Padilla Construction Co. v. Transportation Insurance

Opinion

SILLS, P. J.

I. BACKGROUND

California’s rule of “horizontal exhaustion” in liability insurance law requires all primary insurance to be exhausted before an excess insurer must “drop down” to defend an insured, including in cases of continuing loss. (Community Redevelopment Agency v. Aetna Casualty & Surety Co. (1996) 50 Cal.App.4th 329, 339 [57 Cal.Rptr.2d 755].) Unless there is excess insurance that describes underlying insurance and promises to cover a claim when that specific underlying insurance is exhausted (“vertical exhaustion”* 2 ), the rule of horizontal exhaustion applies to…