California Court of Appeal Rejects Policyholder's Arguments Seeking Elective Stacking of Policies

On August 31, 2017, the California Court of Appeal for the Second Appellate District issued a published decision in Montrose Chem. Corp. v. Superior Court.  Montrose filed a Writ Petition seeking reversal of the trial court order on cross-motions for summary judgment where the trial court denied Montrose’s Motion for Summary Adjudication, ruling that Montrose is not entitled to electively stack its excess policies.  In addition, the Court of Appeal indicated that excess policies may exhaust horizontally so long as their terms so dictate. 

In its decision, the Court of Appeal agreed with the trial court that “elective stacking” is inconsistent with the policy language of at least some of the more than 115 excess policies at issue and is not compelled by California Supreme Court authority. It therefore concluded that the trial court properly denied Montrose’s motion for summary adjudication.

The Court of Appeal remanded the matter back to the trial court based on its ruling directing the trial court to decide on a policy-by-policy basis, taking into account the relevant provisions of each policy, the order in which the policies may be accessed. This is the first time a Court of Appeal in California has publicly held that horizontal exhaustion may be appropriate in allocating indemnity losses among excess policies.

Elizabeth Brockman represents Federal Insurance Company in connection with this matter. 

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