After being ordered to pay tens of millions of dollars in cleanup costs arising from environmental harm caused by landfill operations, the County of San Bernardino tendered claims for insurance coverage to the Insurance Company of the State of Pennsylvania. The County invoked three successive policies issued by the insurer in the 1960s and 1970s and claimed more than ten covered occurrences arising from the landfill operations, with many other claimed occurrences involving different sites waiting in the wings. The County claimed it could “stack” the three policies’ limits to increase the policy limits from $9 million per occurrence to $27 million per occurrence, but the insurer argued that a “non-cumulation” provision in the policies limited the County to one limit per occurrence. The insurer sued the County in federal court, seeking declaratory relief. The district court found in the insurer’s favor and ruled that the non-cumulation provision validly prevented the County from stacking the policies’ limits.
The County appealed, arguing that the non-cumulation provision was ambiguous in several ways and, alternatively, that the provision is an unenforceable “escape clause.” Horvitz & Levy was retained to represent the Insurance Company of the State of Pennsylvania on appeal.
The Ninth Circuit affirmed. Agreeing with Horvitz & Levy’s reading of the policy, the court held that the non-cumulation provision’s “plain language unambiguously precludes stacking” and declined to follow cases cited by the County that found different non-cumulation provisions to be ambiguous. The court also rejected the County’s interpretation of various phrases in the non-cumulation provision, holding that the County’s reading would render policy language superfluous and would lead to potentially absurd results. Finally, the court agreed with Horvitz & Levy’s argument that the non-cumulation provision may be enforced in the circumstances of this case because it neither reduces the insurer’s obligations to zero nor shifts liability to another insurer.