Any Friendly Wagers on Outcome of State of California v. Continental Ins.?

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” approach.

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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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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