State v. Cont'l Ins. Co.
| Decision Date | 29 September 2017 |
| Docket Number | E064518 |
| Citation | 15 Cal.App.5th 1017,223 Cal.Rptr.3d 716 |
| Court | California Court of Appeals Court of Appeals |
| Parties | STATE of California, Plaintiff and Respondent, v. The CONTINENTAL INSURANCE COMPANY et al., Defendants and Appellants. |
Certified for Partial Publication.*
Berkes Crane Robinson & Seal, Steven M. Crane, and Barbara S. Hodous, Los Angeles, for Defendants and Appellants.
Kamala D. Harris, Attorney General, Kristin G. Hogue, Senior Assistant Attorney General, Peter A. Meshot, Supervising Deputy Attorney General, and Darryl L. Doke, Deputy Attorney General; Law Offices of Roger W. Simpson and Roger W. Simpson for Plaintiff and Respondent.
This is an action by the State of California (State) to recover from various insurers the costs of cleaning up the Stringfellow hazardous waste site. It has been pending since 1993. It has been to this court three times and to the California Supreme Court twice. At this point, however, the only remaining insurers are the Continental Insurance Company and Continental Casualty Company (collectively Continental), and the only remaining issues relate to prejudgment interest.
In 2015, Continental paid the State its full policy limits of $12 million. The trial court ruled that the State was entitled to mandatory prejudgment interest on that amount at seven percent, dating back to 1998, and thus totaling $13,914,082.09. In the alternative, it also ruled that the State was entitled to discretionary prejudgment interest, at seven percent, dating back to 2002, and thus totaling $10,554,082.19.
Continental appeals. In the published portion of this opinion, we address its contentions that the award of mandatory prejudgment interest was erroneous because:
1. The award was premised on the trial court's erroneous ruling as to when Continental's policies attached.
2. The State was not entitled to mandatory prejudgment interest because the amount of its damages was uncertain.
Continental further contends that the award of discretionary prejudgment interest was erroneous because the trial court used an inapplicable interest rate.
Finding no error affecting the award of mandatory prejudgment interest, we will affirm it. Accordingly, we need not review the award of discretionary prejudgment interest.
Various insurers issued liability insurance policies to the State, such that the State had at least some coverage at all times from 1963 through 1978. Except for the 1963-1964 policy period, the State was self-insured for the first $1, $2, or $5 million in liability, and it had a series of policies for liability above that, affording total coverage of either $50 or $51 million per policy period.
Continental (and/or its predecessors in interest) issued three of these policies:
Company Period Limits Retention
Continental Casualty 1970-1973 $5 million $16 million
Harbor 1970-1973 $5 million $16 million
CNA Casualty 1973-1976 $2 million $25 million
Attachment A is a chart illustrating the amounts and policy periods of all of the relevant policies.
In 1983, the United States and the State, as plaintiffs, filed an action in federal court against numerous defendants, alleging that they were responsible for the contamination of the Stringfellow site. Some of the defendants filed counterclaims against the State. On July 28, 1988, the State gave notice of the counterclaims to its insurers, including Continental.
On September 11, 1998, the federal district court issued a "Judgment Pursuant to Rule 54(b)."1 (Capitalization altered.) It defined the "plaintiffs" as the United States and the State. It also defined the "counterclaimants" as those defendants who had filed counterclaims against the State. These included J.B. Stringfellow, Stringfellow Quarry Co., and Stringfellow Quarry Co., Inc. (Stringfellow counterclaimants).
It declared that the State "is liable to counterclaimants" under both the Comprehensive Environmental Response, Compensation, and Liability Act ( 42 U.S.C. § 9601 et seq. ) (CERCLA) and state law.
For purposes of CERCLA, it found that the United States, the State, and the counterclaimants were all "liable persons." It allocated liability under CERCLA as follows:
a. The State was 65 percent liable "as against all [c]ounterclaimants."
b. The Stringfellow counterclaimants were 10 percent liable.
c. The remaining counterclaimants and the United States were 25 percent liable.
d. "[A]ny orphan share[ ] created by any party who is unable to pay its apportioned share under CERCLA ... shall be reallocated among the existing solvent parties in the same proportionate amounts as the above-described allocated CERCLA equitable shares."
For purposes of state law, it ruled: "Each counterclaimant is entitled to be paid by the State ... 100% (one hundred percent) of any damages which that counterclaimant has incurred or will incur." It specifically ruled that the counterclaimants' liability under state law was "0% (zero percent)." It added, "The Court finds that the state law claims are direct claims for damages."
Finally, it provided: "[T]he United States has incurred certain costs of response in connection with the site which are consistent with the National Contingency Plan; those costs plus interest[ ] accrued through February 29, 1992 total $80,174,584.22."
The State filed an appeal from the Rule 54(b) judgment. It ultimately dismissed that appeal in 2002.
Meanwhile, in December 1998, the State entered into a settlement agreement with the counterclaimants. In it, the counterclaimants released the State from all claims for past costs incurred at the Stringfellow site. In return, the State agreed to assume all liability for the Stringfellow site, including the liability to reimburse the United States for past and future costs incurred.
In April 2001, the State entered into a settlement agreement with the United States, in which the State agreed to pay $99.4 million "for Response Costs ... that the United States incurred at the Site ...." In July 2001, the federal district court ordered this settlement agreement into effect as a consent decree. In August 2001, the State duly paid the United States $99.4 million.
Meanwhile, separate and apart from its liability to the United States and/or the counterclaimants, the State also carried out its own remediation work at the Stringfellow site. As of the time of trial, remediation work was still going on.
In 1993, the State filed an action against certain insurers, seeking to recover the costs of cleaning up the Stringfellow site. In 2002, the State filed a second action against additional insurers, including Continental. The two actions were consolidated; the defendants in the second action agreed to be bound by previous rulings in the first action. One of these previous rulings, in June 1999, was that the policy limits under a policy for a multi-year period applied once per policy period, not once per year (no-annualization ruling).
In March 2004, the trial court ruled that each insurer was potentially liable for the total amount of the loss (subject to its policy limits); it rejected the contention that each insurer could be liable only for the portion of the loss attributable to its own policy periods (all-sums ruling). At the same time, however, it also ruled that the State could not recover the policy limits in effect for every policy period. Instead, the State had to choose one policy period, and it could recover only up to the policy limits of the policies in effect during that period (no-stacking ruling).
In February 2005, the trial court ruled that, for purposes of policy limits, there had been only a single covered occurrence (one-occurrence ruling).
Meanwhile, a number of insurers had settled with the State. In March 2006, the trial court ruled that the amounts of these settlements, which totaled, at that point, approximately $120 million, had to be used to offset the other defendants' liability (offset ruling).
At that point, based on the one-occurrence, no-annualization and no-stacking rulings, the most the State could recover was $48 million. The $120 million in settlements was more than sufficient to offset this. Accordingly, the trial court entered a final judgment finding the defendants liable, but awarding the State zero damages.
The State appealed; the defendants cross-appealed. In 2009, we filed our opinion. ( State of California v. Continental Ins. Co. (2009) 88 Cal.Rptr.3d 288, review granted Mar. 18, 2009.) We affirmed the no-annualization ruling ( id . at pp. 317-319 ), the all-sums ruling ( id . at pp. 297-302 ), and the one-occurrence ruling ( id . at pp. 313-317 ). We concluded that the offset ruling was moot. ( Id . at pp. 319-320.) However, we reversed the no-stacking ruling. ( Id . at pp. 302-313.)
In 2012, the California Supreme Court affirmed our decision. ( State of California v. Continental Ins. Co. (2012) 55 Cal.4th 186, 145 Cal.Rptr.3d 1, 281 P.3d 1000.)
On remand, the parties filed cross-motions for summary adjudication on the issue of whether Continental's policies attached immediately upon exhaustion of the specified retention for the specified policy period (vertical exhaustion) or only upon exhaustion of all retentions across all policy periods (horizontal exhaustion). In October 2014, the trial court ruled that vertical exhaustion applied (vertical exhaustion ruling). Thus, it granted the State's motion and denied Continental's motion.
In February 2015, the parties stipulated that Continental would pay its policy limits of $12 million, without any right of reimbursement, and that the trial court would proceed to determine all factual and legal issues regarding prejudgment interest. According to Continental, it paid the $12 million on April 6, 2015.
The parties filed prehearing briefs on the issue of prejudgment interest.
The State took the position that its damages were certain for...
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