A recent California Court of Appeal decision clarifies that vertical exhaustion applies to an excess policy that only specifies a retained limit, even where the insured subsequently purchases insurance to cover the retained amounts.
In State of California v. The Continental Insurance Company, et al. (September 29, 2017) 2017 WL 4324857, the State of California sued to recover from various insurers for the costs of the remediation of the Stringfellow hazardous waste site. The state engaged in extensive litigation, both with its insurers and with potentially responsible parties in the environmental matter. By 2015, the only insurers remaining in the dispute were Continental Insurance Company and Continental Casualty Company (collectively, “Continental”), which had issued the state policies of insurance that were excess to retained limits. The state purchased insurance to cover most of its exposure within these retentions.