added up across policy periods.

"A continuous loss spanning ... policy periods is fundamentally different from an instantaneous loss, such that it is appropriate to place a greater contractual obligation on the insurers. Indeed, an antistacking rule would give a windfall to the insurers," the court wrote. The justices described an inherent "flukiness" of timing in overlapping insurance coverage, and cited other case law in allowing insurance policies to be stacked.

The ruling reversed the trial court's decision preventing the state from recovering more than the $120 million already gained in settlements. It upheld a decision that the contamination comprised a single occurrence - which began with the deposit of waste - and that the state had no duty to mitigate the loss, since its negligence was not willful.

The appellate court remanded the case for a decision on insurance coverage amount, and awarded appeal costs to the state.

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