Landmark Decision Strikes Down Insurers’ Occurrence Limit of Liability Endorsements

Commercial property insurers have routinely sought to limit their exposure for damage to particular buildings or properties by attaching so-called Occurrence Limit of Liability Endorsements (“OLL Endorsements”) to their policies.  These endorsements purport to limit each carrier’s exposure to the specific values assigned to each building or property.  They are almost always manuscript endorsements that are written differently by each insurance company and are often drafted in confusing, and sometimes incomprehensible, language that muddles the insurance carrier’s obligations to its policyholder.

In a groundbreaking decision, Pillsbury & Coleman successfully struck down five OLL Endorsements that were employed by insurance companies participating in a $100,000,000 quota-share insurance program.  The Napa County Superior Court in Calistoga Ranch Owner, LLC v. AIG Specialty Insurance Company, et al., Case No. 21CV001530, held that all five OLL Endorsements violated California’s fundamental “conspicuous, plain and clear” rule of policy interpretation.  The Court concluded that the OLL Endorsements were neither plain nor clear and were thus “unenforceable” as a matter of law.  This landmark decision is the first in California to strike down an insurance company’s OLL Endorsement.