Lead Paint Coverage Claim Bites The Dust

Gina M. Foran, William Baron and Philip Matthews | Duane Morris

Duane Morris lawyers helped secure a victory at the California Court of Appeal when the court held Tuesday that ConAgra’s insurers have no duty to indemnify ConAgra against a public nuisance action in which ConAgra was ordered to contribute to an abatement fund due to its predecessor’s promotion of the use of lead paint in pre-1950 homes.  (See Certain Underwriters at Lloyd’s London, et al. v. ConAgra Grocery Products Companyet al., Case No. A160548, April 19, 2022, certified for publication (“ConAgra“).)

The underlying case (the “Santa Clara  Action”) began in 2000 when Santa Clara County, later joined by other California government agencies filed a class action complaint against certain lead paint manufacturers, including ConAgra, NL Industries, Inc., and Sherwin-Williams Company. The focus of the underlying case was narrowed, and that case ultimately went to trial on one cause of action for representative public nuisance.  In pursuing that causes of action, the underlying plaintiffs alleged that the presence of lead in paint and coatings in and around homes and buildings in California created a public health crisis created and/or assisted by the defendants.  In a pre-trial appeal in the Santa Clara  County action, the court held that the representative public nuisance cause of action required as an essential element that the paint manufacturers had acted intentionally with actual knowledge that their marketing of lead paint for interior residential use would cause harm.  (See County of Santa Clara v. Atlantic Richfield Co.  (2006) 137 Cal.App.4th 292, 299 (“Santa Clara I“).)  The underlying case went to trial under that standard, and the court found the manufacturers jointly and severally liable for representative public nuisance.

In 2017, the Court of Appeal in the Santa Clara  Action affirmed the finding that the paint manufacturer were liable, although the Court ruled that the amount of the judgment must be re-tried.  (People v. ConAgra Grocery Products Co.  (2017) 17 Cal.App.5th 51 (“Santa Clara II“).).  In upholding the finding of liability, Santa Clara II  held that when ConAgra’s corporate predecessor, W.P. Fuller & Co. (“Fuller”) marketed paint for use inside homes, Fuller had “actual knowledge of the hazards of lead paint—including childhood lead poisoning,” and specifically that “(1) ‘lower level lead exposure harmed children,’ (2) ‘lead paint used on the interiors of homes would deteriorate,’ and (3) ‘lead dust resulting from this deterioration would poison children and cause serious injury.'”  (Santa Clara II, supra,  17 Cal.App.4th at 85.)

The plaintiffs’ public nuisance cause of action in the Santa Clara  Action did not seek damages, but instead sought abatement, which allows a plaintiff to obtain relief before a hazard causes physical injury or damage to property.  The trial court in the Santa Clara  initially ordered the defendants to pay $1.15 billion into an abatement fund.  On remand after the 2017 appellate opinion, the Santa Clara  trial court recalculated the amount of the abatement fund to be $409 million.  The parties in that case eventually reached a settlement, which required ConAgra to pay $101,666,666 to resolve the plaintiffs’ claims.

While the underlying Santa Clara  action was pending, in January 2014 certain London Market insurers filed a declaratory relief action seeking a determination that they had no coverage obligations to ConAgra under policies issued to ConAgra and its predecessors, and bringing numerous other insurers into the case.  The coverage case was stayed while the underlying case went forward.  The insurers ultimately filed a motion seeking summary judgment on the grounds that: (1) Cal. Ins. Code Section 533 prohibits coverage for ConAgra’s intentional promotion of lead paint with actual knowledge of the health hazards that would result; (2) there was no “occurrence” under the policies because the harm was expected or intended from the standpoint of the insured; (3) the abatement remedy was not liability for “damages” or an “expense” under the policies; and (4) ConAgra’s liability was not “because of” or “on account of” “bodily injury,” “property damage” and/or “personal injury” under the policies.

The trial court granted summary judgment in favor of the insurers, ruling that Insurance Code Section 533 barred coverage as a matter of law where liability arises from deliberate conduct that the insured expected or intended to cause damage. The court reasoned that Fuller, ConAgra’s predecessor, intentionally promoted lead paint for use inside homes with actual knowledge that damage to children was at least highly probable.

ConAgra appealed the judgment to the California Court of Appeal. It advanced several arguments in its appeal, including contentions that: (1) Because it was ConAgra’s predecessor, Fuller, that committed the wrongful acts, Section 533 did not apply to bar coverage for ConAgra; (2) Section 533 is inapplicable because the loss for which ConAgra seeks indemnity was too attenuated from Fuller’s past promotion of lead paint for Section 533 to apply; and (3) the underlying findings did not establish as a matter of law that Fuller acted with the requisite knowledge under Section 533. The Court of Appeal rejected each of these arguments.

With respect to its first argument, ConAgra reasoned that its predecessor’s knowledge should not be imputed to ConAgra under Section 533, citing cases that allowed coverage where an insured was vicariously liable for willful conduct of another person. The court rejected this argument, holding that cases regarding vicarious liability do not apply in situations involving successor liability.  The Court reasoned that, in the event of a merger, as occurred when Fuller was merged into ConAgra through several corporate acquisitions over time, the successor is on notice that it is succeeding to the liabilities of its predecessor and is therefore responsible as the wrongdoer for purposes of Section 533.

In its second argument, ConAgra contended that even if the focus is on its predecessor’s conduct, Section 533 should not apply because the loss ConAgra was being held liable for was too attenuated from Fuller’s promotions.  ConAgra argued that Section 533 required both a direct causal relationship and a close temporal connection between the act and the loss. Because only a few of Fuller’s promotions were held to be actionable, and the harm resulted decades after the wrongful conducts, ConAgra argued that Section 533’s requirements were not satisfied. The court disagreed, noting examples of environmental contamination cases where Section 533 applied to bar coverage where the wrongful act causing damage occurred many years before the damage eventually resulted. The Court also quoted the lower court for its statement that the connection between the promotion and current presence of lead was not too attenuated, as those who were influenced by the promotions to use lead paint were the “single conduit” between defendants’ actions and the current hazard. The Court of Appeal stated that the underlying litigation conclusively established ConAgra’s liability for public nuisance, and that the proper inquiry under Section 533 is whether the loss for which an insured seeks indemnity was caused by a willful act of the insured.

ConAgra last argued that the underlying findings did not establish that Fuller acted with the requisite knowledge under Section 533. ConAgra argued that the “actual knowledge” found was not the same as the subjective “substantial certainty” required under Section 533, and that coverage could be precluded only if evidence showed that Fuller believed the widespread prevalence of deteriorated lead paint was substantially certain to result from its few actionable promotions. The Court rejected this argument, noting that the proper test was whether there was a willful act of the insured performed with the expectation that harm would result.  Because the courts in the Santa Clara  action had found that it conclusively established that Fuller had actual knowledge that harm would result from its promotion of lead paint, Fuller necessarily acted with knowledge that lead paint was “substantially certain” or “highly likely” to result in a hazard. This evidence satisfied Section 533’s willful act requirement.

As part of its last argument, ConAgra asserted that Section 533 could bar coverage only if it was proven that Fuller’s management had the requisite knowledge to preclude coverage. The Court of Appeal rejected that argument, citing prior case law holding that the knowledge of all employees is imputed to the corporation for purposes of applying Section 533.

Accordingly, the Court of Appeal affirmed the lower court rulings and upheld summary judgment in favor of the insurers.

See full opinion here.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Georgia Supreme Court Holds Pollution Exclusion Applicable to Lead Paint Injury

Traub Lieerman Straus & Shrewsberry LLP | March 22,2 016

In its recent decision in Georgia Farm Bureau Mut. Ins. Co. v. Smith, 2016 Ga. LEXIS 245 (Ga. Mar. 21, 2016), the Supreme Court of Georgia had occasion to consider whether under Georgia law, the pollution exclusion applies to a bodily injury claim arising out of ingestion of lead paint.

Georgia Farm Bureau (“GFB”) issued a general liability policy to the landlord of a private rental house. The landlord was named as a defendant in a lawsuit alleging that a child tenant suffered injury as a result of ingesting paint chips containing lead. GFB contended, among other things, the claim was barred by its policy’s pollution exclusion which applied to bodily injury claims arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants” at or from any premises owned or occupied by any insured. The policy defined the term “pollutants” as:

… any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.

While the trial court initially granted summary judgment in GFB’s favor, the Georgia Court of Appeals reversed, concluding that lead-based paint was not a pollutant for the purpose of the exclusion. In so doing, the Court of Appeals distinguished the Supreme Court’s decision in Reed v. Auto-Owners Ins. Co., 284 Ga. 286 (2008), which held the pollution exclusion applicable to an underlying claim involving the indoor release of carbon monoxide.

In considering the issue, the Georgia Supreme Court noted that while the pollution exclusion was originally drafted to apply to environmental contamination, the language was revised in the 1980s to encompass non-environmental pollution claims. The Court further observed that while some jurisdictions have continued to limit the pollution exclusion to traditional environmental harms despite these changes in the exclusion, Georgia courts have not applied such a limitation, as reflected in the Reed decision.

The Court further observed that the proper analysis for determining whether a particular constituent is a “pollutant” is not to look to the “purpose and historical evolution” of the pollution exclusion, but instead to look to the plain language of the terms. With this frame of reference, the Court concluded that lead-based paint is a “pollutant” and that as such, the pollution exclusion was applicable to the underlying claim.

Nebraska Supreme Court Holds Pollution Exclusion Applicable to Lead Paint Claim

TLSS Insurance Law Blog – September 23, 2014

In its recent decision in State Farm Fire & Casualty Co. v. Dantzler, the Supreme Court of Nebraska had occasion to consider the application of pollution exclusion to an underlying personal injury claim involving an individual’s exposure to lead paint.

The case involved coverage under a rental dwelling policy issued by State Farm with the following pollution exclusion applicable to:

 i.    bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, spill, release or escape of pollutants:

(1)   at or from premises owned, rented or occupied by the named insured;

The policy defined “pollutants” to mean “solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”

All parties agreed that lead paint is a “pollutant.” The question presented to the Court was whether the alleged injury resulted from a requisite “discharge, dispersal, dispersal, spill, release or escape” of the lead paint. The Nebraska Court of Appeals denied State Farm’s motion for summary judgment based, in large part, on the decision by a Connecticut intermediate court in Danbury Ins. Co. v. Novella, 727 A.2d 279 (Conn. Supp. 1998). The Danbury court held that exposure to lead paint can happen in manners other than the discharge, dispersal, release, etc. Relying on this decision, the Nebraska Court of Appeals reasoned that if lead paint exposure is not exclusively the result of a discharge, dispersal, spill, release or escape of the lead paint, then it was incumbent on State Farm to demonstrate the precise manner by which the claimant was exposed, and its failure to have done so in its motion papers raised a question of fact precluding summary judgment.

In considering the matter, the Nebraska Supreme Court acknowledged a split in authority throughout the country as to whether the pollution exclusion is limited to matters considered traditional environmental harm, or applies more broadly to any harms resulting from pollutants. Notably, in Cincinnati Ins. Co. v. Becker Warehouse, Inc., 635 N.W.2d 112 (Neb. 2001), the Nebraska Supreme Court concluded that the pollution exclusion is not limited to matters involving traditional environmental damage since no such limitation is expressly stated in the language of the exclusion. With this in mind, the Court concluded that the Court of Appeals’ reliance on the Danbury decision was in error, since the Danbury decision relied on a more limited application of the exclusion to traditional environmental harm.

The Nebraska Supreme Court further reasoned that in any case involving exposure to lead paint, there necessarily is a separation of that paint from the painted surface which allows for the claimant’s injury, and this separation is necessarily a discharge, or a dispersal, or spill, or release. This is true regardless of whether the claimant’s exposure is a result of ingesting paint chips or inhaling lead paint dust. The Court therefore concluded that the exclusion necessarily applies to any claim alleging injury as a result of lead paint exposure, thus making it unnecessary for the insurer to determine the precise manner by which the exposure happened. As the Court explained:

Because the above terms encompass the separation of lead-based paint that is inherent in every case of lead paint poisoning, the pollution exclusion is not ambiguous as applied to lead-based paint and a determination of the specific process of exposure in any particular case is not material to application of the exclusion. Regardless of how the lead-based paint is separated from the painted surface or what form it takes once it is separated, an individual’s exposure to and absorption of that lead-based paint results from the “discharge, dispersal, spill, release or escape” of a pollutant. Thus, it is not necessary to differentiate between the processes by which exposure occurs. It is not material to application of the pollution exclusion to determine the manner in which the injured party was allegedly exposed to lead-based paint.

via Nebraska Supreme Court Holds Pollution Exclusion Applicable to Lead Paint Claim | Traub Lieberman Straus & Shrewsberry LLP.

EPA Fines 16 Firms for Violations of the Lead Renovation, Repair and Painting Rule

Stacy Kika – November 14, 2012

The U.S. Environmental Protection Agency (EPA) today announced 16 enforcement actions for violations of the lead-based paint Renovation, Repair and Painting Rule (RRP). A priority for EPA’s enforcement program is to protect children, and others, from exposure to lead dust that can cause lead poisoning by ensuring that renovators follow the RRP and other lead rules. Lead exposure can cause a range of adverse health effects, from behavioral disorders and learning disabilities to seizures and death, putting young children at the greatest risk because their nervous systems are still developing.

“At least 4 million households with children have lead paint, and over a half million children have elevated levels of lead in their blood. But lead exposure is preventable when you know what to look for and what to do,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance. “These settlements serve as an important reminder of the importance of using lead-safe practices to protect the health of our children and prevent lead poisoning.”

The RRP rule requires that contractors that work on pre-1978 dwellings and child-occupied facilities be trained and certified to use lead-safe work practices. This ensures that common renovation and repair activities like sanding, cutting and replacing windows are done in ways that minimize dangerous lead dust. EPA finalized the RRP rule in 2008 and the rule took effect on April 22, 2010.

The enforcement actions listed below address many serious RRP Rule violations that could result in harm to human health. These actions include cases where the respondent failed to follow lead-safe work practices. Lead-safe work practices are critical to reducing exposure to lead-based paint hazards and, thereby, avoiding potential lead poisoning. In at least five actions, children lived at the property; thus, the respondent directly put children at risk of exposure to lead-based paint hazards. Also, in several cases, respondents failed to obtain firm certification prior to performing or offering to perform renovation activities on pre-1978 homes. The RRP Rule’s certification requirements ensure that firms and renovators know the RRP Rule, and how to employ lead-safe work practices. Other alleged violations include the respondent’s failure to provide EPA’s “Renovate Right” pamphlet to homeowners and occupants. The pamphlet is an important mechanism for helping homeowners and tenants understand the risks of lead-based paint hazards, and how best to minimize these risks to protect themselves and their families.

The 16 enforcement actions include 13 administrative settlements and 3 filed administrative complaints. The settlements advance EPA’s mission to protect human health because, under each settlement, the respondent was required to certify that it has come into compliance with the RRP Rule – and compliance results in greater protection for children and others in the future. EPA also assessed civil penalties. When formulating penalties, EPA must evaluate an entity’s ability to pay a penalty and to remain in business. Accordingly, the Agency assessed a total of $53,792 in civil penalties. In the 3 administrative complaints that EPA has filed, the Agency seeks civil penalties up to the statutory maximum of $37,500 per violation.

Settlements:

– Alliance Contracting & Design, LLC of Bay City, Mich.

– Dasa Properties LLC of Buffalo, N. Y.

– DiGiorgi Roofing and Siding, Inc. of Beacon Falls, Conn.

– Exterior Images of Derry, N.H.

– Hometown Painting, Inc. of Warrenville, Ill.

– Kindred Painting, LLC of Dover, N.H.

– Leanza Painting Contractors, Inc. of Morristown, N. J.

– Mac Stringer Painting and Staining of Ontario, N. Y.

– Scheffler Painting, LLC of Trenton, Mich.

– Spartan Painting, Inc. of Haslett, Mich.

– Sunshine Home Improvement, LLC of Lenexa, Kan.

– Universal Remodeling & Building, LLC of Stratford, Conn.

– Wildwood Apartments, LLC of Jackson, Mich.

Complaints:

– Collegiate Entrepreneurs, Inc. of Braintree, Mass.

– PZ Painting of Springfield, N.J.

– Kachina Contractor Solutions of Elkins Park, Penn.

via 11/14/2012: EPA Fines 16 Firms for Violations of the Lead Renovation, Repair and Painting Rule.

No More Opting Out of Rule for Renovation of Buildings Containing Lead Paint

Jennifer Sulla – July 17, 2012

On June 22, 2012, the US Court of Appeals for the DC Circuit upheld the US Environmental Protection Agency’s (EPA) removal of the opt-out provision for work that disturbs lead-based paint in pre-1978 housing.

The opt-out provision would have allowed those homeowners who certified that there were no children younger than six or pregnant women residing in the home to “opt out” of the EPA’s Renovation, Repair and Painting Rule (RRP Rule). The opt-out provision was in the original RRP Rule promulgated by EPA in 2008, but was removed in 2010 as part of a settlement between EPA and several environmental and health advocacy groups.

The National Association of Home Builders and other trade associations petitioned the US Court of Appeals for the DC Circuit for review of EPA’s change of heart. The court ruled against petitioners, holding that it was not arbitrary and capricious for EPA to change its mind and that the court had no jurisdiction to review EPA’s failure to convene a small business advocacy review.

The court noted that two events, in addition to settling with environmental and other groups, explained the EPA’s decision: the inauguration of a new President and the appointment of a new EPA administrator. According to the court, and quoting then-Justice Rehnquist, “[a] change in administration … is a perfectly reasonable basis for an executive agency’s reappraisal of the costs and benefits of its programs and regulations.”

So the story is not over. Not only is there an upcoming Presidential election, but legislation introduced in the US House and Senate earlier this year would, among other things, reinstate the opt-out provision. But in the meantime, EPA is enforcing the RRP Rule and announced earlier this year its first known enforcement actions against three violators.

via No more opting out of rule for renovation of buildings containing lead paint – Lexology.