Insurers Lose Big Toxic Cleanup Appeal In Calif.

Six insurers could be on the hook for a total of $100 million under the latest court ruling in a 15-year legal battle between California and its liability carriers over a claim for toxic waste cleanup costs, according to a plaintiff’s attorney.

That estimate came from Robert Horkovich of Anderson Kill & Olick, one of the firms representing the state against the insurers.

Mr. Horkovich said he expects the insurers to seek a review of the case by the California State Supreme Court in the wake of Monday’s verdict by the California Appellate Court (4th District) in Riverside, Calif.

The appeals court decision by a three-judge panel reversed a lower court ruling in 2005 that severely limited the insurers’ exposure and found they owed the state nothing after factoring in payments by other carriers that made settlements in the case.

At issue were cleanup costs that the state was held liable for after federal officials brought an action against it in 1998 over its faulty construction of a toxic waste collection point known as Stringfellow Acid Pits, which leaked poisons into groundwater extending for miles from its site at a rock quarry in Glen Avon, Calif.

The state has estimated that the past and future remediation costs could total up to $700 million. In limiting what California could collect from insurers, the trial judge, Erik Kaiser (now retired) relied on a California court decision in 1998--FMC Corp. v. Plaisted & Companies.

The Riverside appellate court panel, which remanded the case for further action, said FMC was a flawed decision because “it failed to follow other closely analogous California cases, based on reasoning that we find to be flawed and unconvincing.”

The FMC case ruling held that even though a policy covered multiple years, recoveries were limited by the amount of property damage taking place in a single year.

Mr. Horkovich said this meant the insured, in making a claim, basically had to pick only one year for which a recovery could be made.

Under the latest ruling, policyholders can stack coverage--accessing all coverage under all policies in all years triggered.

Insurers that remain as defendants in the case are Continental Insurance Company, Continental Casualty Company, Employers Insurance of Wausau, Horace Mann Insurance Company, Stonebridge Life Insurance Company, and Yosemite Insurance Company.

Each of them had issued to the state an excess corporate general liability policy covering a two- or three-year policy period.