Pacific Coast Building Products, Inc. v. AIU Insurance

MEMORANDUM *

This action stems from an insurance dispute between an insured, Pacific Coast *548 Building Products, Inc. (“Pacific Coast”), and an excess insurer, AIU Insurance Company (“AIU”). Pacific Coast appeals the district court’s judgment regarding the applicability of the horizontal exhaustion rule. We affirm.

California insurance law governs in this diversity case. James B. Lansing Sound Inc. v. National Union Fire Ins. Co., 801 F.2d 1560, 1561 (9th Cir.1986). Because the parties are familiar with the facts and procedural history, we do not restate them here except as necessary to explain our disposition.

Horizontal exhaustion applies where an excess policy, by its terms, is excess to all underlying insurance. Olympic Ins. Co. v. Employers Surplus Lines Ins. Co., 126 Cal.App.3d 593, 600 , 178 Cal.Rptr. 908 (1981). The California general rule is that, if a policy so provides, all primary insurance must be exhausted before a secondary insurer will have exposure. Cmty. Redevelopment Agency v. Aetna Cas. & Sur. Co., 50 Cal.App.4th 329, 339 , 57 Cal. Rptr.2d 755 (1996).

As an initial matter, we reject Pacific Coast’s contention that the AIU policy is ambiguous and, as a…