The Supreme Court of California has accepted review of Montrose Chemical Corporation v. Superior Court, 14 Cal.App.5th 1306 (App. 2nd Dist. 2017), a decision in which the Court of Appeal required a policyholder to prove horizontal exhaustion to trigger excess insurance coverage. The Supreme Court’s decision to accept review comes in the wake of State of California v. The Continental Insurance Company, 15 Cal.App.5th 1017 (App. 4th Dist. 2017), in which the Court of Appeal rejected Montrose and applied a vertical exhaustion rule. Reversal of Montrose would provide a significant victory for policyholders seeking to maximize insurance coverage for long tail losses, and would correct significant analytical errors in the Montrose decision regarding the meaning of other insurance clauses.
On November 29, 2017, the Supreme Court of California agreed to review Montrose Chemical Corporation v. Superior Court, 14 Cal.App.5th 1306 (App. 2nd Dist. 2017), which applied horizontal exhaustion, rather than vertical exhaustion, to determine when excess insurance coverage could be triggered. See Montrose and Multiple Policy Periods. The Montrose decision conflicts with a subsequent decision of the Fourth District Court of Appeal, as well as the decisions of multiple other jurisdictions on this issue. By accepting the petition for review, the Supreme Court has the opportunity to resolve a split between the Second and Fourth District Courts of Appeal on this important issue and to reassert its jurisprudence regarding the application of “other insurance” clauses and “all sums” allocation.