Cannon Electric v. Munich Reinsurance America CA2/5

FACTS AND PROCEDURAL HISTORY

ITT’s Liability Insurance

ITT manufactured and supplied products to a variety of industries worldwide, including automotive and industrial components. During the relevant period, from 1959 to 1986, ITT purchased multiple layers of insurance coverage: (1) primary policies for different policy periods from various insurers, including Pacific Employers Insurance Company (PEIC); (2) umbrella policies from various insurers, including Affiliated FM Insurance Co. (Affiliated FM); and (3) excess policies from various insurers, including Munich and United States Fire Insurance Company (U.S. Fire). The layers of insurance coverage were structured to operate as if a single insurer had issued a single policy. If ITT’s primary insurance coverage were exhausted by a single claim or group of claims, ITT expected the first layer umbrella policy to take over as if it were the primary policy. If the umbrella policy were exhausted by the payment of claims up to the aggregate limit, the next layer of excess coverage would be activated, exhausting vertically thereafter until the entire amount of coverage was exhausted. ITT purchased “follow form” excess policies that…