In Certain Underwriters at Lloyd’s London v. Valiant Ins. Co., 2010 WL 1427571, 5 (April 12, 2010) (published) the Washington Court of Appeals held that an anti-stacking provision applied to limit affiliated insurers’ exposures to the limits of one insurance policy.
Two affiliated insurers, Valiant Insurance Company (“Valiant”) and Northern Insurance Company of New York (“Northern”), insured Stratford Construction, LLC (“Stratford”) under three successive primary policies. Valiant and Northern are both Zurich-affiliated companies. Certain Underwriters at Lloyd’s London (“Underwriters”) insured Stratford during two subsequent policy periods, and Great American provided excess coverage for several policy periods. The Valiant and Northern policies limit recovery to one policy limit per “occurrence” when the insured holds two or more policies issued by companies affiliated with Zurich.
GCG Associates, LP (“GCG”), hired Stratford to construct a four-story retirement center in Lynnwood, Washington. Stratford completed construction in 2000. In 2006, GCG filed two suits against Stratford related to the construction, which were later consolidated. Expert reports indicated that water damage resulted from a variety of construction defects including improper installation of roofing or stucco by one subcontractor and improper installation of windows by another.
Stratford settled the consolidated construction defect lawsuit for $5 million. Valiant contributed the $1 million limits of its policy, but Northern did not contribute to the settlement. Underwriters, Great American, and subcontractors apparently made up the difference. Underwriters sued Valiant and Northern for contribution and subrogation.
The Court of Appeals agreed with the trial court’s determination that the continuing water intrusion damage to the building was caused by one “occurrence” even though the damage occurred at different locations and at different times. The Court of Appeals found that the “key to the present case is the Zurich policy definition of ‘occurrence’ as an ‘accident, including continuous and repeated exposure to substantially the same general harmful conditions.’ The continuous and repeated exposure of Chateau Pacific to harmful moisture that gradually intruded through the building envelope over a five year period from different sources fits this definition.” The Court of Appeals also held that the anti-stacking provision did not conflict with the stated policy limits and did not violate public policy. The Court then concluded that “[b]ecause the policies issued by Zurich’s affiliated companies all applied to the same occurrence, the anti-stacking provision limited coverage to the highest applicable policy limit under any one of those policies.”
Two affiliated insurers, Valiant Insurance Company (“Valiant”) and Northern Insurance Company of New York (“Northern”), insured Stratford Construction, LLC (“Stratford”) under three successive primary policies. Valiant and Northern are both Zurich-affiliated companies. Certain Underwriters at Lloyd’s London (“Underwriters”) insured Stratford during two subsequent policy periods, and Great American provided excess coverage for several policy periods. The Valiant and Northern policies limit recovery to one policy limit per “occurrence” when the insured holds two or more policies issued by companies affiliated with Zurich.
GCG Associates, LP (“GCG”), hired Stratford to construct a four-story retirement center in Lynnwood, Washington. Stratford completed construction in 2000. In 2006, GCG filed two suits against Stratford related to the construction, which were later consolidated. Expert reports indicated that water damage resulted from a variety of construction defects including improper installation of roofing or stucco by one subcontractor and improper installation of windows by another.
Stratford settled the consolidated construction defect lawsuit for $5 million. Valiant contributed the $1 million limits of its policy, but Northern did not contribute to the settlement. Underwriters, Great American, and subcontractors apparently made up the difference. Underwriters sued Valiant and Northern for contribution and subrogation.
The Court of Appeals agreed with the trial court’s determination that the continuing water intrusion damage to the building was caused by one “occurrence” even though the damage occurred at different locations and at different times. The Court of Appeals found that the “key to the present case is the Zurich policy definition of ‘occurrence’ as an ‘accident, including continuous and repeated exposure to substantially the same general harmful conditions.’ The continuous and repeated exposure of Chateau Pacific to harmful moisture that gradually intruded through the building envelope over a five year period from different sources fits this definition.” The Court of Appeals also held that the anti-stacking provision did not conflict with the stated policy limits and did not violate public policy. The Court then concluded that “[b]ecause the policies issued by Zurich’s affiliated companies all applied to the same occurrence, the anti-stacking provision limited coverage to the highest applicable policy limit under any one of those policies.”
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