Continental Casualty Co. v. Rohr, Inc. ( 2020 )

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CONTINENTAL CASUALTY COMPANY ET AL.
v. ROHR, INC., ET AL.
(AC 41537)
(AC 41538)
(AC 42613)
DiPentima, C. J., and Prescott and Bear, Js.*
Syllabus
The plaintiff insurance companies sought a declaratory judgment to deter-
mine the rights and obligations of the parties under certain policies that
the plaintiffs and certain of the defendant insurance companies had
issued to the defendant manufacturer R Co. with respect to underlying
lawsuits against R Co. concerning environmental contamination at vari-
ous locations, principally in California, dating back to the 1940s. The
plaintiffs sought a judgment declaring that they had no duty to defend
or to indemnify R Co. in connection with the underlying claims and
that, if the trial court found that they were obligated to defend or to
indemnify R Co., they were entitled to contribution from the defendant
primary, umbrella and excess insurers. The plaintiff insurance compa-
nies included C Co., L Co., and certain London market insurers. The
defendants included secondary insurers E Co., S Co., F Co., T Co. and
U Co., which had issued certain excess policies to R Co. between 1982
and 1986. Prior to this litigation, the substantive issues of which are
governed by California law, R Co. settled certain of its coverage claims
with the defendant A Co., the successor in interest to I Co., which had
issued to R Co. two primary policies that were in effect between 1959
and 1971. The plaintiffs, which had issued policies to R Co. that were
in excess to the 1959–1971 policies, claimed that R Co. had settled with
A Co. for less than the total amount of coverage under the 1959–1971
I Co. policies and, thus, R Co. did not fully exhaust its coverage under
those policies. The trial court stayed the plaintiffs’ contribution claims
and bifurcated the proceedings, the first phase of which was limited to
the question of when the obligations, if any, of the excess insurers
arose in light of the limits of the underlying primary policy or policies.
Thereafter, C Co. and several other plaintiffs filed a motion for partial
summary judgment in which they claimed that the I Co. primary policies
first had to be exhausted before the excess policies could be implicated.
The C Co. plaintiffs further claimed that the I Co. policies provided
combined limits of $24 million in coverage per occurrence, which had
not been exhausted because I Co. had not paid or been held liable to
pay its full indemnity limits by judgment or settlement. F Co. and E Co.
then filed motions in which they joined the motion for partial summary
judgment filed by the C Co. plaintiffs. R Co. thereafter filed motions for
partial summary judgment as against the C Co. plaintiffs, F Co. and E
Co. R Co. maintained that it was entitled to coverage under its excess
policies and that, pursuant to controlling California law and the language
of the excess policies, it was required to satisfy only a single per occur-
rence limit of $2 million to reach the excess insurers’ coverage. R Co.
further claimed that vertical exhaustion was mandated by the excess
policies and that recovery from the excess insurers was not precluded
by its settlement under the I Co. primary policies. The trial court rendered
judgment granting the motion for partial summary judgment filed by
the C Co. plaintiffs, and the joinder motions filed by F Co. and E Co.,
and denying the motions for partial summary judgment filed by R Co.
The court determined that the I Co. primary policies had been in force
for four consecutive policy periods, each of which provided $2 million
in coverage per occurrence, for a total of $8 million per occurrence for
the years the I Co. policies were in effect. The court also determined
that the underlying primary policies had to be horizontally exhausted
before any of the C Co. plaintiffs’ excess policies could attach to provide
coverage. The court further determined that R Co. was required to be
paid the limits of its underlying primary policies before it could access
certain of the excess policies. The court determined that a 1982–1983
policy that was issued by F Co. was specifically excess to a certain
excess policy issued by T Co. that provided $10 million in coverage
above an additional $40 million in other underlying insurance. The court
also determined that a 1984 policy and a 1985 policy that were issued
by F Co. were general excess policies and that the limits of all three F
Co. policies could not be triggered because certain underlying policies
issued by S Co., T Co. and I Co. constituted other valid insurance that
was collectible by the insured. The court determined that the coverage
limits of a 1984–1985 excess policy and three 1985–1986 excess policies
that were issued by E Co. could not be triggered because underlying
policies issued by S Co., T Co., U Co. and I Co. constituted other valid
insurance that was collectible by the insured. R Co. filed separate appeals
challenging the trial court’s judgment for the C Co. plaintiffs and for F
Co. and E Co., and the C Co. plaintiffs cross appealed. Held:
1. The trial court improperly granted the motion for partial summary judg-
ment filed by the C Co. plaintiffs, as the court’s conclusion that their
excess policies could never attach was incorrect because A Co. had
paid R Co. more than the per occurrence limits of the underlying I Co.
primary policies:
a. The C Co. plaintiffs could not prevail on their claim that the I Co.
primary policies had a total liability of $24 million over the 1959–1971
period, which was based on their assertion that the three year policy
period endorsements to the primary policies were to be treated as annual
periods that were subject to a per occurrence limit and that the policy
period of each multiyear primary policy was defined as three consecutive
annual periods: the trial court properly concluded that each I Co. policy
provided a per occurrence limit of $2 million that could not be annu-
alized, the court having correctly determined that the limit of liability
provision in each policy set a per occurrence limit for each three year
period of the policy and an aggregate limit for multiple occurrences
during any annual period; moreover, the provisions of the policies were
not ambiguous, as the endorsements stated that the three year policy
periods were made up of three annual periods, which was relevant in
that rates were based on annual periods, nowhere in the policies or
their endorsements was the policy period defined as three consecutive
annual periods, and there was no language in the policies or their declara-
tions that provided for coverage on a per occurrence, per year basis.
b. Contrary to the trial court’s determination that the I Co. primary
policies provided $8 million in coverage because their $2 million per
occurrence limits were in force for four consecutive policy periods, R
Co. was entitled to $2 million in coverage per policy for a total of $4
million in coverage; the policies’ renewal certificates and endorsements
constituted continuations of the original contracts such that the limit
of liability was the amount stated in the contracts regardless of the
number of years involved or the number of premiums that were paid.
c. This court concluded, after an examination of California law, that
the trial court did not err in determining that R Co. was required to
horizontally exhaust all of its primary insurance before the liability of
its excess insurers could attach: this court determined that it would
apply the rule of horizontal exhaustion set forth by the California Court
of Appeal in Community Redevelopment Agency v. Aetna Casualty &
Surety Co. (50 Cal. App. 4th 329) and other California cases that adhere
to the settled rule under California law that an excess policy does not
cover a loss until all primary insurance has been exhausted.
d. Although the trial court properly determined that payment of the full
limits of the primary policies was necessary for exhaustion to be satis-
fied, it improperly determined that the necessary exhaustion of the I Co.
primary policies remained unsatisfied: because R Co. received payment
pursuant to the settlement of the I Co. primary policies for an amount
that exceeded the $4 million in coverage under those policies, under
the circumstances here, exhaustion by payment of the full amount of
the limits of those policies was satisfied, and, as that determination
also applied to the H Co. and London excess policies, the trial court
improperly determined that a certain London market insurance policy
was inaccessible and that no liability could attach under a certain H
Co. umbrella policy.
2. R Co.’s claim that the trial court improperly granted F Co.’s motion for
summary judgment was unavailing, as R Co. failed to exhaust certain of
its excess insurance policies when it entered into settlement agreements
with S Co. and T Co.; F Co.’s 1982–1983 and 1984 and 1985 excess
policies applied only after the exhaustion of the T Co. and S Co. $10
million excess policies and $40 million in other underlying insurance,
and even if R Co. had horizontally exhausted the $40 million in underlying
insurance, it failed to exhaust the T Co. and S Co. policies when it
settled with T Co. and S Co. for less than the limits of their policies.
3. The trial court properly granted E Co.’s motion for summary judgment
as to the 1984–1985 excess policy it issued to R Co. but improperly
granted the motion as to three 1985–1986 excess policies it issued to
R Co.:
a. Although the trial court improperly concluded that the limits of E
Co.’s 1984–1985 policy were not triggered because the I Co. primary
policies had not been exhausted, the court’s decision as to the 1984–1985
policy was nevertheless proper, that policy having been specifically
excess to a directly underlying policy issued by S Co. that had been
settled with R Co. for less than its full limits.
b. E Co. was not entitled to summary judgment as to its three 1985–1986
policies, the trial court having incorrectly determined that, to the extent
those policies involved the same occurrences covered by the I Co.
policies, the limits of E Co.’s 1985–1986 policies had not been triggered
because the coverage limits of the I Co. policies had not been satisfied.
4. The C Co. plaintiffs could not prevail on their cross appeal, in which they
claimed that the 1959–1971 I Co. primary policies had annual period
per occurrence limits that totaled $24 million, this court having rejected
similar arguments the C Co. plaintiffs raised on direct appeal with respect
to whether the $2 million per occurrence limits in the I Co. policies
may be annualized.
Argued February 13—officially released December 15, 2020
Procedural History
Action for a declaratory judgment to determine, inter
alia, the rights of the parties under certain insurance
policies issued to the named defendant by the plaintiffs
and certain of the defendants concerning underlying
claims of environmental contamination brought against
the named defendant, and for other relief, brought to
the Superior Court in the judicial district of Hartford,
where the defendant Federal Insurance Company et
al. filed cross claims and the named defendant filed a
counterclaim and a cross claim; thereafter, the court,
Hon. A. Susan Peck, judge trial referee, bifurcated the
trial and ordered that the parties’ declaratory judgment
claims be tried to the court in the first phase; subse-
quently, the court granted the motions for partial sum-
mary judgment filed by the named plaintiff et al. and the
motions for summary judgment filed by the defendant
Federal Insurance Company et al., and denied the
named defendant’s motions for partial summary judg-
ment, and the named defendant appealed and the
named plaintiff et al. cross appealed to this court, which
consolidated the appeals. Reversed in part; judgment
directed; further proceedings.
Marilyn B. Fagelson, with whom were Proloy K. Das,
Rachel Snow Kindseth, Benjamin H. Nissim and, on
the brief, Steven M. Greenspan, Amanda M. Leffler,
pro hac vice, and Paul A. Rose, pro hac vice, for the
appellant-cross appellee (named defendant).
Matthew B. Anderson, pro hac vice, with whom were
William A. Meehan and, on the brief, Stephen T.
Roberts, for the appellees-cross appellants (named
plaintiff et al.).
Brian C. Coffey, pro hac vice, with whom were Stuart
G. Blackburn, Laura Pascale Zaino and, on the brief,
William M. Cohn, pro hac vice, for the appellees (defen-
dant Century Indemnity Company et al.).
Opinion
BEAR, J. These appeals and cross appeal involve
issues relating to whether certain umbrella and excess
policies issued by the plaintiff and defendant insurers
provide coverage for environmental property damage
remediation claims brought against the named defen-
dant, Rohr, Inc. (Rohr).
In Docket No. AC 42613, Rohr appeals from the judg-
ment of the trial court granting the motion for partial
summary judgment filed by the plaintiff Continental
Casualty Company (Continental), in its own capacity
and as successor in interest to certain Harbor Insurance
Company insurance policies (Harbor excess policies)
and as successor by merger to CNA Casualty of Califor-
nia; the plaintiff Certain Underwriters at Lloyd’s, Lon-
don (Lloyd’s); and certain plaintiff London market
insurance companies (London insurers), specifically,
The Ocean Marine Insurance Company (Ocean Marine)
as successor to certain policies severally subscribed to
by Commercial Union Assurance Company PLC and/or
General Accident Fire & Marine Life Assurance Corpo-
ration, and Scottish Lion Insurance Company, Ltd.
(Scottish Lion).1 In Docket No. AC 42613, the Continen-
tal plaintiffs cross appealed from the judgment.
In Docket No. AC 41537, Rohr appeals from the judg-
ment of the trial court granting the motion for summary
judgment filed by the defendant Federal Insurance
Company (Federal), and in Docket No. AC 41538, Rohr
appeals from the summary judgment rendered in favor
of the defendant Century Indemnity Company (Cen-
tury), formerly known as California Union Insurance
Company.
On appeal in Docket No. AC 42613, Rohr claims that
the trial court erred in concluding that (1) the underly-
ing primary insurance policies issued to Rohr by Royal
Indemnity Company (Royal) for the period between
August 1, 1959, and August 1, 1971 (Royal primary poli-
cies), provided per occurrence limits of $8 million, (2)
the underlying primary insurance policies must be hori-
zontally exhausted before any of the excess policies
could attach to provide coverage, and (3) Rohr was
required to be paid those policy limits before it could
access certain excess insurance policies. On the cross
appeal, the Continental plaintiffs challenge the trial
court’s determination that the Royal primary policies
have a total per occurrence limit of $8 million and claim
that the total per occurrence limit of the Royal primary
policies is $24 million. For the reasons discussed more
fully herein, we reverse in part the judgment of the
trial court.
The following undisputed factual and procedural his-
tory is relevant to our resolution of the claims on appeal.
Over the course of several decades, dating back to the
1940s, environmental contamination occurred at vari-
ous sites located principally in California2 as a result
of manufacturing operations at those sites by Rohr,
which is a wholly owned subsidiary of United Technolo-
gies Corporation with its principal place of business
located in Farmington. Consequently, claims were
brought against Rohr seeking recovery for the costs of
remediation of those sites, and Rohr, in turn, sought
coverage from its insurers for defense and indemnity
costs it has incurred, and will continue to incur, related
to the remediation. Prior to this litigation, Rohr settled
certain of its coverage claims with the defendant
Arrowood Indemnity Company (Arrowood), as succes-
sor in interest to Royal. Two of the Royal primary poli-
cies are directly at issue in the present case: policy RLP
144014, which was in effect between August 1, 1959,
and August 1, 1965; and policy RTS 902235, which was
in effect between August 1, 1965, and August 1, 1971.3
The plaintiffs4 issued policies to Rohr that are excess to
the 1959–1971 Royal primary policies. A central dispute
between the parties to these appeals concerns the claim
by the excess insurers that the amount paid to Rohr
under its settlement with Arrowood was less than the
total amount of the coverage under the Royal primary
policies and, thus, did not fully exhaust the coverage
provided under those policies.
In 2016, the plaintiffs commenced the present action
against the defendants5 seeking a declaratory judgment
as to the rights and obligations of the parties under
certain insurance policies issued to Rohr by the plaintiff
insurers and certain of the defendant insurers concern-
ing the underlying environmental property damage
claims.6 Specifically, the plaintiffs sought a judgment
declaring: in count one of their complaint, that they
have no duty to defend Rohr in connection with the
underlying claims; in count two, that they have no obli-
gation to indemnify Rohr concerning the underlying
claims; and in count three, that, in the event the court
finds that they are obligated to defend or indemnify
Rohr, they are entitled to contribution from the defen-
dant primary, umbrella and excess insurers.7
On September 26, 2016, the court granted a joint
motion of the parties to stay the contribution claims
alleged in count three. In a scheduling order issued the
same day, the litigation was divided into two phases,
with the first phase being limited to the following ques-
tion: ‘‘At what point will the obligations of the excess
insurers, if any, arise in light of the limits of the underly-
ing primary policy or policies?’’ The remaining issues
were scheduled to be decided in phase two, if necessary.
On December 16, 2016, the Continental plaintiffs filed
a motion for partial summary judgment. In their motion,
they claimed that there was no genuine issue of material
fact and that they were entitled to summary judgment
in their favor because (1) all of the Royal primary poli-
cies first had to be exhausted before the excess policies
could be implicated, (2) the Royal primary policies pro-
vide combined limits of $24 million in coverage per
occurrence, and (3) the Royal primary policies have
not been exhausted because Royal has not paid, or been
held liable to pay, their full indemnity limits either by
judgment or settlement.8 On January 6, 2017, Federal
and Century filed motions joining in the motion for
summary judgment filed by the Continental plaintiffs.
On January 23, 2017, Rohr filed a motion for partial
summary judgment as to the Continental plaintiffs. In
its memorandum in support of its motion and in
response to the motion for partial summary judgment
filed by those plaintiffs, Rohr maintained that, with
respect to the underlying claims, it is entitled to cover-
age under its excess comprehensive liability policies.
Specifically, Rohr claimed, inter alia, that it was
‘‘required to satisfy only a single per occurrence limit
of $2 million in order to reach the excess insurers’
coverage,’’ that ‘‘vertical exhaustion is mandated by the
language of the excess policies,’’ and that its ‘‘settlement
[under the Royal primary policies] does not preclude
it from recovering against the excess insurers.’’ Rohr
further claimed that the excess insurers could not
‘‘avoid their obligations to Rohr by complaining that
Rohr did not collect enough money in settlement from
its primary insurer, Royal. Recent controlling California
law, as well as the language of the excess policies and
[the] Royal primary policies, compel the conclusion that
Rohr need collect only $2 million from Royal before it
can recover from the excess insurers.’’ Also on January
23, 2017, Rohr filed a motion for partial summary judg-
ment as to Federal and Century, incorporating by refer-
ence its combined memorandum in opposition to the
motions for summary judgment filed by Federal and
Century and in support of its motion for partial sum-
mary judgment as to those defendants, and all of the
exhibits thereto. Rohr claimed, inter alia, that the join-
der motions for summary judgment filed by Federal
and Century failed for the same reasons set forth in
Rohr’s opposition to the motion for partial summary
judgment filed by the Continental plaintiffs.
In a memorandum of decision dated March 19, 2018,
the court, Hon. A. Susan Peck, judge trial referee, ren-
dered judgment granting the motion for partial sum-
mary judgment filed by the Continental plaintiffs and
the joinder motions for summary judgment filed by
Federal and Century, and denying Rohr’s motions for
partial summary judgment. On April 9, 2018, Rohr filed
its appeal in Docket No. AC 41537 challenging the sum-
mary judgment rendered in favor of Federal, its appeal
in Docket No. AC 41538 challenging the summary judg-
ment rendered in favor of Century, and its appeal in
Docket No. AC 41540 challenging the summary judg-
ment rendered in favor of the Continental plaintiffs. On
that day, Rohr also filed a motion, pursuant to Practice
Book § 61-4, for a written determination of appealability
of the court’s decision regarding the parties’ motions
for summary judgment. In its motion, Rohr alleged that
the decision was a final appealable judgment as to Fed-
eral and Century because it resolved all claims between
Rohr and those parties. With respect to the Continental
plaintiffs, Rohr acknowledged that the decision did not
resolve all issues concerning coverage obligations for
all policies with those parties and left issues regarding
the remaining policies to be addressed in the next phase
of the litigation. Rohr claimed, however, that because
the issues to be addressed in its appeal from the sum-
mary judgment rendered in favor of Federal and Cen-
tury were related closely to those raised in the summary
judgment rendered in favor of the Continental plaintiffs,
‘‘it would be the most efficient use of judicial resources
to grant the . . . motion so that an appeal from [the
summary judgment rendered in favor of the Continental
plaintiffs] . . . can be consolidated with the aforemen-
tioned appeals and argued by all of the affected parties
at the same time.’’ (Citation omitted.) The trial court
granted Rohr’s motion on May 25, 2018.
Subsequently, on January 16, 2019, this court granted
Rohr’s motion to consolidate its appeals in Docket Nos.
AC 41537 and AC 41538, dismissed the appeal and cross
appeal in Docket No. AC 41540 for lack of a final judg-
ment, as the decision appealed from did not dispose of
the entire complaint or all causes of action with respect
to the Continental plaintiffs, and denied Rohr’s request
for permission to appeal pursuant to Practice Book
§ 61-4. On February 15, 2019, this court granted Rohr’s
motion for reconsideration, as well as its motion for
permission to appeal. Thereafter, Rohr filed the appeal
in Docket No. AC 42613 challenging the summary judg-
ment rendered in favor of the Continental plaintiffs,
which, in turn, filed a cross appeal. The three appeals
subsequently were consolidated.
The parties do not dispute that the substantive issues
in this action are governed by California law. It is well
established, however, ‘‘that in a choice of law situation
the forum state will apply its own procedure . . . .
Paine Webber Jackson & Curtis, Inc. v. Winters, 22
Conn. App. 640, 650, 579 A.2d 545, cert. denied, 216
Conn. 820, 581 A.2d 1055 (1990); see, e.g., Ferri v. Pow-
ell-Ferri, 326 Conn. 438, 447, 165 A.3d 1137 (2017)
([a]lthough the choice of law provision in the [trust at
issue] dictates that matters of substance will be ana-
lyzed according to Massachusetts law, procedural
issues such as the standard of review [and standing]
are governed by Connecticut law); Montoya v. Montoya,
280 Conn. 605, 612 n.7, 909 A.2d 947 (2006) ([a]lthough
the [premarital] agreement’s choice of law provision
dictates that the substance of the contract will be ana-
lyzed according to New York law, procedural issues
such as the applicable standard of review are governed
by Connecticut law) . . . .’’ (Citation omitted; internal
quotation marks omitted.) Reclaimant Corp. v.
Deutsch, 332 Conn. 590, 603, 211 A.3d 976 (2019).
Accordingly, we set forth our standard of review pursu-
ant to Connecticut law.
The standard of review applicable to a trial court’s
decision to grant a motion for summary judgment is
well established. ‘‘Practice Book § 17-49 provides that
summary judgment shall be rendered forthwith if the
pleadings, affidavits and any other proof submitted
show that there is no genuine issue as to any material
fact and that the moving party is entitled to judgment
as a matter of law. A party moving for summary judg-
ment is held to a strict standard. . . . To satisfy his
burden the movant must make a showing that it is quite
clear what the truth is, and that excludes any real doubt
as to the existence of any genuine issue of material
fact. . . . As the burden of proof is on the movant, the
evidence must be viewed in the light most favorable
to the opponent.’’ (Internal quotation marks omitted.)
Raczkowski v. McFarlane, 195 Conn. App. 402, 408, 225
A.3d 305 (2020); see also Cyr v. VKB, LLC, 194 Conn.
App. 871, 877, 222 A.3d 965 (2019). ‘‘A material fact is
a fact that will make a difference in the outcome of the
case. . . . Once the moving party has presented evi-
dence in support of the motion for summary judgment,
the opposing party must present evidence that demon-
strates the existence of some disputed factual issue
. . . . It is not enough, however, for the opposing party
merely to assert the existence of such a disputed issue.
Mere assertions of fact . . . are insufficient to estab-
lish the existence of a material fact and, therefore, can-
not refute evidence properly presented to the court
under Practice Book § [17-45].’’ (Internal quotation
marks omitted.) Streifel v. Bulkley, 195 Conn. App. 294,
300, 224 A.3d 539, cert. denied, 335 Conn. 911, 228 A.3d
375 (2020). ‘‘Our review of the trial court’s decision to
grant [a] motion for summary judgment is plenary.’’
(Internal quotation marks omitted.) Lucenti v. Laviero,
327 Conn. 764, 773, 176 A.3d 1 (2018).
I
INSURANCE LAW PRINCIPLES
Because the trial court’s resolution of the issues
raised in the motions for summary judgment involved
a discussion and application of various technical con-
cepts and terms related to insurance contract interpre-
tation under California law, before we address the mer-
its of the court’s decision, a discussion of those
principles and concepts, as well as the terms of the
insurance policies at issue, is necessary.
A
Primary and Excess Insurance
We first discuss the distinctions between primary
and excess insurance coverage. ‘‘Primary coverage is
insurance coverage whereby, under the terms of the
ing of the occurrence that gives rise to liability. . . .
Primary insurers generally have the primary duty of
defense. Excess or secondary coverage is coverage
whereby, under the terms of the policy, liability attaches
only after a predetermined amount of primary coverage
has been exhausted.’’ (Emphasis omitted; internal quo-
tation marks omitted.) Century Surety Co. v. United
Pacific Ins. Co., 109 Cal. App. 4th 1246, 1255, 135 Cal.
Rptr. 2d 879 (2003), review denied, California Supreme
Court, Docket No. S117884 (September 17, 2003); see
also Legacy Vulcan Corp. v. Superior Court, 185 Cal.
App. 4th 677, 689, 110 Cal. Rptr. 3d 795 (2010), review
denied, California Supreme Court, Docket No. S184633
(September 1, 2010). ‘‘[E]xcess insurance is insurance
that is expressly understood by both the insurer and
insured to be secondary to specific underlying coverage
which will not begin until after that underlying coverage
is exhausted and which does not broaden that underly-
ing coverage. . . . California case law has consistently
protected the limited and shielded position of the
excess carrier when the obligations of the excess carrier
are set in clear phrases.’’ (Citations omitted; internal
quotation marks omitted.) Qualcomm, Inc. v. Certain
Underwriters at Lloyd’s, London, 161 Cal. App. 4th
184, 194, 73 Cal. Rptr. 3d 770 (2008), review denied,
California Supreme Court, Docket No. S163293 (June
11, 2008); see also Century Surety Co. v. United Pacific
Ins. Co., supra, 1255. ‘‘Unless the provisions of an
excess policy provide otherwise, an excess insurer has
no obligation to provide a defense to its insured before
the primary coverage is exhausted.’’ Community Rede-
velopment Agency v. Aetna Casualty & Surety Co., 50
Cal. App. 4th 329, 338, 57 Cal. Rptr. 2d 755 (1996); see
also North River Ins. Co. v. American Home Assurance
Co., 210 Cal. App. 3d 108, 112, 257 Cal. Rptr. 129 (1989)
(‘‘[l]iability under an excess policy attaches only after
all primary coverage has been exhausted’’).
As in the present case, an insured may have several
layers of excess or secondary insurance, and ‘‘[w]hen
secondary insurance is written to be excess to identified
policies, it is said to be ‘specific excess.’ ’’ Olympic Ins.
Co. v. Employers Surplus Lines Ins. Co., 126 Cal. App.
3d 593, 598, 178 Cal. Rptr. 908 (1981). ‘‘When California
courts refer to differing ‘levels’ of coverage in excess
insurance policies, they are referring to whether the
policy is a ‘specific excess’ or a ‘general excess’ insur-
ance policy. A specific excess insurance policy is an
insurance policy that ‘provide[s] excess coverage only
over specified primary policies.’ . . . Thus, a specific
excess policy must pay as soon as the limits of the
specified underlying insurance are exhausted. . . . In
contrast, general excess insurance policies ‘provide
coverage only when all primary policies are exhausted.’
. . . This is called ‘horizontal exhaustion’ because each
primary policy on the lower ‘level’ must exhaust before
a general excess policy, which sits on a higher level,
becomes implicated.’’ (Citations omitted; emphasis in
original.) St. Paul Fire & Marine Ins. Co. v. Ins. Co.
of the State of Pennsylvania, Docket No. 15-CV-02744-
LHK, 2017 WL 897437, *14 (N.D. Cal. March 7, 2017);
see also Padilla Construction Co. v. Transportation
Ins. Co., 150 Cal. App. 4th 984, 986–87, 58 Cal. Rptr. 3d
807 (2007) (‘‘California’s rule of ‘horizontal exhaustion’
in liability insurance law requires all primary insurance
to be exhausted before an excess insurer must ‘drop
down’ to defend an insured, including in cases of contin-
uing loss. . . . Unless there is excess insurance that
describes underlying insurance and promises to cover
a claim when that specific underlying insurance is
exhausted (‘vertical exhaustion’), the rule of horizontal
exhaustion applies to cases of alleged continuing prop-
erty damage . . . .’’ (Citation omitted; footnote
omitted.)).
In contrast, under vertical exhaustion, ‘‘coverage atta-
ches under an excess policy when the limits of a specifi-
cally scheduled underlying policy [are] exhausted and
the language of the excess policy provides that it shall
be excess only to that specific underlying policy.’’ Com-
munity Redevelopment Agency v. Aetna Casualty &
Surety Co., supra, 50 Cal. App. 4th 339–40. Moreover,
the principle that a secondary policy ‘‘does not apply
to cover a loss until the underlying primary insurance
has been exhausted . . . holds true even where there
is more underlying primary insurance than contem-
plated by the terms of the secondary policy.’’ Olympic
Ins. Co. v. Employers Surplus Lines Ins. Co., supra,
126 Cal. App. 3d 600.
B
Principles Governing Continuous Loss Cases
Environmental injury cases such as the present one,
in which the harm is alleged to have occurred over the
course of multiple years and policy periods, involve
what has been termed ‘‘long-tail’’ injuries. Such injuries
involve ‘‘a series of indivisible injuries attributable to
continuing events without a single unambiguous cause.
Long-tail injuries produce progressive damage that
takes place slowly over years or even decades.’’ (Inter-
nal quotation marks omitted.) California v. Continen-
tal Ins. Co., 55 Cal. 4th 186, 195–96, 281 P.3d 1000, 145
Cal. Rptr. 3d 1 (2012) (Continental Ins. Co. I). In cases
involving long-tail injuries, the relationship between pri-
mary and excess insurance can be complex, as ‘‘[i]t is
often virtually impossible for an insured to prove what
specific damage occurred during each of the multiple
consecutive policy periods in a progressive property
damage case.’’ (Internal quotation marks omitted.) Id.,
196; see id. (explaining that ‘‘many insurers are unwill-
ing to indemnify insureds for long-tail claims’’ and that
their refusal to do so often causes insureds to bring
complex actions seeking coverage, which involve large
numbers of litigants and insurance policies covering
multiple years and policy periods).
There are three California Supreme Court cases that
primarily inform our discussion of the general princi-
ples governing long-tail injury or continuous loss cases:
Montrose Chemical Corp. of California v. Admiral Ins.
Co., 10 Cal. 4th 645, 913 P.2d 878, 42 Cal. Rptr. 2d 324
(1995) (Montrose I), Aerojet-General Corp. v. Transport
Indemnity Co., 17 Cal. 4th 38, 948 P.2d 909, 70 Cal.
Rptr. 2d 118 (1997) (Aerojet), and Continental Ins. Co.
I, supra, 55 Cal. 4th 186.
In the first case, Montrose I, the question before the
court was ‘‘whether four comprehensive general liabil-
ity . . . policies issued by [the] defendant . . . Admi-
ral Insurance Company (Admiral) to [the] plaintiff . . .
Montrose Chemical Corporation of California [Mon-
trose Chemical] obligate Admiral to defend Montrose
[Chemical] in lawsuits seeking damages for continuous
or progressively deteriorating bodily injury and prop-
erty damage that occurred during the successive policy
periods.’’ Montrose I, supra, 10 Cal. 4th 654. The losses
were allegedly caused by the disposal of hazardous
wastes by Montrose Chemical ‘‘at times predating the
commencement of Admiral’s policy periods.’’ Id.
In addressing the ‘‘issue of when potential coverage
is triggered under a [comprehensive general liability]
policy where the underlying third party claims involve
continuous or progressively deteriorating damage or
injury’’; id., 661; the court concluded that ‘‘the continu-
ous injury trigger of coverage9 should be applied to the
underlying third party claims of continuous or progres-
sively deteriorating damage or injury alleged to have
occurred during Admiral’s policy periods. Where, as
here, successive [comprehensive general liability] pol-
icy periods are implicated, bodily injury and property
damage which is continuous or progressively deterio-
rating throughout several policy periods is potentially
covered by all policies in effect during those periods.’’
(Footnote added.) Id., 689. The court explained: ‘‘[I]t
has long been understood that the standard form [com-
prehensive general liability] policy provides liability
coverage for damage or injury occurring during the
policy period which results from an accident, or from
continuous or repeated exposure to injurious condi-
tions. There is no requirement that the sudden, acciden-
tal damage-causing act or event, or the conditions giving
rise to the damage or injury, themselves occur within
the policy period in order for potential liability coverage
to arise. . . . [W]here successive [comprehensive gen-
eral liability] policies have been purchased, bodily
injury and property damage that is continuing or pro-
gressively deteriorating throughout more than one pol-
icy period is potentially covered by all policies in effect
during those periods.’’ (Citation omitted; emphasis
omitted; footnote omitted.) Id., 686–87; see also Padilla
Construction Co. v. Transportation Ins. Co., supra, 150
Cal. App. 4th 987 (explaining that, in Montrose I, the
California Supreme Court ‘‘adopted a ‘continuous injury
trigger’ as the test for the defense obligation of tradi-
tional, occurrence-based primary commercial liability
insurance when the underlying claims involve continu-
ous or deteriorating damage’’ and that ‘‘[t]he continuous
injury trigger generally means . . . that all primary
insurers over the time of the alleged continuous injury
will be obligated to defend an underlying action claim-
ing such continuous damage’’).
In the second case, Aerojet, supra, 17 Cal. 4th 38,
the California Supreme Court adopted the ‘‘all sums’’
approach. Specifically, the court held that, ‘‘based on
standard policy language, in which the insurer promises
to pay ‘all sums’ that the insured becomes legally obli-
gated to pay as damages, the insurer’s duty to indemnify
the insured ‘extends to all specified harm caused by an
included occurrence, even if some such harm results
beyond the policy period.’ ’’ California v. Continental
Ins. Co., 15 Cal. App. 5th 1017, 1029–30, 223 Cal. Rptr.
3d 716 (2017) (Continental Ins. Co. II) (quoting Aerojet,
supra, 56–57), review denied, California Supreme Court,
Docket No. S245241 (December 20, 2017).
Finally, in the third case, Continental Ins. Co. I,
supra, 55 Cal. 4th 186, the California Supreme Court
addressed the issue of stacking. First, the court
explained its prior ruling in Aerojet, noting, ‘‘the settled
rule of the case law is that an insurer on the risk when
continuous or progressively deteriorating [property]
damage or [bodily] injury first manifests itself remains
obligated to indemnify the insured for the entirety of
the ensuing damage or injury. . . . In other words,
under Aerojet, as long as the policyholder is insured at
some point during the continuing damage period, the
insurers’ indemnity obligations persist until the loss is
complete, or terminates.’’ (Citations omitted; emphasis
omitted; internal quotation marks omitted.) Id., 197.
In light of the language of the applicable policies
obligating the insurers to pay ‘‘ ‘all sums which the
[i]insured shall become obligated to pay . . . for dam-
ages . . . because of injury to or destruction of prop-
erty’ ’’; id., 199; the court in Continental Ins. Co. I was
constrained to apply the all sums coverage principles
and concluded that the policies at issue obligated ‘‘the
insurers to pay all sums for property damage attribut-
able to [a particular waste] site, up to their policy limits,
if applicable, as long as some of the continuous property
damage occurred while each policy was on the loss.’’
(Internal quotation marks omitted.) Id., 200. Specifi-
cally, the court explained: ‘‘[T]he all sums indemnity
coverage . . . envisions that each successive insurer
is potentially liable for the entire loss up to its policy
limits. When the entire loss is within the limits of one
policy, the insured can recover from that insurer, which
may then seek contribution from the other insurers on
the risk during the same loss. Recognizing, however,
that this method stops short of satisfying the coverage
responsibilities of the policies covering a continuous
long-tail loss, and potentially leaves the insured vastly
uncovered for a significant portion of the loss, the . . .
Court of Appeal allowed the insured to stack the consec-
utive policies and recover up to the policy limits of
the multiple plans. ‘Stacking’ generally refers to the
stacking of policy limits across multiple policy periods
that were on a particular risk. In other words, ‘[s]tacking
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.’ ’’ Id. Accordingly, ‘‘[t]he all-sums-with-stacking
indemnity principle properly incorporates the Montrose
[I] continuous injury trigger of coverage rule and the
Aerojet all sums rule, and ‘effectively stacks the insur-
ance coverage from different policy periods to form
one giant ‘‘uber-policy’’ with a coverage limit equal to
the sum of all purchased insurance policies. Instead of
treating a long-tail injury as though it occurred in one
policy period, this approach treats all the triggered
insurance as though it were purchased in one policy
period. The [insured] has access to far more insurance
than it would ever be entitled to within any one period.’
. . . The all-sums-with-stacking rule means that the
insured has immediate access to the insurance it pur-
chased. It does not put the insured in the position of
receiving less coverage than it bought. It also acknowl-
edges the uniquely progressive nature of long-tail injur-
ies that cause progressive damage throughout multiple
policy periods.’’ (Citation omitted; emphasis in origi-
nal.) Id., 201.
C
Rules of Insurance Contract Interpretation
We next set forth the well established rules of insur-
ance contract interpretation under California law that
guide our analysis of the claims on appeal. The Califor-
nia Supreme Court has stated: ‘‘Insurance policies are
contracts and, therefore, are governed in the first
instance by the rules of construction applicable to con-
tracts. Under statutory rules of contract interpretation,
the mutual intention of the parties at the time the con-
tract is formed governs its interpretation. . . . Such
intent is to be inferred, if possible, solely from the
written provisions of the contract. . . . The clear and
explicit meaning of these provisions, interpreted in their
ordinary and popular sense, controls judicial interpreta-
tion unless used by the parties in a technical sense, or
unless a special meaning is given to them by usage.
. . . If the meaning a layperson would ascribe to the
language of a contract of insurance is clear and unam-
biguous, a court will apply that meaning. . . .
‘‘In contrast, [i]f there is ambiguity . . . it is resolved
by interpreting the ambiguous provisions in the sense
the promisor (i.e., the insurer) believed the promisee
understood them at the time of formation. . . . If appli-
cation of this rule does not eliminate the ambiguity,
ambiguous language is construed against the party who
caused the uncertainty to exist. . . . This rule, as
applied to a promise of coverage in an insurance policy,
protects not the subjective beliefs of the insurer but,
rather, the objectively reasonable expectations of the
insured. . . . Only if this rule does not resolve the
ambiguity do we then resolve it against the insurer.
. . . [I]n the insurance context, we generally resolve
ambiguities in favor of coverage. . . . Similarly, we
generally interpret the coverage clauses of insurance
policies broadly, [in order to protect] the objectively
reasonable expectations of the insured. . . . These
rules stem from the fact that the insurer typically drafts
policy language, leaving the insured little or no meaning-
ful opportunity or ability to bargain for modifications.’’
(Citations omitted; internal quotation marks omitted.)
Montrose I, supra, 10 Cal. 4th 666–67; see also Falkow-
ski v. Imation Corp., 132 Cal. App. 4th 499, 505–506,
33 Cal. Rptr. 3d 724 (2005), review denied, California
Supreme Court, Docket No. S137944 (November 30,
2005); Wells Fargo Bank, N.A. v. California Ins. Guar-
antee Assn., 38 Cal. App. 4th 936, 942–43, 45 Cal. Rptr.
2d 537 (1995). ‘‘[C]onstruction of a contract of insurance
presents a question of law [that] this court reviews de
novo. . . . Lexington Ins. Co. v. Lexington Healthcare
Group, Inc., 311 Conn. 29, 37, 84 A.3d 1167 (2014).
Because all of the . . . claims on appeal relate to an
interpretation of the [insurance] polic[ies], our review
is plenary.’’ (Internal quotation marks omitted.) Gabriel
v. Mount Vernon Fire Ins. Co., 186 Conn. App. 163, 167,
199 A.3d 79 (2018), cert. denied, 331 Conn. 903, 201
A.3d 1023 (2019); see also Chicago Title Ins. Co. v.
Bristol Heights Associates, LLC, 142 Conn. App. 390,
405, 70 A.3d 74, cert. denied, 309 Conn. 909, 68 A.3d
662 (2013).
II
INSURANCE POLICIES OF ROYAL AND
THE CONTINENTAL PLAINTIFFS
A
Royal Primary Policies
We next set forth the terms of the primary policies
issued by Royal, now known as Arrowood, to Rohr.
Pursuant to comprehensive general liability policy RLP
144014, Royal agreed ‘‘[t]o pay on behalf of the insured
all sums which the insured shall become legally obli-
gated to pay as damages because of injury to or destruc-
tion of property, including the loss of use thereof.’’ The
policy period covered August 1, 1959, to August 1, 1962,
and provided coverage in the amount of $2 million in
the aggregate annually and $2 million per occurrence
during the policy period. An occurrence is defined as
‘‘an event or continuous or repeated exposure to condi-
tions, which unexpectedly cause injury or damage dur-
ing the policy period. All such exposure to substantially
the same general conditions or arising from the same
cause shall be deemed one occurrence.’’ Pursuant to
the policy declarations, ‘‘[t]he policy period stated in
the declaration is comprised of three consecutive
annual periods.’’
The policy is also subject to the following condition:
‘‘The limit of liability stated in the declarations as appli-
cable to ‘each occurrence’ is the limit of the Company’s
liability for all damages, including damages for care and
loss of services arising out of bodily injury, sickness or
disease, including death at any time resulting therefrom
sustained by one or more persons or damages arising
out of injury to or destruction of all property of one or
more persons or organizations, including the loss of use
thereof, as a result of any one occurrence, regardless
of whether such damages are payable under one or
more coverages. Subject to the limit of liability with
respect to ‘each occurrence,’ the limit of liability stated
in the declarations as ‘aggregate’ is the total limit of
the Company’s liability with respect to all occurrences
taking place during any annual term of this policy.’’
Policy RLP 144014 was extended by three years from
August 1, 1962, to August 1, 1965, pursuant to a renewal
certificate, which provided that the same terms and
conditions in the policy would continue in full force
and effect.
Royal also issued to Rohr comprehensive general
liability policy RTS 902235. The policy period for that
policy was in effect from August 1, 1965, to August 1,
1968, and it also provided coverage in the amount of
$2 million per occurrence and $2 million in the aggre-
gate per annual period. Policy RTS 902235 contained
essentially the same terms, conditions, definitions and
exclusions as policy RLP 144014. Policy RTS 902235 was
extended for a second three year period from August
1, 1968, to August 1, 1971.
B
Harbor and London Excess Policies
1
Harbor Excess Policies
Harbor Insurance Company (Harbor) issued a num-
ber of excess comprehensive liability policies to Rohr.
The language of policy 102211 is indicative of many of
those policies, and, therefore, we discuss it more fully
herein.10 Policy 102211, which was in effect from August
1, 1964, to August 1, 1967, provided coverage limits of
up to $5 million per occurrence and $5 million in the
aggregate per policy year. An occurrence is ‘‘deemed
to have the same meaning . . . as is attributed to [it]
in the [policies] of the primary insurers,’’ and a policy
year is defined as ‘‘a period of one calendar year . . . .’’
Harbor excess policy 102211 identifies Royal primary
policy RLP 144014 as a primary insurance policy with
respect to comprehensive general liability.
Pursuant to policy 102211, Harbor agreed ‘‘to pay on
behalf of the Assured all sums which the Assured shall
become legally obligated to pay, or by final judgment
be adjudged to pay, to any person or persons as dam-
ages . . . (b) for damage to or destruction of property
of others . . . occurring during the period of this Insur-
ance . . . .’’ Furthermore, liability attaches to the
insurer ‘‘only in respect of such hazards as are set forth
in item 1 of the [accompanying] Schedule and . . . only
after the Primary and Underlying Excess Insurers have
paid or have been held liable to pay the full amount of
their respective ultimate net loss liability . . . .’’ Specif-
ically, the policy states that liability to pay shall not
attach ‘‘unless and until the Primary and Underlying
Excess Insurers shall have admitted liability for the
Primary and Underlying Excess Limit(s) or unless and
until the Assured has by final judgment been adjudged
to pay an amount which exceeds such Primary and
Underlying Excess Limit(s) and then only after the Pri-
mary and Underlying Excess Insurers have paid or have
been held liable to pay the full amount of the Primary
and Underlying Excess Limit(s).’’ Finally, the policy
defines ‘‘ultimate net loss’’ to mean ‘‘the amount payable
in settlement of the liability of the Assured after making
deductions for all recoveries and for other valid and
collectible insurances, excepting, however, the policy/
ies of the Primary and Underlying Excess Insurers, and
shall exclude all expenses and Costs.’’11
2
London Excess Policies
Paragraph 159 of the complaint alleges that certain
of the plaintiffs, including Lloyd’s, Scottish Lion, Ocean
Marine, Winterthur Swiss Insurance Corporation, Ltd.,
Tenecom, formerly known as Yasuda Insurance Com-
pany, Nissan Fire & Marine Insurance Company, Ltd.,
and NRG N.V., ‘‘individually severally subscribed, each
in his/her/its own proportionate share and not for any
other,’’ to sixteen listed excess liability insurance poli-
cies, which are collectively referred to in this opinion
as the London excess policies.12 The complaint further
alleges that ‘‘[t]he London excess policies provide limits
of liability in excess of the underlying insurance, which
must be exhausted before’’ there is any liability to pay
under those excess policies.
Like the Harbor excess policies, the London excess
policies contain similar provisions governing the attach-
ment of liability and defining ultimate net loss, although
they vary in the amount of coverage provided for an
occurrence. For example, the London excess policies
contain the following or similar provision regarding
the attachment of liability: ‘‘Liability to pay under this
Insurance shall not attach unless and until the Primary
and Underlying Excess Insurers shall have admitted
liability for the Primary and Underlying Excess Limit(s)
or unless and until the Assured has by final judgment
been adjudged to pay an amount which exceeds such
Primary and Underlying Excess Limit(s) and then only
after the Primary and Underlying Excess Insurers have
paid or have been held liable to pay the full amount
of the Primary and Underlying Excess Limit(s).’’13 The
London excess policies similarly define ultimate net
loss to mean ‘‘the amount payable in settlement of the
liability of the Assured after making deductions for all
recoveries and for other valid and collectible insur-
ances, excepting however the policy/ies of the Primary
and Underlying Excess Insurers, and shall exclude all
expenses and Costs.’’
3
Whether the Harbor and London Excess Policies
Are Specific or General Excess Policies
Before we can address the claims raised in this
appeal, we must first determine whether the trial court
properly concluded that the Harbor excess policies and
the London excess policies are general, instead of spe-
cific, excess policies.
Rohr claims that ‘‘the language in nearly all of the
excess policies here [shows that they] are excess to
specifically identified underlying policies and/or to a
specified sum of underlying limits and, therefore,
clearly require vertical exhaustion.’’ Rohr further
alleges that the court in Community Redevelopment
Agency v. Aetna Casualty & Surety Co., supra, 50 Cal.
App. 4th 329, ‘‘recognized that where a policy provides
that it is excess only to a specific underlying policy,
vertical exhaustion applies.’’ In opposition, the Conti-
nental plaintiffs contend that the Harbor and London
excess policies are general excess policies, to which
the rule of horizontal exhaustion applies. Specifically,
they claim that, ‘‘[h]ere, because the excess policies
provide that they are excess above the other insurance
which contribute[s] to payment of the loss, along with
the specified primary insurance, they are similarly not
limited to only the specifically described underlying
insurance.’’ They further assert that ‘‘Rohr’s contention
that the excess policies’ attachment point is dependent
only on the payment of a single specified sum is contrary
to the policies’ ultimate net loss and other insurance
provisions, as well as the [holding] in Peerless [Casualty
Co. v. Continental Casualty Co., 144 Cal. App. 2d 617,
301 P.2d 602 (1956)]14 . . . . Accordingly, when read-
ing the schedule of underlying insurance and attach-
ment of liability and ultimate net loss provisions
together, it is clear the excess policies are only reached
once the underlying insurers have paid or been held
liable to pay and the calculation of ultimate net loss,
which reduces the amounts of ‘all recoveries’ and ‘for
valid and collectible insurances,’ including all insurance
not directly underlying (which, in turn, must be
exhausted by payment).’’ (Footnote added.)
In its memorandum of decision, the trial court
addressed this issue and stated: ‘‘In this case, while the
schedule pages of the excess policies reference the
Royal primary policy RLP 144014, the excess policies
specifically provide that the policies will attach ‘only
after the Primary and Underlying Excess Insurers
have paid or have been held liable to pay the full
amount of the Primary and Underlying Excess Lim-
it(s).’ . . . Based upon this language, the Harbor and
London policies provide for the upper layer excess poli-
cies to pay their respective limits only once the insured
has recovered all proceeds from all valid and collectible
underlying insurance, including all primary policies.
‘‘That the excess policies make reference to15 the
Royal primary policy in the schedule or declaration is
not enough, in and of itself, to warrant a conclusion
that the policies are ‘specific excess’ and subject to a
vertical exhaustion allocation scheme; as previously
stated, horizontal exhaustion is the rule in California
in long-tail cases unless specific policy language both
describes and limits the underlying policies. . . .
Moreover, there are no other specific references here
to the Royal primary policies, which, when read in con-
junction with the ‘ultimate net loss’ and ‘other insur-
ance’ provisions, would overcome the usual presump-
tion requiring exhaustion of all primary coverage
policies in effect during the period of continuing dam-
age. Liability under the Harbor and London [excess]
policies, therefore, attaches only after all primary poli-
cies have been exhausted. Accordingly, the Harbor and
London policies, construed in their entirety, are general
excess policies, and liability under these contracts will
not attach before all primary insurance has been
exhausted.’’ (Citation omitted; emphasis in original;
footnote added.) We agree with the trial court’s con-
clusion.
We find Community Redevelopment Agency v. Aetna
Casualty & Surety Co., supra, 50 Cal. App. 4th 329,
instructive on this issue. In that case, the court stated:
‘‘[W]e must conclude that when a policy which provides
excess insurance above a stated amount of primary
insurance contains provisions which make it also
excess insurance above all other insurance which con-
tributes to the payment of the loss together with specifi-
cally stated primary insurance, such clause will be given
effect as written. . . . In other words, an excess
insurer can require in its policy that all primary insur-
ance be first exhausted. Consistent with the horizontal
rule, that is what [the excess insurer] effectively did in
this case. Because exhaustion of all available primary
(or underlying) insurance never occurred, [the excess
insurer’s] duty, under the terms of its policy, to ‘drop
down’ and provide a defense never arose.’’ (Citation
omitted; emphasis in original.) Id., 341; see also Peerless
Casualty Co. v. Continental Casualty Co., supra, 144
Cal. App. 2d 626; cf. Travelers Casualty & Surety Co.
v. Transcontinental Ins. Co., 122 Cal. App. 4th 949, 959,
19 Cal. Rptr. 3d 272 (2004) (concluding that, unlike in
Community Redevelopment Agency, language of
excess policy was ‘‘ ‘sufficiently clear’ ’’ to trigger
defense obligations of excess insurer upon exhaustion
of underlying insurance as defined in policy, regardless
of existence of other insurance), review denied, Califor-
nia Supreme Court, Docket No. S127264 (September
29, 2004).
In St. Paul Fire & Marine Ins. Co. v. Ins. Co. of the
State of Pennsylvania, supra, 2017 WL 897437, *14,
the court further explained: ‘‘California courts consider
specific excess policies to be on a lower level than
general excess policies and, thus, specific excess poli-
cies must pay before general excess policies. . . . In
cases involving continuing losses over multiple years,
thus triggering multiple annual policies, the default in
California is for an excess insurance policy to be a
general excess policy. . . . However, this default is
rebutted if the insurance policy contains language stat-
ing that the policy is excess to a specific underlying
policy. . . . Even where a specific underlying policy is
listed, other provisions in the policies such as the ‘other
insurance’ provision may indicate that the policy
remains a general excess policy.’’ (Citations omitted.)
In the present case, the Harbor and London excess
policies contain similar language providing that liability
shall attach to the insurer only after the primary and
underlying excess insurers have paid or have been held
liable to pay the full amount of the primary and underly-
ing excess limits or their respective ultimate net loss
liability, which is defined as an amount payable in settle-
ment of the liability of the insured ‘‘after making deduc-
tions for all recoveries and for other valid and collect-
ible insurances . . . .’’ (Emphasis added.) The policies
of those excess insurers, which clearly require that the
primary insurance first be exhausted before any obliga-
tions of those excess insurers arise and contain provi-
sions making those policies excess above ‘‘other valid
and collectible insurances,’’ do not contain language
specifically limiting those policies to be excess above
only the Royal primary policy. See Travelers Casualty &
Surety Co. v. Transcontinental Ins. Co., supra, 122 Cal.
App. 4th 959. Accordingly, we conclude that the trial
court properly determined that the Harbor and London
excess policies are general excess policies.16
C
Harbor Umbrella Policy
Harbor umbrella policy 108909 contains some terms
that vary from the other Harbor excess policies. The
limit of liability in the Harbor umbrella policy is $3
million per occurrence and $3 million in the aggregate,
and the policy is excess to, inter alia, Royal primary
policy RTS 902235, and Harbor excess policies 108908
and 108907. Pursuant to the ‘‘Loss Payable’’ provision
of the umbrella policy, liability with respect to any
occurrence ‘‘shall not attach unless and until the
Assured, or the Assured’s Underlying Insurer, shall have
paid the amount of the underlying limits on account of
such occurrence.’’ The ‘‘Limit of Liability’’ provision
states that, ‘‘[i]n the event of reduction or exhaustion
of the aggregate limits of liability under said underlying
insurance by reason of losses paid thereunder, this
Insurance shall (1) in the event of reduction pay the
excess of the reduced underlying limit; (2) in the event
of exhaustion continue in force as underlying insur-
ance.’’ Under the ‘‘Other Insurance’’ clause, ‘‘[i]f other
valid and collectible coverage with any other Insurer
is available to the Assured covering a loss also covered
by this Insurance, other than coverage that is in excess
of the Insurance afforded hereunder, the Insurance
afforded hereunder shall be in excess of and shall not
contribute with such other Insurance. Nothing herein
shall be construed to make this Insurance subject to
the terms, conditions and limitations of other Insur-
ance.’’ The trial court, after examining those provisions,
stated: ‘‘The umbrella policy’s language thus provides
that, in the event that a loss is not fully covered under
the underlying insurances, the umbrella policy itself
will continue to provide coverage as though it were an
underlying insurance policy. The policy’s plain language
also provides that, if a loss is covered by the underlying
insurance, then the policy shall not contribute with the
underlying insurance policy. Additionally, the language
plainly provides that, in the event the underlying insur-
ance is exhausted, then the Harbor umbrella policy has
the capacity to continue on as underlying insurance, or
act as an excess insurance policy.
‘‘In these circumstances, there exists valid and col-
lectible insurance in the form of the Royal primary
policy [RTS] 902235. According to its plain terms, the
Harbor umbrella policy shall not contribute with the
Royal primary policy. Additionally, if the Royal primary
policy has exhausted its limits, then the Harbor
umbrella policy will continue as underlying insurance,
or act as excess insurance. Both options under the
Harbor policy contemplate that the underlying primary
insurer shall have paid its underlying limits before liabil-
ity attaches under the policy. If the underlying primary
insurance has not been exhausted, then liability shall
not attach under the Harbor umbrella policy.’’ We will
address whether liability has attached under the Harbor
umbrella policy in part III C of this opinion.
III
THE CONTINENTAL PLAINTIFFS’ MOTION
FOR PARTIAL SUMMARY JUDGMENT
The trial court explained the essence of the dispute
between the parties as follows: ‘‘For purposes of the
present motions for summary judgment, there is no real
dispute regarding the relevant facts . . . [including]
. . . the fact that the underlying claims arise from
alleged damages resulting over the course of decades
from the gradual or continuous release of toxic chemi-
cals into the environment. Nor do the parties disagree
regarding the fact that Rohr reached a settlement with
its primary insurer and the dollar amount of that set-
tlement.17
‘‘The issues before the court, therefore, are purely
questions of law, namely, the interpretation of the terms
of the various insurance policies issued to Rohr by
the excess insurers, and the legal effect, if any, of the
settlement on the excess insurers’ liability to Rohr in
light of that interpretation. Central to the resolution of
these issues is the court’s interpretation of language
in Rohr’s primary and excess [comprehensive general
liability] policies. A key point of disagreement is the
interpretation of provisions in Rohr’s primary [compre-
hensive general liability] policies defining the limits of
liability under those policies. The excess insurers main-
tain that the $2 million ‘per occurrence’ and ‘aggregate’
limits in the primary policies, under the circumstances
of this case, effectively provide $2 million of coverage
per year that the policies were in effect, for a total
effective limit of $24 million that must be exhausted
before the excess policies may be accessed. Rohr, on
the other hand, takes the position that the primary pol-
icy limits are exhausted once $2 million have been paid
out for any one occurrence, and that the excess policies
become accessible at that point.’’ (Footnote added; foot-
note omitted.)
We first address Rohr’s claims on appeal with respect
to the judgment of the trial court granting the motion
for partial summary judgment filed by the Continen-
tal plaintiffs.
A
Per Occurrence Limits
Rohr’s first claim on appeal is that the trial court
erred in concluding that the Royal primary policies pro-
vided per occurrence limits of $8 million. Specifically,
Rohr claims that the trial court’s conclusion that there
was $8 million in per occurrence coverage under the
Royal primary policies was improper because the court
‘‘incorrectly treated each of the two policies, and each
of the two policy extensions, as providing separate $2
million limits that could be added together.’’ We agree.
The following additional facts are necessary to our
resolution of this claim. As stated previously, there are
two Royal primary policies that are directly at issue in
the present case, each of which covered a three year
period and was extended for an additional three years:
policy RLP 144014, which was in effect between August
1, 1959, and August 1, 1962, and was extended to cover
the period between August 1, 1962, and August 1, 1965;
and policy RTS 902235, which was in effect between
August 1, 1965, and August 1, 1968, and was extended
to cover the period between August 1, 1968, and August
1, 1971. Both policies provided coverage in the amount
of $2 million in the aggregate and $2 million per occur-
rence and similarly define an occurrence as follows:
‘‘ ‘Occurrence’ means an event or continuous or
repeated exposure to conditions which unexpectedly
cause injury or damages during the policy period. All
such exposure to substantially the same general condi-
tions or arising from the same cause shall be deemed
one occurrence.’’ (Emphasis added.)
In support of its claim, Rohr relies on the language
of the limit of liability clause in each of the policies,
which provides that ‘‘[t]he limit of liability stated in the
declarations as applicable to ‘each occurrence’ is the
limit of the Company’s liability for all . . . damages
arising out of injury to or destruction of all property of
one or more persons or organizations . . . as a result
of any one occurrence, regardless of whether such dam-
ages are payable under one or more coverages.’’
According to Rohr, pursuant to this plain language,
liability under the Royal primary policies ‘‘can be no
more than $2 million for a single occurrence no matter
how many years or how many policies of the [insurer]
are implicated by the occurrence.’’ In claiming that the
policies make a distinction between aggregate and per
occurrence limits, Rohr further relies on the language
of the limit of liability provision providing that ‘‘[s]ub-
ject to the limit of liability with respect to ‘each occur-
rence’, the limit of liability stated in the declarations
as ‘aggregate’ is the total limit of the Company’s liability
with respect to all occurrences taking place during any
annual term of this policy.’’ (Emphasis added.) Because
the policies include language demonstrating that the
aggregate limit is annualized and omit such language
as to the per occurrence limit, Rohr claims that it is
clear from the policies that the per occurrence limits
of $2 million cannot be annualized. In support of its
claim that a single occurrence can take place over multi-
ple years, Rohr relies on the definition of an occurrence
as meaning ‘‘an event or continuous or repeated expo-
sure to conditions’’ that causes injury or damage, and
the limiting language that the exposure to substantially
the same conditions arising from the same cause ‘‘shall
be deemed one occurrence.’’ Thus, Rohr alleges that
the environmental contamination that occurred over
the period of 1959 to 1971 covered by the policies consti-
tuted a single occurrence and resulted in coverage of
$2 million for that one occurrence.18 Finally, Rohr claims
that the three year extension of each policy did not
provide additional per occurrence limits and that,
‘‘[e]ven if each of the two Royal [primary] policies pro-
vided separate per occurrence limits . . . then, at
most, the two Royal policies provide a total of $4 million
in per occurrence limits.’’
Contrary to Rohr’s claims, the Continental plaintiffs
claim that the Royal primary policies that were in effect
from 1959 to 1971 have annual per occurrence limits
of $2 million, for a total liability over the twelve years
of $24 million. In support of their claim, the Continental
plaintiffs rely primarily on the language of the three
year policy period endorsements, which provide that
‘‘[t]he policy period stated in the declaration is com-
prised of three consecutive annual periods.’’ According
to the Continental plaintiffs, those endorsements dem-
onstrate that the Royal primary policy periods ‘‘are to
be treated as annual periods, each subject to a per
occurrence limit,’’ rather than ‘‘as a multiyear policy
with a single per occurrence limit,’’ and that ‘‘[t]he ‘pol-
icy period’ of each multiyear Royal primary policy is
specifically defined by endorsement as ‘three consecu-
tive annual periods.’ ’’ (Emphasis omitted.) The Conti-
nental plaintiffs also rely on Stonewall Ins. Co. v. Palos
Verdes Estates, 46 Cal. App. 4th 1810, 1849, 54 Cal. Rptr.
2d 176 (1996) (Stonewall), review denied, California
Supreme Court, Docket No. S027319 (October 23, 1996),
in support of their position.
1
Annualization
In order for this court to resolve the first issue raised
on appeal, we must first determine whether the per
occurrence limit of $2 million may be annualized pursu-
ant to the terms of the policies. As stated previously,
the interpretation of an insurance contract involves a
question of law over which we must exercise de novo
review. See Chicago Title Ins. Co. v. Bristol Heights
Associates, LLC, supra, 142 Conn. App. 405; Nation-
wide Mutual Ins. Co. v. Allen, 83 Conn. App. 526, 537,
850 A.2d 1047, cert. denied, 271 Conn. 907, 859 A.2d
562 (2004).
‘‘Words used in an insurance policy are to be interpre-
ted according to the plain meaning which a layman
would ordinarily attach to them. Courts will not adopt
a strained or absurd interpretation in order to create
an ambiguity where none exists.’’ Reserve Ins. Co. v.
Pisciotta, 30 Cal. 3d 800, 807, 640 P.2d 764, 180 Cal.
Rptr. 628 (1982); see also Legacy Vulcan Corp. v. Supe-
rior Court, supra, 185 Cal. App. 4th 688 (‘‘We interpret
words in accordance with their ordinary and popular
sense, unless the words are used in a technical sense
or a special meaning is given to them by usage. . . .
If contractual language is clear and explicit and does
not involve an absurdity, the plain meaning governs.’’
(Citation omitted.)). ‘‘In California, a contract must be
interpreted ‘to give effect to the mutual intention of the
parties as it existed at the time of contracting.’ . . . If
possible, the Court will infer that mutual intention
solely from the plain language of the contract, read as
a whole.’’ (Citation omitted.) Atain Specialty Ins. Co.
v. Sierra Pacific Management Co., Docket No. 2:14-cv-
00609 (TLN), 2016 WL 6568678, *2 (E.D. Cal. November
3, 2016), aff’d, 725 Fed. Appx. 557 (9th Cir. 2018).
In addressing this issue, the trial court agreed with
Rohr that the aggregate limits and the per occurrence
limits are treated differently in the policies. After setting
forth the limit of liability provision of the policies, the
court explained: ‘‘The first sentence of the clause
defines the limits of what the policy will pay for one
occurrence, whether the damages ‘are payable under
one or more coverages.’ The insuring agreements define
the three types of coverage provided under the policy:
Coverage A (bodily injury), Coverage B (property dam-
age), and Coverage C (malpractice). The plain meaning
of this language is that if one occurrence results in more
than one type of injury as defined under the available
coverages, the policy limit for one occurrence is a total
of $2 million for the combined injuries. The natural,
unrestrained reading of the clause is that if one occur-
rence results in both bodily injury and property damage,
the policy’s limits do not provide coverage in the
amount of $2 million for bodily injury and an additional
$2 million for property damage. Instead, the combined
bodily injury and property damage arising from that
occurrence are subject to a limit of $2 million per
occurrence.
‘‘The second sentence under the limits of liability
clause defines the policies’ aggregate limits. The lan-
guage provides that the aggregate limit is ‘subject to’
the per occurrence limit, and that the aggregate limit
is the total amount of coverage that the policy will
provide for all occurrences ‘during any annual term.’
The Royal policies do not define ‘aggregate.’ Accord-
ingly, critical to construction of the policies’ terms is
the meaning of the word ‘aggregate’ as interpreted in
its ordinary and popular sense. ‘Aggregate,’ as an adjec-
tive, is defined to mean ‘formed by the collection of
units or particles into a body, mass, or amount.’ Mer-
riam-Webster’s Collegiate Dictionary (10th Ed. 2000).
As a noun, ‘aggregate’ means ‘the whole sum or amount:
sum total.’ . . . Id. Thus, the most natural reading of
the clause is that, regardless of the number of occur-
rences causing injury within one annual term (one year)
of the policy, the greatest amount of coverage that the
policy will provide in that year is $2 million. Therefore,
if one occurrence had already resulted in payment of
$500,000 in claims, and a second occurrence within the
annual term yields $2 million in claims, the greatest
amount of coverage that the policy will provide for the
second occurrence is $1.5 million.’’ (Footnote omitted.)
The trial court found that the reference to ‘‘ ‘any
annual term’ ’’ only in the aggregate limit of liability
clause demonstrated an intent of the parties to treat
the aggregate and per occurrence limits differently. The
court concluded that ‘‘a natural, unrestrained reading
of the limits of liability clauses compels an interpreta-
tion that the first sentence sets a per occurrence limit
for the three year policy period, while the second sen-
tence establishes an aggregate limit for multiple occur-
rences during any annual term.’’ (Emphasis in origi-
nal.) Thus, the court concluded that the per occurrence
limits could not be annualized.19 We agree with that con-
clusion.
The plain language of the Royal primary policies ref-
erencing an annual term in the sentence defining the
aggregate limit of liability in the declarations, while
making no such reference to an annual time period in
the sentence defining the limit of liability with respect
to each occurrence as stated in the declarations, indi-
cates a clear intent of the parties that the reference to
‘‘any annual term’’ applies to the aggregate limit only.
See Northrop Grumman Corp. v. Factory Mutual Ins.
Co., 805 F. Supp. 2d 945, 952 (C.D. Cal. 2011) (failure
of insurer to include limiting language in insurance con-
tract with respect to certain peril, even though insurer
had done so within same section for another peril, indi-
cated intent of parties not to so limit coverage); see
also Fireman’s Fund Ins. Cos. v. Atlantic Richfield
Co., 94 Cal. App. 4th 842, 852, 115 Cal. Rptr. 2d 26
(2001) (‘‘an insurance company’s failure to use available
language to exclude certain types of liability gives rise
to the inference that the parties intended not to so limit
coverage’’). The policy period for each policy as set
forth in the declarations is a three year period, and the
language of each policy providing coverage of $2 million
for each occurrence is not stated in terms of per occur-
rence, per year. The provisions are not ambiguous, and
we must read them as written. See Continental Ins.
Co. II, supra, 15 Cal. App. 5th 1031 (‘‘[i]f contractual
language is clear and explicit, it governs’’ (internal quo-
tation marks omitted)); Peerless Casualty Co. v. Conti-
nental Casualty Co., supra, 144 Cal. App. 2d 626 (insur-
ance clause ‘‘will be given effect as written’’).
We are not persuaded by the claim of the Continental
plaintiffs that ‘‘[t]he ‘policy period’ of each multiyear
Royal primary policy is specifically defined by endorse-
ment as ‘three consecutive annual periods.’ ’’ (Emphasis
omitted.) Each policy contains an endorsement titled,
‘‘Three Year Policy Period,’’ which provides in part: ‘‘It
is agreed that such insurance as is afforded by the policy
applies subject to the following provision: (1) The policy
period stated in the declaration is comprised of three
consecutive annual periods.’’ That endorsement does
not define a policy period as three consecutive annual
periods; rather, it states that the three year policy period
is ‘‘comprised’’ of three annual periods. (Emphasis
added.) Comprised is defined by Merriam-Webster’s
Dictionary as ‘‘to be made up of . . . compose; consti-
tute . . . .’’ Merriam-Webster’s Collegiate Dictionary
(10th Ed. 1998) p. 237. The endorsement simply states
that the three year policy period is made up of three
annual periods, which is relevant in that rates are based
on annual periods, as further stated in the endorsement.
Nowhere in the policies or the endorsements is the
policy period defined as three consecutive annual peri-
ods, so that each year is a separate policy period, as
alleged by the Continental plaintiffs.
Moreover, the reliance on Stonewall, supra, 46 Cal.
App. 4th 1810, by the Continental plaintiffs is misplaced.
The policy at issue in that case was for a three year
period from November 1, 1975, to November 1, 1978. Id.,
1849. The policy covered ‘‘liability for property damage
with limits per [an attached endorsement]. There [were]
three separate endorsements for the years 1975 through
1978, each including a limit of $300,000 per occurrence
and in the aggregate and a deductible of $1,000 per
claim. There [were] three separate [d]eclarations, each
for a separate policy period.’’ (Internal quotation marks
omitted.) Id. The trial court in that case concluded that
the subject policy ‘‘covered three separate periods with
a limit of $300,000 for each period, an aggregate of
$900,000 in coverage. [The insurer] argue[d] that its
policy included one $300,000 limit applicable to the
entire three-year period.’’ Id. The California Court of
Appeal agreed with the trial court, finding that the pol-
icy was ambiguous and that the ambiguity had to be
construed against the insurer. Id. Moreover, the ambigu-
ity was resolved against the insurer also on the basis
of a stipulation it had entered into, which provided that
‘‘ ‘[t]he subject policies of insurance issued by . . . [the
insurer] . . . provided coverage of $300,000 per occur-
rence per year as respects property damage.’ ’’ (Empha-
sis added.) Id.
In the present case, each Royal primary policy con-
tained one endorsement providing for a policy period
of three years and setting the limit of coverage at $2
million per occurrence, which is factually different from
the three separate endorsements at issue in Stonewall,
each of which set forth a per occurrence limit of
$300,000. Nor is there any language in the Royal primary
policies or their declarations providing for coverage
on a per occurrence, per year basis. We, therefore,
conclude that Stonewall is distinguishable from the
present case. Accordingly, the per occurrence language
of each Royal primary policy provides coverage of up
to $2 million for an occurrence that takes place during
the policy period and not for each year of that policy
period.
2
Policy Extensions
Having determined that the per occurrence limits of
the Royal primary policies may not be annualized under
the terms of those policies, we next address Rohr’s
claim that the extensions of the two Royal primary
policies did not result in additional per occurrence lim-
its. We agree.
Rohr’s claim is based on its assertion that the
endorsements did not create new stand-alone policies
but, rather, simply extended the policy period for each
policy. Thus, Rohr claims, ‘‘[a]t most, the two Royal
policies together provide a total of $4 million in per
occurrence limits,’’ and that because Arrowood, as suc-
cessor to Royal, paid more than $4 million in settling
with Rohr, the policies were exhausted and, thus, the
trial court improperly rendered summary judgment in
favor of the Continental plaintiffs on this issue. Rohr
relies on A.B.S. Clothing Collection, Inc. v. Home Ins.
Co., 34 Cal. App. 4th 1470, 41 Cal. Rptr. 2d 166 (1995)
(A.B.S. Clothing), review denied, California Supreme
Court, Docket No. S047360 (August 10, 1995), in support
of its claim. That case involved a breach of contract
action by a policyholder against its insurance company
and concerned the following issue: ‘‘When an employee
embezzles funds from an employer over a period of
years during which the employer carries insurance
against employee dishonesty from the same insurer,
may the employer recover up to the insurer’s limit of
liability for each year in which the embezzlement
occurs?’’ Id., 1473. The insurer had ‘‘issued a separate
policy document each year. Each policy was effective
for a specified ‘policy period’ [of one year]. The second
policy stated it was a ‘renewal’ of the first; the third
stated it was a ‘renewal’ of the second.’’ Id., 1483. Rohr
points to the fact that, in finding that the parties had
entered into separate, independent contracts, the court
in A.B.S. Clothing ‘‘considered that the insure[d] [had]
issued three separate policies, each with different pol-
icy numbers and policy periods, notwithstanding that
the second and third policies were identified as ‘renew-
als.’ ’’ Thus, Rohr asserts that because those circum-
stances are different from those in the present case,
the extensions here merely constituted continuations
of the original contracts.
The Continental plaintiffs disagree with Rohr’s con-
tention that the two policy extensions did not constitute
separate contracts with separate policy limits. Instead,
they claim that because endorsements to the Royal
primary policies state that the policy period ‘‘ ‘is com-
prised of three consecutive annual periods,’ ’’ each three
year policy and each three year extension, at a mini-
mum, ‘‘constitute separate policy periods, totaling four
policy periods.’’ The Continental plaintiffs cite A.B.S.
Clothing, supra, 34 Cal. App. 4th 1476, for the proposi-
tion that, ‘‘[w]here indemnity is afforded through sepa-
rate and distinct contracts for specific policy periods
the insurer is generally held liable up to its limit of
liability for each policy period.’’ Furthermore, to sup-
port their claim that the policy extensions for each
policy do not constitute one continuous contract, they
claim that A.B.S. Clothing left open one situation in
which an extension does not constitute a new policy
with a new contract period, namely, ‘‘where the terms
of the contract, taken as a whole, establish an intention
the policy be continued indefinitely . . . .’’20 (Empha-
sis added.) Id.
We first examine the general rules governing insur-
ance contract renewals or extensions, and the decision
in A.B.S. Clothing before addressing the merits of the
parties’ claims. ‘‘Renewal or to renew means the issu-
ance and delivery by an insurer of a policy replacing
at the end of the policy period a policy previously issued
and delivered by the same insurer, or the issuance and
delivery of a certificate or notice extending the term
of a policy beyond its policy period or term . . . .’’
(Internal quotation marks omitted.) Borders v. Great
Falls Yosemite Ins. Co., 72 Cal. App. 3d 86, 93, 140 Cal.
Rptr. 33 (1977). ‘‘The renewal of insurance contracts
may raise many questions, including whether there is
a right to renew, whether nonrenewal has been effected
in accordance with the terms of all relevant policy and
statutory provisions, and whether a renewal, once
effected, is to be regarded as a continuation or exten-
sion of the original policy or as a new policy or contract
of insurance. An accurate definition of renewal cannot
be made until it is first determined whether the renewal
takes effect as an extension or continuation of the origi-
nal policy or whether it represents the formation of a
new, although identical, contract of insurance.’’ 2 S.
Plitt et al., Couch on Insurance (3d Ed. Rev. 2010) § 29:1,
p. 29-4. Moreover, ‘‘[w]hether the renewal of a policy
constitutes a new and independent contract or continu-
ation of the original contract primarily depends upon
the intention of the parties as ascertained from the
instrument itself. In the absence of any contrary statu-
tory provision, the parties may effectively designate that
the renewal policy shall be regarded as a continuation
of the policy or that it shall not be so regarded. Accord-
ingly, it has been held that the rule that a renewal policy
constitutes a separate and distinct contract for the
period of time covered by the renewal does not apply
where the extension agreement shows a contrary inten-
tion as by stipulating that the original agreement ‘con-
tinues in force.’ ’’ (Emphasis added; footnotes omitted.)
Id., § 29:33, p. 29-65. ‘‘In the absence of a clear provision
in the policy defining the nature of the renewal, some
courts regard the renewed or renewal contract as
though it were merely a continuation or extension of
the original contract. By this view, the renewal of a
policy continues it in force without interruption, and
the renewal certificate is simply a contract to continue
in force a preexisting policy of insurance.’’ (Footnotes
omitted.) Id., § 29:35, p. 29-68.
In California, ‘‘[t]he renewal of an insurance policy
constitutes a separate and distinct contract for the
period of time covered by the renewal and is not a
continuous contract ‘unless there is clear and unambig-
uous language showing the parties intended to enter
into one continuous contract.’ ’’ Charles Dunn Co. v.
Tudor Ins. Co., 308 Fed. Appx. 149, 151 (9th Cir. 2009),
quoting A.B.S. Clothing, supra, 34 Cal. App. 4th 1478.
In Charles Dunn Co., the United States Court of Appeals
for the Ninth Circuit found the existence of separate
and distinct contracts where the insurance company
‘‘issued separate policy documents for each renewal
policy and each renewal policy identified a separate
policy period.’’ Id. In A.B.S. Clothing, the California
Court of Appeal found that the policies at issue in that
case did not contain clear and unambiguous language
demonstrating an intent of the parties to enter into one
continuous contract. A.B.S. Clothing, supra, 1478. In
reaching that conclusion, the court first explained that
the issue before it was one of first impression in Califor-
nia and that ‘‘[c]ourts in other jurisdictions have gener-
ally held if coverage is based on a series of separate,
independent contracts, then the [insured] is entitled to
recover up to the limit of liability for each policy period
in which a loss occurs. On the other hand, if there
is but one continuous contract, then the [insured’s]
recovery cannot exceed the limit of liability stated in
the contract regardless of the number of years the cov-
erage has been in force, the number of policies issued
or the number of premiums the [insured] has paid.’’ Id.,
1473–74. The court further explained: ‘‘Over the years,
the rule has developed that a renewal of a fidelity policy
or bond constitutes a separate and distinct contract for
the period of time covered by such renewal unless it
appears to be the intention of the parties as evidenced
by the provisions thereof that such policy or bond and
the renewal thereof shall constitute one continuous
contract.’’ (Internal quotation marks omitted.) Id., 1476.
Because the insurer had issued separate policy docu-
ments, the court examined the provisions of the poli-
cies, finding that certain provisions were ambiguous
and did not demonstrate a clear and unambiguous intent
of the parties to enter into one continuous contract.
Id., 1480–83. In particular, the court found that ‘‘[t]he
issuance of separate policy documents, each of which
refers to terms, conditions and losses under that partic-
ular policy, is strong evidence the original policy and
the subsequent renewal policies were intended to be
separate and distinct contracts.’’ Id., 1484.
With this backdrop in mind, the question that we
must answer is whether it is clear from the language
of the policy renewal certificate and endorsement that
the parties intended to enter into one continuous con-
tract. With respect to Royal primary policy RLP 144014,
the record contains a ‘‘Renewal Certificate’’ dated
August 1, 1962. The certificate includes the same policy
number, ‘‘RLP 144014,’’ and indicates the name of the
insured as Rohr and the name of the insurer as ‘‘Royal
Indemnity [Company].’’ It provides as follows: ‘‘It is
hereby understood and agreed that the term of [the]
above policy is extended for a period of three years.
‘‘August 1, 1962 to August 1, 1965
‘‘It is further agreed that all coverages now provided
by the policy, with same insuring agreements, condi-
tions, exclusions and provisions of retrospective pre-
mium endorsement, continue in full force and effect.’’
(Emphasis added.) The certificate also contains the fol-
lowing provision: ‘‘This endorsement is issued for
attachment to and is hereby made a part of the policy
designated above, and is effective as of the date indi-
cated . . . .’’
We conclude from the language used in the August
1, 1962 renewal certificate that the parties intended for
the extension to be a part of one continuous contract.
First, the renewal certificate contains the same policy
number as the original policy, and no new policy docu-
ment was issued; the parties simply executed the
renewal certificate. The clear language of the renewal
certificate states that the ‘‘term’’ of Royal policy RLP
144014 is being ‘‘extended for a period of three years.’’
Moreover, the language that all coverages already pro-
vided by policy RLP 144014 ‘‘continue in full force and
effect’’ is indicative of an intent to continue in force
the preexisting policy of insurance. See 2 S. Plitt et al.,
supra, § 29:33, p. 29-65 (‘‘it has been held that the rule
that a renewal policy constitutes a separate and distinct
contract for the period of time covered by the renewal
does not apply where the extension agreement shows
a contrary intention as by stipulating that the original
agreement ‘continues in force’ ’’ (emphasis added)); see
also Grand Lodge of United Bros. of Friendship &
Sisters of Mysterious Ten v. Massachusetts Bonding &
Ins. Co., 324 Mo. 938, 952, 25 S.W.2d 783 (1930) (‘‘[t]he
words ‘continue in force’ as used in the continuation
certificate clearly indicate that it was the intention of
the parties to extend the duration or term of the original
bond and not to make a new contract’’). The word
continue is defined to mean ‘‘to maintain without inter-
ruption a condition, course, or action . . . to remain
in existence . . . .’’ Merriam-Webster’s Collegiate Dic-
tionary (10th Ed. 1998) p. 251. An unrestrained reading
of the language of the renewal certificate supports a
conclusion that Royal primary policy RLP 144014,
which was in effect from August 1, 1959, to August 1,
1962, was merely extended to cover the period from
August 1, 1962, to August 1, 1965, and that the renewal
constituted a continuation of the existing policy. It fol-
lows, therefore, that the insurer’s liability cannot
exceed that which is stated in the limit of liability of
the policy—$2 million—regardless of the number of
years the coverage has been in force.
With respect to Royal primary policy RTS 902235,
which was in effect from August 1, 1965, to August 1,
1968, the record contains an endorsement that identifies
the same policy number, the name of the insured as
Rohr and the name of the insurer as Royal Indemnity
Company. The endorsement contains the following pro-
vision: ‘‘This endorsement is issued for attachment to
and is hereby made a part of the policy designated
above, and is effective as of the date indicated . . . .’’
The endorsement provides: ‘‘It is agreed that the policy
is extended for a second three year term effective
August 1, 1968 to August 1, 1971 and that the deposit
is increased from $4,000.00 to $6,500.00. It is further
agreed that for the term from August 1, 1968 to August
1, 1969 the earned premium under this policy for cover-
age A, B and C will be determined on the basis of the
following rates . . . .’’ Although the language of the
endorsement differs slightly from that of the renewal
certificate for policy RLP 144014, in that the endorse-
ment states that the ‘‘policy is extended for a second
three year term’’; (emphasis added); whereas the
renewal certificate for policy RLP 144014 states that
‘‘the term of [the] above policy is extended for a period
of three years’’; (emphasis added); the end result is the
same in both circumstances: each policy was extended
for a three year period. See 2 A. Windt, Insurance
Claims & Disputes (6th Ed. 2013) § 6:48 (‘‘If extra years
of coverage are added to a policy, the insured will not
be entitled to a separate policy limit for each year
(unless the policy provides for a separate per year limit).
If the endorsement that provides extra years of cover-
age states that the policy term is being ‘extended,’ there
is still only one policy, not a new policy, for the
years added.’’).
As with policy RLP 144014, the extension of policy
RTS 902235 carries the same policy number, and no
separate policy document was executed, which has
been found to be indicative of an intent to have one
continuous contract, rather than separate contracts. Cf.
A.B.S. Clothing, supra, 34 Cal. App. 4th 1474, 1484; see
also Charles Dunn Co. v. Tudor Ins. Co., supra, 308
Fed. Appx. 151. Furthermore, the endorsement itself
states that it was ‘‘attach[ed] to’’ and ‘‘made a part of’’
the original policy, RTS 902235. Finally, and perhaps
most telling of an intent for the policy extensions to
be part of one continuous contract, rather than new
separate, independent contracts, is the fact that Royal
issued policy RLP 144014 in 1959 for an initial three
year period, which was extended to provide coverage
through August 1, 1965, when Royal issued policy RTS
902235. The fact that Royal issued a new separate pol-
icy, with a different policy number, in 1965, whereas it
had previously executed a renewal certificate extending
the policy period for the policy that previously had
been in place, further supports a determination that
the renewal certificate to policy RLP 144014 and the
endorsement to policy RTS 902235 merely extended
and continued those policies and did not create new,
separate contracts with separate policy limits.
In the present case, the trial court concluded that,
because ‘‘the policies unambiguously provide a per
occurrence limit that applies per policy period . . . the
Royal policies were in force for a total of four consecu-
tive policy periods, each providing $2 million in cover-
age per occurrence for a total of $8 million per occur-
rence for the years that the Royal policies were in
force.’’ In light of our review of the relevant law on this
issue, as well as the language of the renewal certificate
and the endorsement themselves, we cannot agree with
the trial court’s conclusion. We conclude that the
renewal and endorsement constituted continuations of
the original contracts; accordingly, the limit of the insur-
er’s liability is ‘‘the amount stated in the contract regard-
less of the number of years involved or number of
premiums paid.’’ A.B.S. Clothing, supra, 34 Cal. App.
4th 1476. Because the per occurrence limit of liability
in each policy is $2 million, Rohr is entitled to coverage
in the amount of $2 million per policy, for a total of $4
million, as we more fully discuss in the next part of
this opinion.
B
Horizontal Exhaustion of Primary Policies
Rohr next claims that the trial court erred in
determining that the underlying primary policies must
be horizontally exhausted before liability under the
excess policies may attach. In light of our determination
that the $2 million per occurrence limit of liability in
the Royal primary policies cannot be annualized and
that the extensions of the two Royal primary policies
did not result in additional per occurrence limits, the
limit of liability for each of the Royal primary policies,
which provide that an occurrence is ‘‘an event or contin-
uous or repeated exposure to conditions which unex-
pectedly cause injury or damage during the policy
period,’’ is $2 million. Thus, regardless of whether this
court finds that vertical or horizontal exhaustion must
be applied, at most, Rohr must exhaust $4 million of
the 1959–1971 Royal primary insurance coverage before
it can access certain of its excess policies. Because
Rohr settled with Arrowood with respect to those Royal
primary policies for an amount that exceeded $4 mil-
lion, Rohr can meet its exhaustion requirement for cer-
tain of its excess policies under either a vertical or
horizontal exhaustion application.
This court, nevertheless, must address the exhaustion
claims for the following reasons. First, this case
involves a number of different policies with different
exhaustion requirements, in that one of the Harbor
excess policies is an umbrella policy, which has differ-
ent provisions governing its applicability, some of the
policies are first layer excess policies and some, like
certain of the Federal and Century policies, are second
layer excess policies, to which different exhaustion
rules may apply. Thus, although Rohr may meet the
exhaustion requirement of some of the excess policies
regardless of whether a rule of vertical or horizontal
exhaustion applies, a determination of which rule
applies will have an effect on whether or when it can
meet the exhaustion requirements of certain of the
other policies. Second, the first phase of this litigation
before the trial court concerned the following question:
‘‘At what point will the obligations of the excess insur-
ers, if any, arise in light of the limits of the underlying
primary policy or policies?’’ For this court to determine
whether the trial court properly answered that question
for certain of the excess policies, we must first deter-
mine whether vertical or horizontal exhaustion applies.
Finally, under California law, each policy must be inter-
preted according to its terms. See Continental Ins. Co.
I, supra, 55 Cal. 4th 195 (fundamental goal of insurance
contract interpretation is to give effect to mutual intent
of parties, which should be inferred, if possible, solely
from written provisions of contract). Because of the
variation in the types of policies involved in these
appeals, as well as their exhaustion requirements, we
must examine the rules and case law governing vertical
and horizontal exhaustion and address whether the trial
court’s determination that a horizontal exhaustion
requirement applied here was proper.
Before we address the merits of this claim, we first
set forth our standard of review and the applicable law
on this issue. Because this claim concerns the interpre-
tation of an insurance contract, it involves a question
of law over which we must exercise de novo review.
See Chicago Title Ins. Co. v. Bristol Heights Associates,
LLC, supra, 142 Conn. App. 405; Nationwide Mutual
Ins. Co. v. Allen, supra, 83 Conn. App. 537. As this
court previously discussed, California courts apply the
continuous injury trigger of coverage and the all sums
plus stacking rules to long-tail environmental injury
claims like the one in the present case. Continental
Ins. Co. I, supra, 55 Cal. 4th 191, 201–202. Under those
rules, an insurer that is liable when continuous or pro-
gressively deteriorating property damage occurs
throughout several policy periods is obligated to pay
the insured all sums for the property damage, up to
the policy limits, ‘‘as long as some of the continuous
property damage occurred while each policy was ‘on
the loss’ ’’; id., 200; and when the ongoing environmental
damage triggers multiple policies across many policy
years, the insurance coverage from several policy peri-
ods may be stacked ‘‘to form one giant ‘uber-policy’
with a coverage limit equal to the sum of all purchased
insurance policies. Instead of treating a long-tail injury
as though it occurred in one policy period, this approach
treats all the triggered insurance as though it were pur-
chased in one policy period.’’ Id., 201.
 First, we examine and determine the applicability of
certain recent California case law on which the parties
rely in making their claims for and against a rule of
horizontal exhaustion.
1
Montrose II and Montrose III Decisions
In Montrose Chemical Corp. of California v. Supe-
rior Court, 14 Cal. App. 5th 1306, 1312, 222 Cal. Rptr.
3d 748 (2017) (Montrose II), rev’d, 9 Cal. 5th 215, 460
P.3d 1201, 260 Cal. Rptr. 3d 822 (2020), Montrose Chemi-
cal brought a declaratory judgment action seeking a
determination regarding the sequence in which it could
access its excess general comprehensive liability poli-
cies to cover its liability for certain environmental injur-
ies caused by its manufacturing of a pesticide. Specifi-
cally, Montrose Chemical sought a judgment declaring
that ‘‘it may ‘electively stack’ excess policies—i.e., that
it may access any excess policy issued in any policy
year so long as the lower lying policies for the same
policy year have been exhausted.’’ (Emphasis omitted.)
Id. The insurers in that case alleged that ‘‘well-estab-
lished California law and the language of the relevant
policies required Montrose [Chemical] to ‘exhaust cov-
erage from all underlying insurers in each of the trig-
gered policy periods, such that higher-level excess
insurers’ obligations are triggered only when all primary
and lower-level excess policies have been exhausted.’ ’’
(Emphasis in original.) Id., 1316–17. The trial court in
that case had concluded that, under the stacking
approach endorsed by the California Supreme Court
in Continental Ins. Co. I, supra, 55 Cal. 4th 186, ‘‘the
aggregate value of all underlying policies throughout
the duration of a continuous loss must be exhausted
before excess coverage is accessible to the insured’’;
(internal quotation marks omitted) Montrose II, supra,
1319; and that ‘‘the parties must employ a horizontal
exhaustion approach, whereby the aggregate limits of
underlying policies for the applicable policy periods
must first be exhausted before any excess policies incur
a duty to indemnify Montrose [Chemical] for its liabili-
ties . . . .’’ (Internal quotation marks omitted.) Id.,
1320.
On appeal in Montrose II, the California Court of
Appeal reversed in part the judgment of the trial court.
Although the Court of Appeal agreed with the trial court
that Montrose Chemical could not electively stack poli-
cies for a single coverage year and vertically exhaust
policies for that single year once the underlying policy
had been exhausted; id., 1321; it concluded that the
excess policies do not need to ‘‘be horizontally
exhausted at each coverage level and for each year
before higher-level policies may be accessed. Instead
. . . the sequence in which policies may be accessed
must be decided on a policy-by-policy basis, taking into
account the relevant provisions of each policy.’’
(Emphasis in original.) Id., 1312. Specifically, the court
explained that, ‘‘because there is tremendous variation
among the policies at issue, [it] decline[d] to adopt a
single exhaustion scheme that applie[d] to [Montrose
Chemical’s] entire coverage portfolio, and instead
direct[ed] that each policy be interpreted according to
its terms.’’ Id., 1321.
After the parties presented oral argument in the pres-
ent case, on April 6, 2020, the California Supreme Court
issued its decision in Montrose Chemical Corp. of Cali-
fornia v. Superior Court, 9 Cal. 5th 215, 460 P.3d 1201,
260 Cal. Rptr. 3d 822 (2020) (Montrose III).21 In Mon-
trose III, the California Supreme Court reversed the
judgment of the Court of Appeal in Montrose II and
concluded that ‘‘California law permits Montrose
[Chemical] to seek indemnification under any excess
policy once Montrose [Chemical] has exhausted the
underlying excess policies in the same policy period.
Montrose [Chemical] [was] 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.’’ Id., 238.
We must examine the basis for the court’s decision in
Montrose III before we can determine how that decision
applies, if at all, to the present case. The California
Supreme Court explained that the issue before it con-
cerned the sequence in which Montrose Chemical could
access certain excess insurance policies covering the
period from 1961 to 1985, during which Montrose Chem-
ical had obtained primary insurance and multiple layers
of excess insurance. Id., 222. The court noted that the
parties in that case were in agreement that the dispute
did not concern the exhaustion of Montrose Chemical’s
primary insurance. Id., 223. The language of each policy
at issue provided that Montrose Chemical was required
to exhaust the limits of its underlying insurance cover-
age before it could obtain coverage under the policy;
id.; and the excess policies also provided, in a number
of ways, that ‘‘ ‘other insurance’ must be exhausted
before the excess policy can be accessed.’’ Id., 224.
The parties’ disagreement concerned whether the other
insurance clauses required the exhaustion of other
insurance from other policy periods. Id., 225. Montrose
Chemical proposed a rule of ‘‘ ‘vertical exhaustion’ or
‘elective stacking,’ whereby it [could] access any excess
policy once it has exhausted other policies with lower
attachment points in the same policy period.’’ Id. In
contrast, the insurers argued for a rule of horizontal
exhaustion whereby an excess policy could be accessed
only after Montrose Chemical exhausted ‘‘other policies
with lower attachment points from every policy period
in which the environmental damage resulting in liability
occurred.’’ (Emphasis in original.) Id.
The California Supreme Court granted the petition for
review in Montrose III ’’to determine whether vertical
exhaustion or horizontal exhaustion is required when
continuous injury occurs over the course of multiple
policy periods for which an insured purchased multiple
layers of excess insurance’’; id., 226; and concluded that
‘‘a rule of vertical exhaustion is appropriate.’’ Id. In
explaining the basis for its decision, the court stated:
‘‘The parties’ dispute centers on the meaning of the
‘other insurance’ clauses in the excess insurance poli-
cies. These clauses provide, in a variety of ways, that
each policy shall be excess to other insurance available
to the insured, whether or not the other insurance is
specifically listed in the policy’s schedule of underlying
insurance. The insurers argue that these clauses call
for a rule of horizontal exhaustion because they restrict
indemnification from any excess policy until the insured
has exhausted all other available insurance—which, in
a case of long-tail injury, means every policy with a
lower attachment point from every policy period trig-
gered by the continuous injury.
‘‘Although the insurers’ interpretation is not an unrea-
sonable one, it is not the only possible interpretation
of the policy language. The ‘other insurance’ clauses at
issue clearly require exhaustion of underlying insur-
ance, but none clearly or explicitly states that Montrose
[Chemical] must exhaust insurance with lower attach-
ment points purchased for different policy periods.’’
(Emphasis in original; footnote omitted.) Id., 230. The
court concluded that the other insurance clauses did
‘‘not clearly specify whether a rule of horizontal or
vertical exhaustion applie[d]’’ and that, ‘‘in the absence
of any more persuasive indication that the parties
intended otherwise, the policies are most naturally read
to mean that Montrose [Chemical] may access its excess
insurance whenever it has exhausted the other directly
underlying excess insurance policies that were pur-
chased for the same policy period.’’ Id., 234. The court
further explained that ‘‘[a] rule of vertical exhaustion
does not restrict the insured from accessing excess
coverage from other policy periods if the terms and
conditions are otherwise met; it merely relieves the
insured of the obligation of establishing whether all of
the applicable terms and conditions at any given ‘layer’
of excess coverage are met before it accesses the next
‘layer’ of coverage.’’ (Emphasis in original.) Id., 235–36.
In its decision, the California Supreme Court noted
the parties’ reliance on Community Redevelopment
Agency v. Aetna Casualty & Surety Co., supra, 50 Cal.
App. 4th 329, but found that case to be distinguishable
for reasons that are important to the present case. Mon-
trose III, supra, 9 Cal. 5th 237. The court in Montrose III
explained: ‘‘In Community Redevelopment [Agency], a
primary insurer sought contribution from an excess
insurer for defense costs on behalf of the insured in a
case involving continuous loss. To resolve the conflict,
the court applied what it termed a ‘horizontal exhaus-
tion rule’; under that rule, the court held, an excess
insurer in a continuous injury case is not required ‘to
‘‘drop down’’ and provide a defense to a common
insured before the liability limits of all primary insurers
on the risk have been exhausted.’ . . . In adopting that
rule, the court explained: ‘Absent a provision in the
excess policy specifically describing and limiting the
underlying insurance, a horizontal exhaustion rule
should be applied in continuous loss cases because it
is most consistent with the principles enunciated in
Montrose [I, supra, 10 Cal. 4th 645]. . . . Under the
principle of horizontal exhaustion, all of the primary
policies must exhaust before any excess will have cov-
erage exposure.’ . . .
‘‘This case differs from Community Redevelopment
[Agency] in fundamental respects. This case, unlike
Community Redevelopment [Agency], is not a contribu-
tion action between primary and excess insurers; it is,
rather, a coverage dispute between excess insurers and
their insured. Regardless of whether Community Rede-
velopment [Agency] was correct to apply a rule of hori-
zontal exhaustion in that distinct context—a question
not presently before us—we are unpersuaded that the
reasoning of Montrose I requires us to apply a rule
of horizontal exhaustion that would limit [Montrose
Chemical’s] ability to access the excess insurance cov-
erage it has paid for.’’ (Citations omitted; emphasis in
original.) Montrose III, supra, 9 Cal. 5th 237. In fact, the
court in Montrose III specifically stated that, ‘‘[b]ecause
the question is not presented here, we do not decide
when or whether an insured may access excess policies
before all primary insurance covering all relevant policy
periods has been exhausted.’’ Id., 226 n.4.
Following the release of the decision in Montrose III,
this court ordered the parties in the present case to
file simultaneous supplemental briefs to address the
impact, if any, of Montrose III on the issues in the
pending appeals. In its supplemental brief, Rohr asserts
that, pursuant to Montrose III, the trial court’s decision
must be reversed. Although Rohr acknowledges that
Montrose III involved circumstances different from
those in the present case, in that the parties in Montrose
III stipulated that all of the primary insurance had been
exhausted and the issue in that case concerned whether
vertical or horizontal exhaustion applied to layers of
excess policies, Rohr claims that ‘‘the ‘all sums’ princi-
ples enunciated [in] Montrose III necessarily lead to
the same result here: vertical exhaustion of directly
underlying policies is all that is required for Rohr to
access its excess policies.’’ Rohr further claims that its
policies contain the ‘‘all sums’’ language and that ‘‘there
is no reason to distinguish primary policies from excess
policies based on [that] language’’; the reasonable
expectations of the parties are best satisfied by a rule of
vertical exhaustion; to the extent that ‘‘other insurance’’
provisions existed, there is no clear or explicit policy
language that requires the exhaustion of all underlying
insurance, including primary insurance, regardless of
the policy period, nor is there any indication in the
construction of other insurance provisions in Montrose
III suggesting that a different exhaustion rule applies
for primary policies; and Community Redevelopment
Agency is distinguishable because it involved a dispute
between insurers, whereas the present case involves a
dispute between an insured and its insurers.
In their supplemental brief, in contrast, the Continen-
tal plaintiffs raise a number of arguments essentially
asserting that Montrose III has no impact on our resolu-
tion of the issues in the present case. Specifically, the
Continental plaintiffs claim that because Montrose III
addressed only the sequence in which an insured may
access its excess policies where all primary insurance
had been exhausted, and because it did not address
or change the rule that all primary insurance must be
exhausted before the obligations of an insurer under a
general excess policy are triggered, it was neither bind-
ing nor persuasive authority and has no impact on the
issues before this court. They claim, therefore, that this
court should follow decisions of the California Courts
of Appeal that universally require horizontal exhaustion
of primary policies before liability of an excess insurer
attaches. We agree with the Continental plaintiffs.
The court in Montrose III specifically stated that it
was not addressing the issue decided in Community
Redevelopment Agency, which is similar to the issue
presently before this court—whether a horizontal
exhaustion rule requiring the exhaustion of all primary
policies before any excess insurance will attach should
be applied in continuous loss cases; Montrose III, supra,
9 Cal. 5th 237; and that it was not deciding ‘‘when or
whether an insured may access excess policies before
all primary insurance covering all relevant policy peri-
ods has been exhausted.’’ Id., 226 n.4. The parties in
Montrose III having stipulated that all primary insur-
ance had been exhausted, the dispute in that case con-
cerned the sequence in which certain excess policies
could be accessed, specifically, ‘‘whether vertical
exhaustion or horizontal exhaustion is required when
continuous injury occurs over the course of multiple
policy periods for which an insured purchased multiple
layers of excess insurance.’’ Id., 226. Thus, the court’s
application of a rule of vertical exhaustion under those
circumstances has no bearing on our determination of
the issue in the present case of whether the trial court
erred in determining that the underlying primary poli-
cies had to be horizontally exhausted before liability
under the excess policies could attach.
2
SantaFe Braun Decision
On July 13, 2020, the California Court of Appeal for
the First District issued its decision in SantaFe Braun,
Inc. v. Ins. Co. of North America, 52 Cal. App. 5th 19,
265 Cal. Rptr. 3d 692 (2020) (SantaFe Braun), review
denied, California Supreme Court, Docket No. S264060
(September 30, 2020). That case involved a declaratory
judgment action brought by an insured against its insur-
ers in which the insured sought to obtain coverage for
asbestos related claims under various excess liability
insurance policies. Id., 21. The trial court rendered judg-
ment in favor of the defendant excess insurers after
determining that SantaFe Braun, Inc. (Braun), had
failed to establish exhaustion of primary and certain
layers of underlying excess insurance. Id. Braun
claimed on appeal that the trial court improperly deter-
mined that the insurance policies at issue required the
exhaustion of all layers of underlying insurance,
namely, horizontal exhaustion, instead of requiring ver-
tical exhaustion of only those policies specified in each
excess policy. Id. During the pendency of the appeal in
SantaFe Braun, the California Supreme Court decided
Montrose III. In SantaFe Braun, the Court of Appeal
for the First District agreed with Braun, concluding
that, on the basis of ‘‘the reasoning in Montrose III . . .
the trial court erred in interpreting the policies at issue
in this case to require horizontal exhaustion of all pri-
mary and underlying excess insurance coverage before
accessing coverage under the excess policies at issue.’’
Id., 22.
On July 16, 2020, Rohr filed a notice with this court
of supplemental authority pursuant to Practice Book
§ 67-10, directing this court’s attention to the decision
in SantaFe Braun, claiming that it was relevant to the
arguments raised by Rohr on appeal. Thereafter, on
July 23, 2020, this court issued an order requiring ‘‘the
parties [to] file supplemental briefs of no more than
[ten] pages on or before August 7, 2020, to discuss the
impact, if any, of the opinion in [SantaFe Braun] on
previous holdings of the California Courts of Appeal,
including, but not limited to, that in Community Rede-
velopment Agency v. Aetna Casualty & Surety Co.,
[supra, 50 Cal. App. 4th 342] and [Continental Ins. Co.
II, supra, 15 Cal. App. 5th 1034] (‘It is settled under
California law that an excess or secondary policy does
not cover a loss, nor does any duty to defend the insured
arise, until all of the primary insurance has been
exhausted. . . . Under the principle of horizontal
exhaustion, all of the primary policies must exhaust
before any excess will have coverage exposure.’
(Emphasis omitted.)); and on Olympic Ins. Co. v.
Employers Surplus Lines Ins. Co., [supra, 126 Cal. App.
3d 600] (the principle that a secondary policy ‘does
not apply to cover a loss until the underlying primary
insurance has been exhausted . . . holds true even
where there is more underlying primary insurance than
contemplated by the terms of the secondary policy’).’’
Before we address the arguments raised in the par-
ties’ supplemental briefs, we must first set forth the
basis for the court’s decision in SantaFe Braun. At the
outset, the court in SantaFe Braun acknowledged that
the decision in Montrose III left unanswered the ques-
tion that was before the court in SantaFe Braun,
namely, ‘‘when the insured has incurred continuous
losses extending over the coverage periods in multiple
primary policies, whether all primary insurance cov-
ering all time periods must be exhausted (‘horizontally’)
before the first level excess policies are triggered, or,
as Braun contends, whether coverage under the excess
policies is triggered once the directly underlying pri-
mary policies specified in each excess policy is
exhausted (‘vertically’).’’ SantaFe Braun, supra, 52 Cal.
App. 5th 27. Nevertheless, the court based its decision
on the holding in Montrose III, stating: ‘‘Interpreting
the provisions of the excess policies to mean what the
Supreme Court in Montrose III held they mean will, in
the absence of explicit language to the contrary, require
the excess carriers to assume responsibility for defense
and indemnity once the directly underlying primary pol-
icies have been exhausted. Whatever the rights of the
excess carriers may be to contribution from primary
insurers whose policies do not directly underlie the
excess policy is a different question that is not now
before us, and on which we express no opinion. We
hold simply that (absent an explicit policy provision
to the contrary) the insured becomes entitled to the
coverage it purchased from the excess carriers once
the primary policies specified in the excess policy have
been exhausted.’’ Id., 29.
After noting the argument of the excess carriers con-
cerning the differences between primary and excess
policies, the court in SantaFe Braun rejected the argu-
ment that such differences compel a conclusion that
horizontal exhaustion of primary coverage is required
before excess coverage is triggered. Id., 28–29. The
court stated that ‘‘the differences between primary and
excess coverage hold true whether vertical or hori-
zontal exhaustion applies’’ and that they provide ‘‘little
justification for construing the policy language interpre-
ted in Montrose III differently simply because primary
coverage purchased often many years later for other
policy periods remains outstanding.’’ Id., 28. The court
in SantaFe Braun further stated: ‘‘Prior to the Supreme
Court’s decision in Montrose III, some appellate courts
concluded that in a continuing loss situation, an excess
insurer has no obligation ‘to ‘‘drop down’’ and provide
a defense to a common insured before the liability limits
of all primary insurers on the risk have been exhausted.’
. . . Community Redevelopment Agency v. Aetna
Casualty & Surety Co. [supra, 50 Cal. App. 4th 332];
see also Padilla [Construction] Co. v. Transportation
Ins. Co. [supra, 150 Cal. App. 4th 986] [‘California’s rule
of ‘‘horizontal exhaustion’’ in liability insurance law
requires all primary insurance to be exhausted before an
excess insurer must ‘‘drop down’’ to defend an insured,
including in cases of continuing loss.’]. . . . These
cases, however, rely on an interpretation of policy lan-
guage rejected by the [California] Supreme Court in
Montrose III. . . . While those cases hold, for example,
that ‘other insurance’ clauses preclude attachment of
coverage until there has been horizontal exhaustion,
Montrose III holds otherwise. Moreover, insofar as
Community Redevelopment [Agency] . . . addresses
the relative obligations as between the various insurers,
and not the excess insurer’s obligations to the insured,
it is distinguishable. While . . . Padilla [Construction
Co.] . . . involved an action by an insured seeking
declaratory relief against its excess insurer, the court’s
extension of Community Redevelopment [Agency] can
no longer be justified after Montrose III.’’ (Citations
omitted; emphasis in original.) SantaFe Braun, supra,
52 Cal. App. 5th 30.
In its second supplemental brief, Rohr claims that
the decision in SantaFe Braun ‘‘squarely addresses the
dispute over the exhaustion of primary policies raised
in this appeal . . . .’’ Specifically, Rohr claims that the
language of the policies at issue in SantaFe Braun is
nearly identical to that of the policies at issue in the
present case, that prior rulings of the Courts of Appeal
in California in Community Redevelopment Agency and
Olympic Ins. Co. are distinguishable because they con-
cerned claims between insurers, which Rohr alleges
have no relevance to direct claims between policyhold-
ers and their excess insurers, and that the differences
between primary and excess insurance do not justify
a horizontal exhaustion approach. Rohr further alleges
that, ‘‘in policyholder claims for coverage for long-tail
claims, California courts have consistently focused on
the construction of policy language rather than equita-
ble principles, and that distinction is critical in
determining the type of exhaustion to be applied.’’
Finally, Rohr alleges that Padilla Construction Co. is
no longer good law in light of SantaFe Braun.
In contrast, the Continental plaintiffs, along with Fed-
eral and Century, claim in their joint supplemental brief
that the decision in SantaFe Braun, a decision of the
Fourth Division of the First District Court of Appeal,
has no impact on the decisions by equal sister districts
or divisions of the California Courts of Appeal in Com-
munity Redevelopment Agency v. Aetna Casualty &
Surety Co., supra, 50 Cal. App. 4th 329 (Third Division of
Second District Court of Appeal), Padilla Construction
Co. v. Transportation Ins. Co., supra, 150 Cal. App. 4th
984 (Third Division of Fourth District Court of Appeal),
Continental Ins. Co. II, supra, 15 Cal. App. 5th 1017
(Second Division of Fourth District Court of Appeal),
and Olympic Ins. Co. v. Employers Surplus Lines Ins.
Co., supra, 126 Cal. App. 3d 593 (Third Division of First
District Court of Appeal). They point out that it is the
sole decision ‘‘by a division or district appellate court
within California to reject long-standing California juris-
prudence holding that all general primary policies must
first be exhausted before any excess policy may cover
the loss.’’ Specifically, they claim that SantaFe Braun
‘‘created a singularly minority rule inconsistent with
over forty years of California law and contrary to the
previous decisions of its sister California Court of
Appeal districts and divisions,’’ and that, ‘‘[u]nder Cali-
fornia procedural rules, SantaFe Braun is not binding
on any other California court [because] ‘a decision by
one court of appeal is not binding on other courts of
appeal. Thus, one district or division within a district
can refuse to follow a prior decision by a different
district or division.’ Precedential Effect of Appellate
Court Opinions, Cal. Prac. Guide Civ. App. & Writs Ch.
14-D; McCallum v. McCallum, 190 Cal. App. 3d 308,
315 n.4, 235 Cal. Rptr. 396 (1987).’’ Citing McCallum v.
McCallum, supra, 315 n.4, for the proposition that a
decision by one division does not overturn a separate
division’s decision, they further allege that Olympic
Ins. Co., a decision by the Third Division of the First
District, is also not impacted by SantaFe Braun. Finally,
they claim that Montrose III should not be applied
beyond its clear and specific holding, which did not
address the issue presented in the present case involv-
ing the exhaustion of primary insurance, and that San-
taFe Braun does not apply because the court in that
case did not analyze the interaction between stand-
alone other insurance provisions and ultimate net loss
provisions in the excess policies, which they claim
require horizontal exhaustion of all primary policies.
We agree with the Continental plaintiffs, Federal and
Century.
Under California law, ‘‘[a] decision of a court of
appeal is not binding in the courts of appeal. One district
or division may refuse to follow a prior decision of a
different district or division . . . .’’ (Internal quotation
marks omitted.) McCallum v. McCallum, supra, 190 Cal.
App. 3d 315 n.4; see also McGlothlen v. Dept. of Motor
Vehicles, 71 Cal. App. 3d 1005, 1017, 140 Cal. Rptr. 168
(1977); Swinerton & Walberg Co. v. City of Inglewood-
Los Angeles County Civic Center Authority, 40 Cal.
App. 3d 98, 101, 114 Cal. Rptr. 834 (1974); see also 9
B. Witkin, Cal. Procedure (3d Ed. 1985) Appeal, § 772,
pp. 740–41. Accordingly, we conclude that we are not
required to follow the decision of the First District Court
of Appeal in SantaFe Braun.22 Instead, we follow the
long line of California cases that adhere to the well
settled rule under California law that an excess policy
does not cover a loss until all primary insurance has
been exhausted. See McConnell v. Underwriters at
Lloyd’s of London, 56 Cal. 2d 637, 646, 365 P.2d 418,
16 Cal. Rptr. 362 (1961) (‘‘excess insurance does not
attach until all primary insurance has been exhausted’’);
Deere & Co. v. Allstate Ins. Co., 32 Cal. App. 5th 499,
516, 244 Cal. Rptr. 3d 100 (2019) (‘‘excess insurance
contracts do not respond to losses unless and until
there has been full and proper exhaustion of primary
insurance’’ (internal quotation marks omitted)), review
denied, California Supreme Court, Docket No. S255410
(June 12, 2019); North American Capacity Ins. Co. v.
Claremont Liability Ins. Co., 177 Cal. App. 4th 272,
293, 99 Cal. Rptr. 3d 225 (2009) (‘‘under the California
rule of ‘horizontal exhaustion,’ all primary insurance
must be exhausted before an excess carrier must ‘drop
down’ to defend an insured, particularly in cases of
continuing loss’’); Padilla Construction Co. v. Trans-
portation Ins. Co., supra, 150 Cal. App. 4th 986 (‘‘Califor-
nia’s rule of ‘horizontal exhaustion’ in liability insurance
law requires all primary insurance to be exhausted
before an excess insurer must ‘drop down’ to defend an
insured, including in cases of continuing loss’’); Carmel
Development Co. v. RLI Ins. Co., 126 Cal. App. 4th 502,
514, 24 Cal. Rptr. 3d 588 (2005) (‘‘[t]he inapplicability of
secondary coverage until exhaustion of primary limits
generally holds true even where there is more underly-
ing primary insurance than contemplated by the terms
of the secondary policy’’ (internal quotation marks omit-
ted)), review denied, California Supreme Court, Docket
No. S131568 (March 30, 2005); American Casualty Co.
v. General Star Indemnity Co., 125 Cal. App. 4th 1510,
1520, 24 Cal. Rptr. 3d 34 (2005) (excess carrier had no
liability under excess policy ‘‘until exhaustion of all
applicable primary policies’’); Travelers Casualty &
Surety Co. v. Transcontinental Ins. Co., supra, 122 Cal.
App. 4th 959 (referencing settled rule that excess policy
does not cover loss until all primary insurance has been
exhausted); Reliance National Indemnity Co. v. Gen-
eral Star Indemnity Co., 72 Cal. App. 4th 1063, 1076–77,
85 Cal. Rptr. 2d 627 (1999) (‘‘[t]he Courts of Appeal
have held [that] ‘[i]t is settled under California law that
an excess or secondary policy does not cover a loss,
nor does any duty to defend the insured arise until all of
the primary insurance has been exhausted’ ’’ (emphasis
omitted)); Fireman’s Fund Ins. Co. v. Maryland Casu-
alty Co., 65 Cal. App. 4th 1279, 1305, 77 Cal. Rptr. 2d
296 (1998) (‘‘true excess insurer—one that is solely and
explicitly an excess insurer providing only secondary
coverage—has no duty to defend or indemnify until all
the underlying primary coverage is exhausted’’); Com-
munity Redevelopment Agency v. Aetna Casualty &
Surety Co., supra, 50 Cal. App. 4th 340 (‘‘Absent a provi-
sion in the excess policy specifically describing and
limiting the underlying insurance, a horizontal exhaus-
tion rule should be applied in continuing loss cases
. . . . In other words, all of the primary policies in force
during the period of continuous loss will be deemed
primary policies to each of the excess policies covering
that same period. Under the principle of horizontal
exhaustion, all of the primary policies must exhaust
before any excess will have coverage exposure.’’
(Emphasis in original.)); Stonewall, supra, 46 Cal. App.
4th 1850 (‘‘‘[l]iability under a secondary [excess] policy
will not attach until all primary insurance is exhausted,
even if the total amount of primary insurance exceeds
the amount contemplated in the secondary policy’ ’’);
Hartford Accident & Indemnity Co. v. Superior Court,
23 Cal. App. 4th 1774, 1779, 29 Cal. Rptr. 2d 32 (1994)
(‘‘[l]iability under an excess policy attaches only after
all primary coverage has been exhausted’’ (internal quo-
tation marks omitted)); Diamond Heights Homeown-
ers Assn. v. National American Ins. Co., 227 Cal. App.
3d 563, 570, 277 Cal. Rptr. 906 (1991) (‘‘all primary or
underlying insurance must be exhausted before excess
coverage becomes effective’’), review denied, California
Supreme Court, Docket No. S019821 (May 16, 1991);
North River Ins. Co. v. American Home Assurance Co.,
supra, 210 Cal. App. 3d 112 (‘‘[l]iability under an excess
policy attaches only after all primary coverage has been
exhausted’’); Olympic Ins. Co. v. Employers Surplus
Lines Ins. Co., supra, 126 Cal. App. 3d 600 (‘‘A secondary
policy, by its terms, does not apply to cover a loss until
the underlying primary insurance has been exhausted.
This principle holds true even where there is more
underlying primary insurance than contemplated by the
terms of the secondary policy.’’).
The California Supreme Court stated its support for
this well settled rule of law in McConnell v. Underwrit-
ers at Lloyd’s of London, supra, 56 Cal. 2d 637. In that
case, the excess insurer alleged that, if the court deter-
mined that two primary policies covered the accident
at issue, then the liability of the excess insurer could
not attach until the combined limits of both of those
policies had been exhausted. Id., 646. The California
Supreme Court stated that that contention ‘‘appear[ed]
to be correct.’’ Id. The language of the excess policy at
issue in that case, which is similar to the language of
the policies at issue in the present case, provided that
liability ‘‘ ‘shall not attach unless and until the Primary
Insurers shall have admitted liability for the Primary
Limit or Limits, or unless and until the Assured has
by final judgment been adjudged to pay a sum which
exceeds such Primary Limit or Limits.’ Under such cir-
cumstances it is held that the excess insurance does
not attach until all primary insurance has been
exhausted.’’ Id. Furthermore, to the extent that one of
the primary insurers had become insolvent, the court
stated that ‘‘it is noted that insolvency of a primary
insurer gives rise to liability under the excess policy,
after, of course, any other primary coverage has been
exhausted.’’ Id. It is important to note that, although
McConnell did not involve a long-tail claim, the court,
at no point, limited its determination that all primary
coverage must be exhausted before liability of the
excess policy could attach to the primary coverage
stated in the excess policy only, as evidenced by its
reference to the exhaustion of ‘‘any other primary cover-
age . . . .’’ Id.
Accordingly, under the facts of the present case, we
disagree with Rohr’s claim that SantaFe Braun should
apply to the issue of whether horizontal exhaustion of
the primary policies is required.
3
California Case Law
Having determined that the California Supreme
Court’s application of a rule of vertical exhaustion to
excess policies in Montrose III has no bearing on our
determination of the issue in the present case of
whether the trial court erred in determining that the
underlying primary policies had to be horizontally
exhausted before liability under the excess policies
could attach, and also having determined that we are
not required to follow the decision of the First District
Court of Appeal in SantaFe Braun, we next look to
relevant California case law for guidance in our resolu-
tion of the issue concerning horizontal exhaustion of
primary policies in this case involving a continuous loss
claim. We conclude, on the basis of that case law, that
the trial court properly determined that horizontal
exhaustion of all primary insurance was required in the
present case.
The primary issue addressed by the California Court
of Appeal in Community Redevelopment Agency v.
Aetna Casualty & Surety Co., supra, 50 Cal. App. 4th
329, which is directly on point to the issue presented
in the present appeals, was ‘‘whether an excess insurer,
under policy provisions such as those presented [in that
case], has any obligation, in a continuing loss case, to
‘drop down’ and provide a defense to a common insured
before the liability limits of all primary insurers on the
risk have been exhausted.’’ (Emphasis in original.) Id.,
332. The court answered that question in the negative,
and its reasoning is relevant to our analysis of the issue
concerning horizontal exhaustion in the present case.
See id.
Community Redevelopment Agency involved a rede-
velopment project in the Los Angeles area in which
mass grading and filling was performed improperly,
resulting in building pads that were defective and dam-
aged, which, in turn, caused continuing damage to the
structures and improvements located thereon as a
result of the continual settling of the pads. Id., 333–34.
United Pacific Insurance Company (United) and State
Farm Fire and Casualty Insurance Company (State
Farm) had issued commercial general liability policies
that provided coverage for the related property damage
claims. Id., 334. Additionally, the developer had pur-
chased an umbrella policy from Scottsdale Insurance
Company (Scottsdale) that was specifically excess to
the State Farm policy, although not exclusively excess.
Id. Although State Farm’s liability limits had been
reached and exhausted, United’s limits had not been
exhausted. Id., 340. United argued that because Scotts-
dale’s policy expressly provided that it was excess to
the State Farm policy, Scottsdale’s duty to provide a
defense arose upon the exhaustion of State Farm’s lia-
bility limits. Id., 341.
The California Court of Appeal rejected United’s
claim that Scottsdale’s duty to provide a defense arose
upon the exhaustion of State Farm’s liability limits,
explaining that because the other provisions of the Scot-
tsdale policy do not limit coverage to only the excess
over the limits of the State Farm policy but, rather,
expressly extend coverage to ‘‘ ‘the applicable limits
of any other underlying insurance collectible by the
[insureds]’ . . . [t]he only reasonable interpretation of
this policy language is that the term ‘underlying insur-
ance’ must be read to include all available primary insur-
ance, not just the policy expressly listed on the schedule
of underlying insurance.’’ (Emphasis in original.) Id. In
reaching that conclusion, the court explained: ‘‘If an
excess policy states that it is excess over a specifically
described policy and will cover a claim when that spe-
cific primary policy is exhausted, such language is suffi-
ciently clear to overcome the usual presumption that
all primary coverage must be exhausted. However, that
is not the case here. As the quoted provisions of Scotts-
dale’s policy make clear . . . it was intended to be
excess to all underlying insurance, whether such insur-
ance was described in the schedule of underlying insur-
ance or not.’’ (Citation omitted; emphasis in original.)
Id., 340 n.6. The court further stated: ‘‘ ‘[W]e must con-
clude that when a policy which provides excess insur-
ance above a stated amount of primary insurance con-
tains provisions which make it also excess insurance
above all other insurance which contributes to the pay-
ment of the loss together with specifically stated pri-
mary insurance, such clause will be given effect as
written.’ . . . In other words, an excess insurer can
require in its policy that all primary insurance be first
exhausted. Consistent with the horizontal rule, that is
what Scottsdale effectively did in this case. Because
exhaustion of all available primary (or underlying)
insurance never occurred, Scottsdale’s duty, under the
terms of its policy, to ‘drop down’ and provide a defense
never arose.’’ (Citation omitted; emphasis in original.)
Id., 341; see also Peerless Casualty Co. v. Continental
Casualty Co., supra, 144 Cal. App. 2d 625; cf. Travelers
Casualty & Surety Co. v. Transcontinental Ins. Co.,
supra, 122 Cal. App. 4th 959 (concluding that, unlike
language of umbrella policy in Community Redevelop-
ment Agency, language of excess policy was ‘‘ ‘suffi-
ciently clear’ ’’ to trigger defense obligations of excess
insurer upon exhaustion of underlying insurance as
defined in policy, regardless of existence of other
insurance).
The court in Community Redevelopment Agency fur-
ther stated: ‘‘It is settled under California law that an
excess or secondary policy does not cover a loss, nor
does any duty to defend the insured arise, until all of
the primary insurance has been exhausted. . . . The
California general rule that all primary insurance must
be exhausted before a secondary insurer will have expo-
sure favors and results in what is called ‘horizontal
exhaustion.’ This is contrasted with ‘vertical exhaus-
tion’ where coverage attaches under an excess policy
when the limits of a specifically scheduled underlying
policy [are] exhausted and the language of the excess
policy provides that it shall be excess only to that spe-
cific underlying policy.
‘‘This is a particular problem in continuous loss cases,
such as the one before us. In such cases, primary liabil-
ity insurers may have exposure to defend (and perhaps
indemnify) claims arising before or after the effective
dates of such policies. As a result of the [California]
Supreme Court’s conclusion that a continuing or pro-
gressively deteriorating condition which causes damage
or injury throughout more than one policy period will
potentially be covered by all policies in effect during
those periods . . . the ‘horizontal exhaustion’ versus
‘vertical exhaustion’ issue will become an increasingly
common one to be resolved. . . . Absent a provision
in the excess policy specifically describing and lim-
iting the underlying insurance, a horizontal exhaustion
rule should be applied in continuous loss cases because
it is most consistent with the principles enunciated in
Montrose [I]. In other words, all of the primary policies
in force during the period of continuous loss will be
deemed primary policies to each of the excess policies
covering that same period. Under the principle of hori-
zontal exhaustion, all of the primary policies must
exhaust before any excess will have coverage expo-
sure.’’ (Citations omitted; emphasis in original; footnote
omitted.) Community Redevelopment Agency v. Aetna
Casualty & Surety Co., supra, 50 Cal. App. 4th 339–40.
Applying the principles of Community Redevelop-
ment Agency to the present case, we conclude that the
trial court properly applied a rule of horizontal exhaus-
tion.23 The Harbor and London excess policies similarly
define ultimate net loss to mean ‘‘the amount payable
in settlement of the liability of the Assured after making
deductions for all recoveries and for other valid and
collectible insurances . . . .’’ Where, as here, general
excess policies like the ones at issue in the present
case provide ‘‘excess insurance above a stated amount
of primary insurance [and] [contain] provisions which
make [them] also excess insurance above all other
insurance which contributes to the payment of the loss
together with the specifically stated primary insurance,
such clause[s] will be given effect as written.’’ Peerless
Casualty Co. v. Continental Casualty Co., supra, 144
Cal. App. 2d 625. For this court to ignore the plain
language of the excess policies making them excess to
‘‘other valid and collectible insurances,’’ in addition to
the specifically stated underlying policies, would be to
ignore the language of the contracts as written, which
is contrary to rules of insurance contract interpretation
under California law. See, e.g., La Jolla Beach & Tennis
Club, Inc. v. Industrial Indemnity Co., 9 Cal. 4th 27,
37, 884 P.2d 1048, 36 Cal. Rptr. 2d 100 (1994); see also
Travelers Casualty & Surety Co. v. Transcontinental
Ins. Co., supra, 122 Cal. App. 4th 955. We conclude,
therefore, that an examination of the policy provisions
at issue in the excess policies supports our decision
not to apply the rule of vertical exhaustion set forth in
SantaFe Braun. Instead, the rule of horizontal exhaus-
tion set forth in Community Redevelopment Agency
and the other California cases cited in part III B 2 of
this opinion should be applied in the circumstances of
the present case.
Rohr cites Continental Ins. Co. II, supra, 15 Cal. App.
5th 1017, in support of its claim that a rule of vertical
exhaustion should apply. In that case, the state of Cali-
fornia brought an action to recover from various insur-
ers for costs related to the cleanup of hazardous waste.
Id., 1022. Following a remand from the California
Supreme Court, the parties filed motions for summary
judgment concerning the issue of whether the policies
issued by Continental Insurance Company and Conti-
nental Casualty Company ‘‘attached immediately upon
exhaustion of the specified retention for the specified
policy period (vertical exhaustion) or only upon exhaus-
tion of all retentions across all policy periods (hori-
zontal exhaustion).’’ Id., 1026. The trial court ruled that
vertical exhaustion applied, and the Court of Appeal
agreed. Id.; see id., 1037. In reaching that conclusion,
the court found that Community Redevelopment
Agency was not controlling because it ‘‘involved true
primary policies’’; id., 1036; whereas, in Continental
Ins. Co. II, ‘‘the applicable policies were not neatly
divided into a primary level and an excess level. With
one negligible exception, all of the applicable policies
were excess to a retention.24 . . . Thus, no policy was
written as excess to any other specified policy . . . .’’
(Emphasis omitted; footnote added; footnote omitted.)
Id., 1034. The court further explained: ‘‘Community
[Redevelopment Agency] reasoned that a primary policy
is qualitatively different from an excess policy; the
defense and indemnity obligations under a primary pol-
icy are immediate, whereas under an excess policy,
they are merely contingent. Thus, an excess insurer
should not be required to defend or to indemnify as
long as any primary insurer is still sitting on its hands.
The same is not true of two insurers [that] have issued
policies that are excess to a retention. Their defense
and indemnity obligations are both contingent, and they
have priced their premiums accordingly. We cannot say,
from their relationship alone, that either one should
have to exhaust before the other is liable.’’ (Footnote
omitted.) Id., 1034–35; see also Montgomery Ward &
Co. v. Imperial Casualty & Indemnity Co., 81 Cal. App.
4th 356, 364, 97 Cal. Rptr. 2d 44 (2000) (self-insurance
retentions ‘‘are not primary insurance and the principle
of horizontal exhaustion does not apply’’). Accordingly,
the circumstances of Continental Ins. Co. II, in which
the court applied a rule of vertical exhaustion, do not
apply to the present case.
We conclude that the trial court did not err in
determining that Rohr was required to horizontally
exhaust all primary insurance before the liability of its
excess insurers could attach.
C
Exhaustion of Primary Policies
Rohr’s final claim related to the summary judgment
rendered in favor of the Continental plaintiffs is that
the trial court erred in concluding that actual payment
by Royal of its policy limits was required to exhaust
those policies in order for Rohr to be able to access
the excess policies of the Continental plaintiffs. Rohr’s
claim is based on the fact that the trial court, in its
memorandum of decision, stated that Arrowood had
‘‘paid less than [the] per occurrence limits of its policies
to Rohr. Because the limits have not been paid in full,
the exhaustion necessary before the Harbor and London
excess policies may be triggered remains unsatisfied.’’
(Emphasis added.) We disagree with Rohr.
In support of its claim, Rohr claims that a reversal of
the trial court’s judgment is required for three reasons.
First, Rohr claims that ‘‘the language of all of the Federal
and Century excess policies and one Continental
umbrella policy makes clear that actual payment of
underlying policies is not required. Instead, exhaustion
can be proved by evidence that the loss attributable to
a single occurrence is greater than the attachment point
of the excess policies—the subject of a future phase
of trial.25 Second, the remaining Continental policies and
Lloyd’s policies only require maintenance of underlying
primary policies during the ‘currency’ of the policy
term—meaning that once the policy term had expired,
Rohr was free to compromise the underlying policies
and fill any gap created by that compromise. Third, and
alternatively, Royal and all relevant underlying insurers
continue to be defendants in this litigation, subject to
contribution claims of other insurers. As such, the liabil-
ity of the Royal and other policies for coverage of the
underlying environmental claims can be determined in
this case, thereby fulfilling the exhaustion requirements
in the Continental and Lloyd’s policies.’’ (Footnote
added.)
In opposition to Rohr’s claim, the Continental plain-
tiffs allege that full payment by Royal of the limits of
the Royal primary policies is necessary for the excess
policies to respond. Specifically, they claim that the
trial court ‘‘correctly held that where excess policies,
like the Continental and London policies here, contain
language that states the policies will not attach until
the primary insurer has paid or been held liable to pay
the full underlying limit (the exhaustion clause), full
payment of the underlying primary policy by the pri-
mary insurer is required before the excess policy
responds.’’
Our analysis of this claim is guided by Qualcomm,
Inc. v. Certain Underwriters at Lloyd’s, London, supra,
161 Cal. App. 4th 184. In that case, the defendant excess
insurer had refused to pay under its excess policy after
Qualcomm, Inc. (Qualcomm), entered into a settlement
with its primary insurer over a coverage dispute related
to a class action lawsuit, which was for an amount
that was less than the $20 million limit of the primary
insurer’s policy. Id., 187–88, 189. Qualcomm filed an
appeal after the trial court ruled that the excess cover-
age had not been triggered. Id. Pursuant to the language
of the exhaustion provision in the limit of liability clause
of the excess policy, the excess insurer would be liable
‘‘only after the insurers under each of the Underlying
policies have paid or have been held liable to pay the
full amount of the Underlying Limit of Liability,’’ which
was $20 million under the primary policy. (Emphasis
in original; internal quotation marks omitted.) Id., 195.
The California Court of Appeal for the Fourth District
concluded that ‘‘the phrase ‘have paid . . . the full
amount [of $20 million]’ . . . cannot have any other
reasonable meaning than actual payment of no less than
the $20 million underlying limit.’’ Id. Moreover, with
respect to the language, ‘‘ ‘have been held liable to pay
the full amount of [$20 million]’ ’’; id., 196; the court
stated: ‘‘We need not decide whether the phrase ‘held
liable to pay’ is susceptible of more than one reasonable
meaning, because even assuming arguendo the phrase
is ambiguous and we interpret it in Qualcomm’s favor
to include responsibility for payment under a settlement
agreement, Qualcomm’s complaint does not indicate
(nor does Qualcomm argue) that the settlement
between it and [its primary insurer] required [the pri-
mary insurer] to accept responsibility or liability for
the full amount of the $20 million limit on the underly-
ing policy. Nor does the complaint plead that [the pri-
mary insurer] was obligated to pay $20 million pursuant
to a court order or judgment, which would plainly fall
within such policy language. By the term of the excess
policy requiring [the primary insurer] be ‘held liable to
pay’ the ‘full amount’ of the underlying limit before [the
excess insurer’s] liability attaches (even if it does not
actually pay . . .) [the excess insurer] is under no obli-
gation to provide excess coverage.’’ (Citation omitted;
emphasis in original; footnote omitted.) Id., 196-97.
Accordingly, the court in Qualcomm, Inc., concluded
that, pursuant to the plain and unambiguous language
of the excess policy, the defendant excess insurer’s
obligation did not arise because ‘‘the primary insurer
neither paid the ‘full amount’ of its liability limit nor
had it become legally obligated to pay the full amount
of the primary liability limit in the parties’ settlement
agreement.’’26 Id., 188; see also Span, Inc. v. Associated
International Ins. Co., 227 Cal. App. 3d 463, 468, 277
Cal. Rptr. 828 (1991) (language of excess policy was not
ambiguous where it required exhaustion of underlying
limit by payment before excess insured was required
to respond and, therefore, exhaustion by insolvency
of primary insurer was not sufficient), review denied,
California Supreme Court, Docket No. S019870 (April
25, 1991).
Pursuant to the attachment of liability clause in Har-
bor excess policy 102211, liability to pay under the
policy does not attach ‘‘unless and until the Primary
and Underlying Excess Insurers shall have admitted
liability for the Primary and Underlying Excess Limit(s)
or unless and until the Assured has by final judgment
been adjudged to pay an amount which exceeds such
Primary and Underlying Excess Limit(s) and then only
after the Primary and Underlying Excess Insurers have
paid or have been held liable to pay the full amount of
the Primary and Underlying Excess Limit(s).’’ With the
exception of the Harbor umbrella policy, the other Har-
bor excess policies at issue in these appeals contain
either identical or substantially similar language; see
footnotes 10 and 11 of this opinion; as do the London
excess policies. See footnote 12 of this opinion. There-
fore, in light of the plain language of the policies, the
trial court’s determination that payment of the full limits
of the primary policies was necessary for exhaustion
to be satisfied was proper. The court, however, never-
theless improperly determined that the necessary
exhaustion of the Royal primary policies remained
unsatisfied. This court has determined that the exhaus-
tion of all primary insurance is required before an
excess insurer is obligated to respond; see part III B
of this opinion; and that the Royal primary policies each
provide coverage of $2 million per occurrence for a
combined total of $4 million. See part III A of this
opinion. Because Rohr has entered into and received
payment pursuant to a settlement concerning the Royal
primary policies for an amount that exceeds $4 million,
under the circumstances here, exhaustion by payment
of the full amount of the limits of the Royal primary
policies has been satisfied.27 This determination applies
to the Harbor and London excess policies with two
noted distinctions. With respect to London policy
V20621, which was found to be specifically excess to
London policy V20620, the trial court found that policy
V20621 will be immediately triggered upon exhaustion
of policy V20620, but that because V20620 could not be
accessed prior to exhaustion of all primary policies,
which the court found could not take place, policy
V20621 likewise would be inaccessible. In light of our
determination of the liability limits of the Royal primary
policies and that, because the amount of the settlement
with and payment by Arrowood under those policies
exceeded their limits, exhaustion of those primary poli-
cies has been satisfied, we disagree with the trial court’s
conclusion regarding the inaccessibility of policy
V20621.28 Moreover, with respect to Harbor umbrella
policy 108909, the trial court again determined that no
liability under the umbrella policy could attach until
the underlying primary insurance has been exhausted
by payment of the liability limits. Given our determina-
tion regarding the exhaustion of the underlying insur-
ance, liability under the Harbor umbrella policy
attaches.
D
Conclusion
In summary, because Arrowood, as successor to
Royal, has paid Rohr more than the per occurrence
limits of its policies, the exhaustion requirement with
respect to the Royal primary policies has been satisfied.
Thus, the trial court’s conclusion that the excess poli-
cies of the Continental plaintiffs could never attach was
incorrect. Therefore, the trial court improperly granted
the motion for partial summary judgment filed by the
Continental plaintiffs and determined that they were
entitled to judgment as a matter of law. Instead, the
court should have granted the motion for summary
judgment filed by Rohr with respect to the Continen-
tal plaintiffs.
IV
FEDERAL’S MOTION FOR SUMMARY JUDGMENT
In its appeal in Docket No. AC 41537, Rohr challenges
the judgment of the trial court granting the motion for
summary judgment filed by Federal.29 We conclude that
the trial court properly granted Federal’s motion for
summary judgment.
In addressing Federal’s motion for summary judg-
ment, the trial court stated: ‘‘Federal issued three excess
policies to Rohr effective from August 1, 1982 through
August 1, 1985. Federal argues that, pursuant to the
principle of horizontal exhaustion, all policies in effect
during any part of the period of continuous loss poten-
tially are liable up to their limits. Federal reasons that
the present case involves claims of property damage
beginning in the 1940s and continuing past 1985, and
that the Royal policies and the Federal policies were
both on the risk for portions of that period. Accordingly,
it argues that all primary policies are deemed primary
to any excess policies covering any part of the period
of continuous loss. See Community Redevelopment
Agency v. Aetna Casualty & Surety Co., supra, 50 Cal.
App. 4th 339. Federal concludes that, accordingly,
although its policies were issued to cover later policy
periods than the Royal policies, they cannot be reached
until all primary policies have been exhausted.
‘‘In support of its assertion that all underlying policies
have not been exhausted, Federal relies on the fact that
Rohr entered into settlement agreements for less than
the full limits with Arrowood on the Royal primary
policies, and also with First State Insurance Company
(First State) and Twin City Fire Insurance Company
(Twin City),30 which issued excess policies directly
underlying the Federal policies during the August 1,
1982, to August 1, 1985 policy periods.
‘‘In its opposition, Rohr maintains that the Federal
policies do not require it to collect any specific amount
from any particular insurer as a condition to coverage,
and that the Federal policies are liable toward the loss
once Rohr’s damages meet the fixed attachment points
of the Federal excess policies. Additionally, Rohr argues
that Federal’s policies do not contain an exhaustion
provision or a provision requiring full payment from
any underlying policies before the Federal policies are
triggered. In the absence of such a provision, Rohr
asserts, settlement with underlying insurers does not
forfeit Rohr’s coverage under the Federal policies. In
such circumstances, Rohr asserts that it becomes ‘self-
insured’ for the loss until the amount of the claims
reach the Federal policies’ excess layer. Moreover, Rohr
argues that the Federal policies do not clearly and
unequivocally inform Rohr that they intend to be in
excess of all primary insurance and all excess insurance
and, accordingly, do not require horizontal exhaustion.’’
(Footnote added.)
On appeal, Federal and Century joined in and adopted
the brief filed by the Continental plaintiffs concerning
the issues of horizontal exhaustion and the lack of
exhaustion of the underlying policies. They also filed
a separate brief to address the legal issues related to
the excess policies they had issued between 1982 and
1986. Their specific arguments will be addressed sepa-
rately as they relate to each of the policies.
A
Federal Excess Policy 7936-07-90
We examine the provisions of the Federal excess
policies. With respect to Federal excess policy 7936-07-
90, the trial court stated: ‘‘The declarations applicable
to policy 7936-07-90 for the period August 1, 1982, to
August 1, 1983, identify it as an excess liability policy
providing $10 million in excess coverage above the
[Twin City] policy, which, in turn, provides $10 million
above an additional $40 million in other underlying
insurance. . . . The insuring agreement provides:
[T]he Company agrees to pay on behalf of the Insured
loss resulting from any occurrence Insured by the terms
and provisions of the First Underlying Insurance policy
scheduled in Item 6 of the Declarations . . . . The
insurance afforded by this policy shall apply only in
excess of and after all underlying insurance . . . has
been exhausted. . . . Underlying insurance is defined
to mean all policies scheduled in Item 6 . . . . The
Federal policy adopts and follows all the terms, condi-
tions and provisions of policy 103926 issued by Twin
City . . . .
‘‘The court concludes that there is a specific relation-
ship between the Federal and Twin City policies. This
conclusion is underscored by the fact that the Federal
policy adopts and follows the terms, conditions and
provisions of the Twin City policy. Accordingly, a natu-
ral, unrestrained reading of the language permits the
court to conclude that the Federal policy is specifically
excess to the Twin City policy.
‘‘The relevant provisions of the Twin City policy are
as follows:
‘‘Limits of Liability . . . The total liability of the
Company for all ultimate net loss as the result of any
one occurrence shall not exceed the limit of liability
stated [in] the declarations as applicable to each occur-
rence. . . . [T]he total liability of the Company for all
ultimate net loss because of . . . property damage to
which this policy applies . . . shall not exceed the limit
of liability stated in the declarations as aggregate . . . .
‘‘Ultimate Net Loss: The total of the following
amounts . . . (1) all sums which the insured . . .
shall become legally obligated to pay as damages,
whether by reason of adjudication or settlement,
because of . . . property damage . . . .
‘‘Other Insurance: The Insurance afforded by this pol-
icy shall be excess insurance over any other . . . Insur-
ance . . . available to the Insured, whether or not
described in the Schedule of Underlying Insurance Poli-
cies, and applicable to any part of ultimate net loss,
whether such other insurance is stated to be primary,
contributing, excess or contingent . . . .
‘‘The court previously concluded that horizontal
exhaustion of the primary policies is applicable to this
case in which continuing property damage has been
alleged across several decades, triggering multiple pol-
icy periods. The Royal [primary] policies, which are
considered primary to all excess policies, have not paid
their full limits. Additionally, the directly underlying
Twin City policy [insurer] has settled with the insured
for less than its full limits. The fact that the Federal
policy is specifically excess to, and follows, the Twin
City policy creates a sequential expectation as to when
the Federal policy pays its limits because the Federal
limits shall immediately follow the Twin City limits.
The Twin City policy’s other insurance clause provides,
however, that its coverage is excess over any other
valid and collectible insurance available to the insured.
Moreover, the terms of the Federal policy expressly
contemplate that a specified amount of coverage within
the policy period will be exhausted, including the limits
of the Twin City policy, before its own limits are
triggered.
‘‘Construing the terms of the Federal and Twin City
policies together and as a whole, the court acknowl-
edges that, although horizontal exhaustion generally is
being applied to the collective policy limits and policy
periods in this case, the specific relationship between
the Federal and Twin City policies would ordinarily
require a vertical allocation scheme between the two
policies, and the limits of the Federal policy would be
immediately triggered once Twin City paid its limits.
. . . In the present case, however, the court cannot
conclude that the limits of this Federal excess policy
are triggered, because the Twin City excess policy, and
the Royal primary policies, which settled for less than
their specified limits, constitute other valid insurance
collectible by the insured. Therefore, the plain terms
of the policies must be given effect as written. As an
excess insurance policy providing coverage above a
stated amount, the Federal policy must be considered
excess insurance above all other available insurance
. . . and cannot be expected to pay its limits until the
applicable limits of any other underlying insurance col-
lectible by the insured, including primary coverage
which is still available, have been paid.’’ (Citations omit-
ted; internal quotation marks omitted.)
Federal claims that, although ‘‘the trial court to some
degree fused the two distinct legal concepts on which
the judgments for Century and Federal were based—
and on which such judgments should be affirmed—any
shortcomings in the trial court’s analysis were ulti-
mately immaterial because the final judgments are fully
supported by the record.’’ Specifically, Federal claims
that ‘‘the fact that the trial court conflated the concept
that an excess policy can ‘follow form’ to underlying
policy terms and conditions with the concept that an
excess policy can ‘specifically follow’ an underlying
policy does not detract from the trial court’s ultimate
correct judgment for Federal.’’ Federal explains that its
1982–1983 policy is a general excess policy that cannot
be reached until ‘‘Rohr exhausts the $50 million in
scheduled limits directly underlying it,’’ and that,
because its policy ‘‘does not contain any language spe-
cifically identifying and limiting the underlying cover-
age,’’ it is excess over all of Rohr’s primary insurance.
(Emphasis in original.) Finally, Federal claims that its
excess policy cannot be reached in light of Rohr’s settle-
ment with Twin City for less than the limits of the Twin
City policy, and cites Qualcomm, Inc., in support of its
claim. In contrast, Rohr claims that, ‘‘[i]f the trial court
was correct in concluding that [the Federal 1982–1983
policy] was specific excess, then vertical exhaustion
should apply without regard to the existence of unex-
hausted policies in other years.’’
Pursuant to the plain terms of the 1982–1983 Federal
excess policy, Federal agreed to pay for loss resulting
to the insured from any occurrence insured by the terms
and provisions of the first underlying insurance policy—
the Twin City policy. The Federal policy further pro-
vides that its coverage applies only in excess of and after
the exhaustion of all underlying insurance as defined
in item 6 of the schedule, which refers to the Twin City
policy as the first underlying insurance policy and to
various other insurance policies on file with the com-
pany totaling $40 million, and does not specifically men-
tion the Royal primary policy. We need not decide
whether the Federal 1982–1983 policy is a general
excess policy or whether, as Federal claims, the trial
court conflated any concepts. Regardless of whether
the policy is specific or general excess, pursuant to
its plain language, Rohr must exhaust $50 million in
scheduled limits directly underlying the Federal policy
before the Federal policy provides coverage. Notwith-
standing our determination that the coverage limits of
the Royal primary policies have been exhausted, the
1982–1983 Federal policy lists the $10 million Twin City
policy as the first underlying insurance policy, with
$40 million in other underlying insurance that must be
exhausted for the insurer to cover a loss under the
policy. The Twin City policy and the Federal policy
constitute multiple layers of excess insurance, to which
a rule of vertical exhaustion applies. See Montrose III,
supra, 9 Cal. 5th 226. Thus, even if horizontal exhaustion
of all of the $40 million in underlying insurance has
occurred, exhaustion of the Twin City policy would still
be required before coverage under the Federal policy
attaches. Because Rohr has settled with Twin City, a
directly underlying excess insurer to the Federal 1982–
1983 policy, for less than the specified limits of the
Twin City policy, the requisite exhaustion has not
occurred. See Qualcomm, Inc. v. Certain Underwriters
at Lloyd’s, London, supra, 161 Cal. App. 4th 196–97.
Accordingly, the trial court properly rendered summary
judgment in Federal’s favor with respect to its 1982–
1983 excess policy.
B
Federal Excess Policies (84) 7936-07-90
And (85) 7936-07-90
With respect to Federal excess policies (84) 7936-07-
90 and (85) 7936-07-90, the trial court stated: ‘‘Unlike
Federal 7936-07-90, Federal policies (84) 7936-07-90 and
(85) 7936-07-90 do not follow form to a directly underly-
ing insurance policy; however, the insuring agreements
for both policies require that the first designated under-
lying insurance and all underlying insurance pay their
limits before the Federal policies pay their own limits.
Federal policy (84) 7936-07-90 provides $10 million in
excess coverage above the Twin City policy, which, in
turn, provides $10 million above an additional $40 mil-
lion in other underlying insurance. . . . The declara-
tions page for Federal policy (84) 7936-07-90 provides
that coverage ‘shall apply only in excess of and after
all underlying insurance (as scheduled in Item 6 of
the Declarations) has been exhausted.’ . . . Item 6 of
the Declarations identifies the Twin City policy as the
first underlying insurance, in addition to various other
underlying policies ‘on file with company.’ . . .
‘‘Federal policy (85) 7936-07-90 provides $10 million
in excess coverage above the First State policy, which
in turn provides $10 million excess coverage. . . . The
terms of Federal (85) 7936-07-90 include the same sub-
stantive language as Federal (84) 7936-07-90, except
that it identifies the First State policy as the first under-
lying insurance. . . .
‘‘Pursuant to their plain language, the court concludes
that Federal policy (84) 7936-07-90 and (85) 7936-07-90
are general excess policies. In this case, the terms of
the policies specify that coverage is intended to be ‘in
excess of and after all underlying insurance.’ The Royal
policies, which are considered primary to all excess
policies covering the claims, and the directly underlying
First State and Twin City excess policies, are ‘underly-
ing insurance.’
‘‘The terms of the Federal policies expressly contem-
plate that a specified amount of underlying coverage
will be exhausted, including the limits of the First State
and Twin City policies. These policies have not paid
their full limits, and, additionally, primary coverage
under the Royal policies also remains available to the
insured. The plain terms of the Federal policies must
be given effect as written. As excess insurance policies
providing coverage above a stated amount, the Federal
policies must be considered excess insurance above all
other available insurance . . . and cannot be expected
to pay their respective limits until the applicable limits
of any other underlying insurance, including primary
coverage, have been paid.’’ (Citations omitted; empha-
sis in original.) The court, thus, determined that Federal
demonstrated that it was entitled to summary judgment
in its favor.
For the same reasons we discussed with respect to
the Federal 1982–1983 policy, we conclude that the trial
court properly rendered summary judgment in favor of
Federal with respect to the 1984 and 1985 policies.
Regardless of whether horizontal exhaustion of all
underlying primary insurance has occurred, the exhaus-
tion of the first layer excess insurance policies—the
First State policy and the Twin City policy—is required
for coverage under these Federal policies to attach.
Because Rohr entered into a settlement with First State
and Twin City for less than the limits of their respective
policies, there can be no exhaustion through payment
of the limits of those policies. See Qualcomm, Inc. v.
Certain Underwriters at Lloyd’s, London, supra, 161
Cal. App. 4th 196–97.
Accordingly, the trial court properly granted Feder-
al’s motion for summary judgment.
V
CENTURY’S MOTION FOR SUMMARY JUDGMENT
In its appeal in Docket No. AC 41538, Rohr challenges
the judgment of the trial court granting the motion for
summary judgment filed by Century.31 We conclude that
the trial court properly granted Century’s motion for
summary judgment with respect to policy 00 73 01, but
should have denied the motion as to policies ZCX8459,
ZCX8609 and ZCX8634.
A
Century Excess Policy 00 73 01
The first of four policies issued by Century to Rohr
was policy 00 73 01. The trial court stated the following
with respect to this policy: ‘‘The declarations applicable
to policy 00 73 01 for the period August 1, 1984, to
August 1, 1985, identify it as a policy of excess insur-
ance, providing $5 million in excess coverage above
$25 million. . . . Item 3 of the declarations specifies
that the $5 million policy limit is in excess of limits
specified in item 2. Item 2 identifies the designated
underlying insurance as a First State insurance [policy]
with limits of $25 million excess of primary limits. . . .
The policy further provides: This is a policy of excess
insurance . . . . The insurance afforded by this Policy
shall follow that of the designated underlying insurance
. . . . Additionally, it provides that [t]his policy indem-
nifies the insured in accordance with the applicable
insuring agreements, conditions . . . of the designated
underlying insurance for excess loss . . . . The court
concludes that there is a specific relationship between
the Century and First State policies. This conclusion is
underscored by the fact that the Century policy shares
the same insuring agreements and conditions applicable
to the First State policy. The Century policy also plainly
provides that its coverage shall follow the First State
policy. Accordingly, a natural, unrestrained reading of
the policy leads the court to conclude that the Century
policy is specifically excess to the First State policy.
‘‘The relevant provisions of the First State policy are
as follows:
‘‘Underlying Limit-Retained Limit: The Company shall
be liable only for the ultimate net loss in excess of
the greater of the insured’s: (A) Underlying Limit—an
amount equal to the limits of liability indicated beside
the underlying insurance listed in the Schedule A of
underlying insurance, plus the applicable limits of any
other underlying insurance collectible by the insured
. . . .
‘‘Ultimate Net Loss: Means the sums paid as damages
in settlement of a claim or in satisfaction of a judgment
for which the insured is legally liable after making
deductions for all other recoveries, salvages and other
insurances whether recoverable or not, other than the
underlying insurance and excess insurance purchased
specifically to be in excess of this policy . . . .
‘‘Other Insurance: If other collectible insurance with
any other insurer is available to the insured covering
a loss covered hereunder . . . the insurance hereunder
shall be in excess of, and not contribute with such other
insurance. . . .
‘‘The court has already concluded that horizontal
exhaustion is applicable to this case in which continuing
property damage has been alleged across several
decades, triggering multiple policy periods. The Royal
policies, which are considered primary to all excess
policies, have not paid their full limits. Additionally, the
directly underlying First State policy has settled with
the insured for less than its full limits. The fact that the
Century policy is specifically excess to, and follows,
the First State policy creates a sequential expectation
as to when the Century policy pays its limits because
the Century limits shall immediately follow the First
State limits. The First State policy’s other insurance
clause provides, however, that coverage shall be in
excess of, and not contribute with other collectible
insurance. The First State policy’s underlying limit-
retained limit clause also requires the applicable limits
of any other underlying insurance collectible by the
insured to be paid before it will pay its own limits.
Moreover, the terms of the Century policy expressly
contemplate that a specified amount of coverage within
the policy period will be exhausted, including the limits
of the First State policy, before its own limits are
triggered.
‘‘Construing the terms of the Century and First State
policies together and as a whole, the court acknowl-
edges that, although horizontal exhaustion is being
applied as a general rule to the collective policy limits
and policy periods in this case, the specific relationship
between the Century and First State policies would
ordinarily require a vertical allocation scheme between
the two policies, and the limits of the Century policy
would be immediately triggered once First State paid
its limits. . . . In the present case, however, the court
cannot conclude that the limits of this Century excess
policy are triggered because the First State excess pol-
icy, and the Royal primary policies, which settled for
less than their specified limits, constituted other valid
insurance collectible by the insured. Therefore, the
plain terms of the policies must be given effect as writ-
ten. As an excess insurance policy providing coverage
above a stated amount, the Century policy must be
considered excess insurance above all other available
insurance . . . and cannot be expected to pay its limits
until the applicable limits of any other underlying insur-
ance collectible by the insured, including primary cover-
age which is still available, have been paid.’’ (Citations
omitted; emphasis in original; internal quotation
marks omitted.)
Although we disagree with the trial court’s conclusion
that the limits of the Royal primary policies have not
been exhausted, its decision rendering summary judg-
ment in favor of Century was nevertheless proper as
to this Century policy. Because the directly underlying
First State policy settled with the insured for less than
its full limits, the coverage provided under Century pol-
icy 00 73 01 has not been triggered.
B
Century Excess Policies ZCX8459,
ZCX8609 and ZCX8634
From the period of August 1, 1985, to August 1, 1986,
Century issued to Rohr three other excess policies that
were substantially similar in content. The trial court
concluded that those policies provided ‘‘three layers of
excess coverage: ZCX8459 providing $5 million in
excess coverage above $6.5 million; ZCX8609 providing
$2.5 million in excess coverage above $21.5 million;
ZCX8634 providing $2.5 million in excess coverage
above $26.5 million. All of these policies indemnify the
insured in accordance with the applicable insuring
agreements, exclusions, and conditions of the desig-
nated underlying insurance. The designated underlying
insurance is umbrella policy 15 71 09 issued by United
Insurance Company (United policy).’’ (Citation omitted;
internal quotation marks omitted.)
The court further stated: ‘‘The declarations of each
respective policy plainly state that it is a policy of excess
insurance and identifies the United policy as its desig-
nated underlying insurance. The Century policies
clearly follow form to the United policy, as noted by
the provision: The insurance afforded by this Policy
shall follow that of the designated underlying insurance.
. . . Accordingly, the court concludes that the Century
policies issued during this period are specifically excess
to the United policy.
‘‘In the section entitled, Retained Limit-Limit of Liabil-
ity, the United policy specifically limits its ultimate net
loss to the total of the applicable limits of the underlying
policies listed in Schedule A hereof, and the applicable
limits of any other insurance collectible by the
insured . . . .
‘‘The plain language of the Century excess policies
communicate the highly specific nature of each Century
policy’s relationship to a specifically identified underly-
ing policy. The Century excess policy language also
plainly provides that the limits are triggered once the
specifically identified underlying policy has paid its lim-
its. While the rule of horizontal exhaustion is generally
applicable to policies covering claims involving a con-
tinuous long-tail loss, the Century policies, pursuant
to their plain terms, are specific excess policies. This
interpretation results from a natural, unrestrained read-
ing of the terms, which provide that the Century limits
are triggered once the designated underlying insurance
pays its limits. In this circumstance, the language can
only be interpreted as requiring a vertical exhaustion
allocation scheme.
‘‘The Century excess policies, therefore, must pay
their limits immediately once the designated underlying
insurance policy pays its limits. The designated underly-
ing insurance policy, pursuant to its terms, is scheduled
to pay its limits after all other collectible insurance has
been paid to the insured. To the extent that the policies
called upon involve the same occurrences covered by
the Royal policies, the limits of the Century policies
have not been triggered, given that all underlying insur-
ance collectible by the insured has not been exhausted,
as previously discussed in this memorandum.’’ (Cita-
tions omitted; emphasis in original; internal quotation
marks omitted.)
Again, we disagree with the trial court’s conclusion
that, with respect to the Royal primary policies, exhaus-
tion of the underlying limits has not occurred. To the
extent that this case concerns the issue of the satisfac-
tion of the Royal primary policies, the trial court incor-
rectly determined that such satisfaction had not
occurred. Accordingly, the court improperly deter-
mined that Century was entitled to summary judgment
with respect to these policies because of the failure to
fully exhaust the Royal primary policies.32
VI
CROSS APPEAL
In their cross appeal, the Continental plaintiffs claim
that the trial court erred ‘‘when it held that the 1959 to
1971 Royal primary policies have per policy occurrence
limits of only $8 million despite the policies’ endorse-
ments, which provide that each of the four Royal pri-
mary policies have annual period per occurrence limits
that total $24 million . . . .’’ We disagree.
The arguments raised by the Continental plaintiffs in
their cross appeal are similar to the ones they raised
on direct appeal with respect to the issue of whether
the $2 million per occurrence limits in the Royal primary
policies may be annualized, which this court addressed
and rejected in part III A 1 of this opinion. In addressing
the annualization question in this opinion, we con-
cluded that ‘‘the per occurrence language of each Royal
primary policy provides coverage of up to $2 million
for an occurrence that takes place during the policy
period and not for each year of that policy period.’’
See part III A 1 of this opinion. We also rejected the
Continental plaintiffs’ reliance on Stonewall, supra, 46
Cal. App. 4th 1849, on which they also rely to support
their claim on the cross appeal. Specifically, we con-
cluded that because each Royal primary policy con-
tained one endorsement providing for a policy period
of three years and setting the limit of coverage at $2
million per occurrence, and because there is no lan-
guage in the Royal primary policies or their declarations
providing for coverage on a per occurrence, per year
basis, Stonewall is factually distinguishable from the
present case. We further concluded in part III A 2 of
this opinion that because the extensions of the Royal
primary policies did not provide additional per occur-
rence limits, the per occurrence limit of liability in each
policy is $2 million and, thus, Rohr is entitled to cover-
age in the amount of $2 million per policy, for a com-
bined total for the two policies of $4 million. In light
of those determinations, we reject the claim of the Con-
tinental plaintiffs in the cross appeal that the Royal
primary policies have annual period per occurrence
limits that total $24 million. Accordingly, the cross
appeal fails.
The judgment is reversed with respect to the granting
of partial summary judgment in favor of the Continental
plaintiffs, the granting of summary judgment in favor
of Century with respect to policies ZCX8459, ZCX8609
and ZCX8634, and the denial of Rohr’s motion for sum-
mary judgment with respect to the Continental plain-
tiffs, and the case is remanded with direction to deny the
motions for summary judgment filed by the Continental
plaintiffs and by Century with respect to policies
ZCX8459, ZCX8609 and ZCX8634, and to grant Rohr’s
motion for summary judgment with respect to the Conti-
nental plaintiffs and for further proceedings thereon;
the judgment is affirmed in all other respects.
In this opinion the other judges concurred.
* The listing of judges reflects their seniority status on this court as of
the date of oral argument.
1
In this opinion, we refer to Continental, Lloyd’s and the London insurers
individually by name where necessary and collectively as the Continental
plaintiffs.
2
The environmental claims involve seven sites located in California (Chula
Vista, Riverside, Agricultural Park, Casmalia Resources Hazardous Waste
Facility, BKK Landfill, Basin By-Product and Gibson Environment) and one
site located in Missouri known as Hayford Bridge.
3
Although only two of the Royal primary policies are at issue in these
appeals, paragraph 235 of the plaintiffs’ complaint identifies six policies
issued to Rohr by Arrowood, as successor to Royal. The additional four
policies are RTS 902220, PLX 120077, RTS 902223, and PTS 902224.
4
The plaintiffs are Continental; Lloyd’s; Berkshire Hathaway Direct Insur-
ance Company, formerly known as American Centennial Insurance Com-
pany; Berkshire Hathaway Specialty Insurance Company, formerly known
as Stonewall Insurance Company; Ocean Marine, as successor to certain
policies subscribed to by Commercial Union Assurance Company PLC and/
or General Accident Fire & Marine Life Assurance Corporation; Scottish
Lion; Winterthur Swiss Insurance Corporation, Ltd.; Tenecom, formerly
known as Yasuda Insurance Company; Nissan Fire & Marine Insurance
Company, Ltd.; NRG N.V.; and Republic Insurance Company.
5
The defendants are Rohr; Hartford Accident & Indemnity Company;
Transport Insurance Company; Arrowood; First Charter Insurance Com-
pany, as successor in interest to Transportation Insurance, Ltd.; Allianz
Underwriters Insurance Company; Allstate Insurance Company, as succes-
sor in interest to Northbrook Excess & Surplus Insurance Company; Chicago
Insurance Company; Employers Mutual Casualty Company; Federal; Fire-
man’s Fund Insurance Company; Westport Insurance Corporation, as succes-
sor in interest to Puritan Insurance Company; Tudor Insurance Company;
United Insurance Company; Twin City Fire Insurance Company; First State
Insurance Company; Century; and Middlesex Insurance Company.
6
Pursuant to paragraph 37 of their complaint, the plaintiffs alleged that
the trial court had ‘‘jurisdiction over this matter pursuant to . . . General
Statutes §[§] 52-59b and . . . 33-929 because, on information and belief,
each of the parties transacts and does business in Connecticut and/or seeks
the performance of the insurance contracts in Connecticut,’’ and that the
court had ‘‘authority to provide the declaratory relief requested pursuant
to . . . General Statutes § 52-29 and . . . Practice Book [§§] 17-54 and
17-55.’’
7
After the plaintiffs commenced this action, Federal and Century each
filed thirty-two special defenses as well as cross claims against Rohr, to
which Rohr filed special defenses. Rohr also filed special defenses in
response to the complaint as well as a counterclaim against certain of
the plaintiffs, including Continental; Lloyd’s; Berkshire Hathaway Specialty
Insurance Company, formerly known as Stonewall Insurance Company;
Ocean Marine; Winterthur Swiss Insurance Corporation, Ltd.; Tenecom,
formerly known as Yasuda Insurance Company; Nissan Fire & Marine Insur-
ance Company, Ltd.; NRG N.V.; and Scottish Lion. Additionally, Rohr filed
a cross claim against certain of the defendant insurers, and the counterclaim
and cross claim defendants filed special defenses in response to Rohr’s
cross claim and counterclaim.
8
In accordance with motions to seal filed by the parties, and after a
hearing held thereon, the court, on April 5, 2017, ordered sealed, pursuant
to Practice Book § 11-20A, certain documents that reflected the dollar
amount and terms of the settlement, finding that ‘‘[t]he unredacted docu-
ments subject to [the] motion[s] to seal contain confidential settlement
information’’ and that ‘‘[t]he privacy interests of certain of the parties to
[the] litigation concerning the information in the unredacted documents
overrides the public’s interest in viewing the material.’’ The documents that
are subject to the order to seal include the memorandum in support of the
motion for partial summary judgment filed by the Continental plaintiffs,
Federal’s memorandum in support of its joinder motion for summary judg-
ment, Century’s memorandum in support of its joinder motion for summary
judgment, Rohr’s memorandum in opposition to the motion for partial sum-
mary judgment filed by the Continental plaintiffs, Rohr’s opposition to the
joinder motions for summary judgment filed by Federal and Century, and
the memorandum in opposition to Rohr’s motion for summary judgment
filed by the Continental plaintiffs. Subsequently, the documents in question
were refiled with redactions concerning the information that is subject to
the sealing order.
9
The court also explained its use of the term ‘‘trigger of coverage’’: ‘‘In
the third party liability insurance context, ‘trigger of coverage’ has been
used by insureds and insurers alike to denote the circumstances that activate
the insurer’s defense and indemnity obligations under the policy. The term
‘trigger of coverage’ should not be misunderstood as a doctrine to be auto-
matically invoked by a court to conclusively establish coverage in certain
categories of cases, or under certain types of policies. The word ‘trigger’ is
not found in the [comprehensive general liability] policies themselves, nor
does the [California] Insurance Code enumerate or define ‘trigger of cover-
age.’ Instead, ‘trigger of coverage’ is a term of convenience used to describe
that which, under the specific terms of an insurance policy, must happen
in the policy period in order for the potential of coverage to arise. The issue
is largely one of timing—what must take place within the policy’s effective
dates for the potential of coverage to be ‘triggered’? Whether coverage is
ultimately established in any given case may depend on the consideration
of many additional factors, including the existence of express conditions
or exclusions in the particular contract of insurance under scrutiny, the
availability of certain defenses that might defeat coverage, and a determina-
tion of whether the facts of the case will support a finding of coverage.’’
(Emphasis omitted.) Montrose I, supra, 10 Cal. 4th 655 n.2.
10
Paragraph 101 of the complaint alleges that Harbor issued thirteen
excess comprehensive liability policies to Rohr. In support of their motion
for partial summary judgment, the Continental plaintiffs submitted the affida-
vit of Kelly M. Wolfe, an associate with the law firm that represents the
Continental plaintiffs. In her affidavit, Wolfe references seven of those poli-
cies that were in effect at various times between 1964 and 1971, which
include policies 102211, 103152, 106597, 103633, 108053, 108908, and 108909.
With the exception of the Harbor umbrella policy 108909, the six Harbor
excess policies contain substantially the same terms and conditions, and
the trial court found that ‘‘the slight differences between individual policies
[were] of no significance.’’ For convenience, we discuss policy 102211 and
set forth key provisions and language that it has in common with the other
policies. The trial court, in rendering its judgment, examined those policies
contained in the trial court record, and we do the same. We also note that
each of the Harbor excess policies that became effective January 1, 1971,
or later contain a provision that excludes from coverage ‘‘any loss arising
out of contamination or pollution.’’ Accordingly, we limit our discussion to
those policies in effect prior to January 1, 1971.
11
Harbor excess policy 103152, which was in effect from August 1, 1965,
to August 1, 1968, contained similar coverage limits, terms, definitions and
conditions, as did Harbor excess policy 103633, which provided $5 million
in coverage limits per occurrence and in the aggregate, and was effective
February 26, 1966, to August 1, 1969. Harbor excess policy 103633 was
excess to Harbor excess policies 103152 (until March 14, 1968) and 106597
(from March 14, 1968), and it was also excess to Royal primary policy RLP
144014. Furthermore, Harbor excess policy 108053, effective August 1, 1969,
to December 1, 1969, and policy 108908, effective December 1, 1969, to June
1, 1973, both contained coverage limits up to $5 million per occurrence and
in the aggregate, and contained terms that were substantially similar to the
other Harbor excess policies. Finally, Harbor issued umbrella policy 108909,
which was in effect from December 1, 1969, to June 1, 1973, provided
coverage in the amount of $3 million per occurrence and in the aggregate,
and was in excess to Harbor excess policy 108908 and to Royal primary
policy RTS 902235. We discuss Harbor umbrella policy 108909 separately
from the other Harbor excess policies. See parts II C and III C of this opinion.
12
The Continental plaintiffs submitted an affidavit of Kelly M. Wolfe, an
associate with the law firm that represents the Continental plaintiffs. In her
affidavit, Wolfe references six of those policies that were in effect from
1966 to 1969, including policies V20620, V20621, V20622, V23801, V23802
and Certificate LA 41019, all of which contain substantially similar terms
and conditions, except for policy V20621. The trial court, in rendering its
judgment, examined those policies contained in the trial court record, and
we do the same. See also parts II B 3 and III C of this opinion.
13
See London excess policies V20620, V20622, V23801, V23802 and London
Certificate LA 41019.
14
The Continental plaintiffs cite Peerless for the rule that, ‘‘when a policy
which provides excess insurance above a stated amount of primary insur-
ance contains provisions . . . which make it also excess insurance above
all other insurance which contributes to the payment of the loss together
with the specifically stated primary insurance, such clause will be given
effect as written.’’ Peerless Casualty Co. v. Continental Casualty Co., supra,
144 Cal. App. 2d 626.
15
Harbor excess policies 102211, 103152, 106597, 103633, and 108053,
and London excess policies V20620, V20622, V23801, V23802 and London
certificate LA 41019 include schedules and endorsements that refer to Royal
primary policy RLP 144014 as an underlying primary insurance policy. Harbor
excess policy 108908 refers to Royal primary policy RTS 902235 as an
underlying primary insurance policy, and London policy V20621 references
‘‘Royal Indemnity Company’’ as a primary insurer, along with three other
primary insurers.
16
The trial court found one exception—London excess policy V20621—
to its conclusion that the Harbor and London excess policies were general
excess policies. Specifically, the court stated: ‘‘Policy V20621 was ‘subscribed
to on the same terms, conditions, definitions and exclusions applicable to
London . . . policy V20620.’ . . . London . . . V20621 sits directly above
London . . . V20620 in the coverage ‘tower.’ The language of London . . .
V20621 plainly provides that this particular excess policy attaches to and
forms part of London . . . V20620. . . .
‘‘This language specifically describes the relationship between policies
V20620 and V20621, and sufficiently overcomes the general presumption
that all underlying insurance must be exhausted before V20621 responds to
the claim. See Community Redevelopment Agency v. Aetna Casualty &
Surety Co., supra, 50 Cal. App. 4th 340 n.6. Instead, the language permits a
natural conclusion that it is the intention of the parties for these two specific
policies to be linked in such a manner so as to form one policy. Accordingly,
the court concludes that London . . . V20621 is specifically excess to Lon-
don . . . V20620, and the policy limits provided under London . . . V20621
will be immediately triggered in accordance with its terms and upon exhaus-
tion of London . . . V20620. Nevertheless, because V20620 itself, as pre-
viously concluded, cannot be exhausted or even accessed prior to exhaustion
of all primary policies, V20621 will likewise be inaccessible prior to the
exhaustion of all primary policies.’’ (Citations omitted.) Although we agree
that policy V20621 is specifically excess to policy V20620, we address the
exhaustion issue and whether policy V20620 can be accessed in parts III A
and C of this opinion.
17
See footnote 8 of this opinion.
18
The trial court did not make a determination regarding the number of
occurrences at issue in this case. The court stated: ‘‘The court reaches no
conclusion as to the number of occurrences at issue, and the record is
insufficient at this time for a definitive determination of that question. Never-
theless, the court concludes, for the reasons that follow, that the Royal
policies have not been exhausted, regardless of the number of occurrences
at issue. . . . Accordingly, regardless of whether the case involves one
occurrence, which would limit coverage under the policies to $8 million,
or several occurrences, for which coverage, under the per occurrence and
annual aggregate limits, might be as much as $24 million, the settlement
amount did not exhaust the Royal policies.’’
19
The court, however, found that the aggregate limits could be annualized.
Specifically, the court found that because the aggregate limits under the
Royal primary policies were triggered for each annual term that those poli-
cies were in effect, and because those policies provided ‘‘aggregate limits
of $2 million for each of twelve annual terms, the total coverage potentially
available in the aggregate under the Royal policies [was] $24 million.’’
20
We disagree with the Continental plaintiffs with respect to this claim.
Nowhere in A.B.S. Clothing did the court state that the only situation in
which an extension would not constitute a new policy with a new contract
period would be a circumstance in which the policy was continued indefi-
nitely. Rather, the court merely stated, as an example of a continuous
contract, a contract that includes terms establishing an intention that the
policy be continued indefinitely. A.B.S. Clothing, supra, 34 Cal. App. 4th
1476. If that were a prerequisite to finding the existence of one continuous
contract, the court would not have had to examine the policy provisions
for ambiguity, as the policies at issue in that case had specific beginning
and ending dates of coverage. See id., 1481.
21
The decision, as modified, was published on May 27, 2020.
22
Moreover, we find SantaFe Braun distinguishable for another reason
as well. Despite the fact that the California Supreme Court in Montrose III
clearly stated that its holding did not address the issue of ‘‘when or whether
an insured may access excess policies before all primary insurance covering
all relevant policy periods has been exhausted’’; Montrose III, supra, 9 Cal.
5th 226 n.4; the court in SantaFe Braun nevertheless rendered its decision
on the basis of Montrose III, concluding that it was compelled by the decision
in Montrose III to find that all primary insurance covering all time periods
did not need to be horizontally exhausted before the first level excess
policies could be triggered. SantaFe Braun, supra, 52 Cal. App. 5th 28–30.
As we have stated previously in this opinion, the application by the California
Supreme Court of a rule of vertical exhaustion under the circumstances
present in Montrose III has no bearing on our determination of the issue
in the present case of whether the trial court erred in determining that the
underlying primary policies had to be horizontally exhausted before liability
under the excess policies could attach. We, thus, necessarily disagree with
the decision of the court in SantaFe Braun that Montrose III governed its
determination of the issue before it concerning the exhaustion of primary
insurance, as opposed to the exhaustion of multiple layers of excess policies,
which was at issue in Montrose III.
23
We note that Rohr attempts to distinguish Community Redevelopment
Agency on the ground that it involved a dispute between insurers. Specifi-
cally, Rohr alleges that ‘‘this case involves a dispute between Rohr and its
insurers and, when a policyholder is involved, the priority must be on
providing the policyholder with access to the excess insurance coverage
it has paid for. Community Redevelopment [Agency], a dispute between
insurers, is inapplicable here.’’ Related to its attempt to distinguish Commu-
nity Redevelopment Agency, Rohr also asserts that the differences between
excess and primary insurance do not compel a conclusion supporting a rule
of horizontal exhaustion. We are not persuaded by either claim, especially
given that the application of a rule of horizontal exhaustion will not deprive
Rohr of access to its excess insurance from the Continental plaintiffs.
24
In Continental Ins. Co. II, supra, 15 Cal. App. 5th 1030, the court
explained that ‘‘[m]ost excess policies are written as excess to a specified
primary policy. Alternatively, however, a policy may be written as excess
to an insured’s retention. The term retention . . . refers to a specific sum
or percentage of loss that is the insured’s initial responsibility and must be
satisfied before there is any coverage under the policy.’’ (Internal quotation
marks omitted.)
25
We address the summary judgment rendered in favor of Federal and
Century separately in this opinion. See parts IV and V of this opinion, respec-
tively.
26
The court in Qualcomm, Inc. v. Certain Underwriters at Lloyd’s, Lon-
don, supra, 161 Cal. App. 4th 204, also rejected Qualcomm’s claim that the
public policy of promoting settlement compelled the conclusion that the
defendant excess insurer was obligated to pay, even if the obligation contra-
vened the language of the policy. The court stated: ‘‘Whatever merit there
may be to conflicting social and economic considerations, they have nothing
whatsoever to do with our interpretation of the unambiguous contractual
terms. . . . If contractual language in an insurance contract is clear and
unambiguous, it governs, and we do not rewrite it for any purpose. . . .
Our conclusion is consistent with the authority on which Qualcomm relies,
Signal [Cos.] v. Harbor Ins. Co., [27 Cal. 3d 359, 365–67, 612 P.2d 889, 165
Cal. Rptr. 799 (1980)], in which the California Supreme Court found no
compelling equitable consideration to impose an obligation on an excess
carrier, contrary to the language of its excess policy, to reimburse a primary
carrier for defense costs where those costs were incurred before exhaustion
of the primary policy limits. . . . The court expressly decline[d] to formu-
late a definitive rule applicable in every case in light of varying equitable
considerations which may arise, and which may affect the insured and the
primary and excess carriers, and which depend upon the particular policies
of insurance, the nature of the claim made, and the relation of the insured
to the insurers. . . . Taking Signal’s lead, we affirm the judgment based
on the excess policy language and underlying circumstances of this particu-
lar case.’’ (Citations omitted; internal quotation marks omitted.) Qualcomm,
Inc. v. Certain Underwriters at Lloyd’s, London, supra, 204.
27
The trial court noted that it made ‘‘no determination at [that] time that
the primary policies are the only policies that must be exhausted before
the Harbor and London policies will provide coverage. As previously noted,
some of the policies may have other levels of coverage intervening between
them and the primary policies. The present motions, however, seek only a
determination of whether coverage under the Harbor and London policies
is unavailable because the primary policies have not been exhausted.
Accordingly, the court is not called upon at this time to determine whether
any additional policies within Rohr’s insurance coverage portfolio must also
be exhausted before coverage is available under the Harbor and London
policies.’’ (Emphasis in original.)
28
We further note that London policy V20621 lists Royal Indemnity Com-
pany as one of four primary insurers under the policy. See footnote 15 of
this opinion. Our determination that the exhaustion requirement has been
satisfied is limited to the exhaustion of the Royal primary policies only. See
footnote 27 of this opinion.
29
Rohr raises the same claims on appeal concerning the granting of the
motions for summary judgment filed by Federal and Century as it does with
respect to the granting of the Continental plaintiffs’ motion for summary
judgment, namely, that the trial court erred in concluding that (1) the Royal
primary policies provided per occurrence limits in the amount of $8 million,
(2) the underlying primary insurance policies had to be horizontally
exhausted before any excess policies could attach to provide coverage, and
(3) Rohr was required to be paid the $8 million policy limit before it could
access its excess insurance policies.
30
In addition to its settlement with Arrowood, on December 10, 2014, Rohr
entered into a settlement agreement with the defendant insurers Hartford
Accident & Indemnity Company, First State and Twin City.
31
See footnote 29 of this opinion.
32
Additionally, pursuant to the plain terms of these Century policies, their
coverage obligations are not triggered unless and until the directly underlying
United policy has paid its limits, which can occur only after the insured
has been paid all other collectible insurance. The issue concerning the
exhaustion of the United policy is not before us in these appeals and is a
matter to be addressed in the next stage of the proceedings before the
trial court.