A California Superior Court judge has awarded the state of California $13.9 million in prejudgment interest in connection with the longstanding coverage dispute over a Southern California hazardous waste site.

In her ruling Tuesday in State of California v. Underwriters at Lloyd's of London et al., Judge Sharon J. Walters, of Superior Court in Riverside, California, ordered insurers to pay the state prejudgment interest dating from Sept. 11, 1998, at an interest rate of 7%. Judge Walters said also if this award should be reversed through an appeal, she was awarding the state $10.6 million interest, dating from September 2002.

The coverage litigation stems from the state's operation of the Stringfellow hazardous waste dump site near Glen Avon, California, for 16 years, beginning in 1956. The state closed the site to new deposits in 1972 after the discovery of groundwater contamination.

Between 1972 and 1978, the state purchased comprehensive general liability coverage that contained pollution exclusion, with exceptions for sudden and accidental incidents.

In 1998, a federal judge determined that the state of California was 100% liable for environmental damage the state caused because it had negligently designed and operated the site.

In 2005, a jury found the insurance companies liable for damages. Further litigation in the case lead to a 2012 ruling by the California Supreme Court in favor of an “all sums with stacking” default allocation rule regarding the CGL policies that had been purchased by California.

Under the ruling policyholders involved in long-tail environmental claims can “stack” coverage limits over multiple policy years and are not limited to a single year. Also, insurers are http://www.businessinsurance.com/article/20120819/NEWS06/308199988 obligated to pay under the “all sums” language in the policy up to their policy limits as long as the continuous property damage occurred while each policy was on the loss.

In her ruling Tuesday, Judge Waters said, “The fact remains the State has been deprived of the use of its money for a lengthy period of time and the insurers essentially have had a loan from the state of $12 million for nearly 13 years. Imposing interest on the loan at the legal rate of 7% is not unreasonable under the facts of this case.”