California Supreme Court justices heard arguments recently in a novel case that could significantly impact the amount insurers must pay to clean up toxic waste.

We have blogged many times about attorneys’ fees in the toxic tort context. The matter of State of California v. Continental Ins. Co., S170560, which came before the justices on oral argument last week, could increase the costs incurred in such cases.

The Continental case arises from the state’s efforts to collect more than $500 million from multiple insurance policies to cover cleanup costs at the defunct Stringfellow hazardous waste dump in Riverside County. The insurers have argued that the state is not entitled to collect the maximum coverage from multiple policies issued over several years, a practice known as “stacking.”

The insurance companies appealed a 4th District Court of Appeal ruling that the state could stack policies that were in effect during the periods that the groundwater contamination took place.

Many of the questions asked during the oral argument centered on whether the “all sums” language contained in standard insuring agreements, including the policies at issue, placed limits on how much the state could collect. The state maintains that the policies do not contain language that prevents stacking; while the insurers have taken the position that stacking gives the insured more than it bargained for upon purchasing the policy.

Insurers and industry counsel are watching the case closely. We will monitor the Court for a decision and report its potential impact on attorneys’ fees and toxic tort coverage in general.