As you may be aware, the California Supreme Court heard argument
in the State of California case on May 30th. (See Bill
Baron's May 4, 2012 posting to this site.) I've entered
into a wager with my partner and insurance guru, Phil Matthews, on
the outcome of State of California, which should decide two very
important insurance coverage questions in California: (1) all sums;
and (2) stacking of policy limits. I won't reveal our
respective wagers, and recognizing that predicting the outcome of
an appellate court is not exactly a science, I invite you to email
me with your prediction as to the outcome of this case. For an
insurance coverage practitioner, this is the functional equivalent
of guessing the Final Four in an office pool. Should be fun, so
email me with your prediction on the questions at the end of this
posting, and I will post the results of this informal survey at the
time of the decision.
Here's what we can report following oral argument.
On the "all sums" issue, three of the justices (Chief
Justice Tani Cantil-Sakauye, Justice Joyce Kennard and Justice
Goodwin Liu) asked questions of Continental's counsel that
strongly suggested they were inclined to accept the lower
court's all sums ruling. The newest Justices, Goodwin Liu and
the Chief Justice, both asked what specific policy language
supported Continental's pro-rata position. Both also seemed not
to be persuaded that the Insuring Agreement, the Policy Period
provision, and the occurrence definition, construed in context of
the policy as a whole, allowed only for coverage for damages
occurring during the policy period. Justice Chin's questioning,
however, seemed to accept that the "during the policy
period" limitation as well as objectively reasonable
expectations did not support coverage for damages that occurred
well outside of the specific policy period. Justice Chin also
wanted to know why pro-rata was not a more "fair"
On the second issue of stacking, there seemed to be a similar
alignment of the justices. The most specific support for either
side of this issue came from Justice Kennard, who stated she
preferred the lower court's approach allowing stacking of
limits, and asked Continental's counsel "what's so
terrible" about stacking of limits? To make the prediction and
wager sporting, very few questions were asked by Justices Werdegar,
Baxter and Corrigan, though Justice Baxter did ask the State's
counsel if he agreed that pro-rata had been adopted by all Federal
Circuit Courts to consider the issue and by a majority of the
States that have decided the issue. So copy and paste the following
questions along with your answer and send to me at
1. Will the Supreme Court follow the majority of jurisdictions
and adopt pro-rata for a continuous loss?
2. If you voted no to question 1, will the Supreme Court allow
policy limits to be stacked?
We encourage you to keep a close watch of this blog site for the
decision (and other content pertinent to legal developments in
insurance law), which is due no later than the end of August.
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