Insurers found liable for $101 million payout to lead paint reduction fund
Taking a calculated risk by selling a dangerous product is not the same as intentionally causing harm. Because of this, insurers must cover a court ruling that forces the company that sold Dutch Boy lead paint to pay $101 million to a California abatement fund, a New York appeals court ruled on May 24. March.
New York’s 1st Department of Appellate Division upheld a decision finding Lloyd’s of London and other insurers liable for NL Industries’ claim. The appeal panel rejected the insurers’ argument that the indemnity was excluded from coverage because the paint manufacturer encouraged the use of lead paint when it knew it posed a serious risk.
“It is not a clear conclusion that NL expected or intended to harm any person or property,” the opinion reads.
Santa Clara County filed a lawsuit in 2000 against NL Industries, ConAgra Grocery Products Co., and Sherwin-Williams Co. under California public nuisance law. Nine other California cities and counties joined the action, which sought to hold manufacturers accountable for promoting lead paint for use in homes despite their knowledge that the product was highly toxic.
NL was a member of the Lead Industries Association, a trade group that sponsored an advertising campaign in the 1930s that promoted the use of white lead carbonate pigments in paint. At the time, it was already widely known that lead dust is toxic. In fact, the NL representative was present when the LIA board in 1930 discussed an article in the US Daily which reported that babies were contracting lead poisoning from chewing paint from toys, cribs and woodwork more frequently than previously thought.
After a six-week trial, the Santa Clara County Superior Court ordered the three companies to pay $1.1 billion into a lead paint abatement fund. The 6th District Court of Appeals changed the ruling to require companies to pay for the reduction only for homes built before 1951, reducing the amount of the reduction fund to $409 million.
The companies appealed, but the California Supreme Court declined to hear the case. The defendants agreed to pay $305 million to settle the lawsuit in 2017. NL’s share is $101.6 million.
When NL Industries turned to its former insurers for cover, Ace and Lloyd’s refused. They said the company intentionally caused the harm that prompted the Santa Clara County lawsuit.
Lloyd’s and 15 other insurers sued in New York County Supreme Court for a declaration that NL’s insurance policies did not provide coverage. The action involves 320 insurance policies covering more than 70 years, according to court documents.
The insurers argued, 1, that NL Industries’ actions were intentional; 2, the court order did not relate to “damages” or “expenses” as required by the policy; and 3, liability has not been imposed on the basis of property damage or personal injury.
Supreme Court Justice Andrea Masley found that the reduction fund payment order was covered by the policies. She said in her order that some of the insurance policies did not contain an exclusion for intentional acts. And she said even policies that exclude damage caused by intentional acts still provide coverage for NL’s actions.
Masley, citing previous case law, said “in New York, there is a distinction between knowledge of a risk of dangerous consequences of one’s actions and an intent to cause harm”.
She also rejected the argument that the court order was not the result of “damage”. The order says the fund was created to address the hazard caused by deteriorating lead paint on approximately 5 million California homes. This amounts to “damages under the relevant policy language,” the order says.
Finally, Masley disagreed with the insurers’ argument that there was no property damage covered.
“Although this court recognizes that property damage and bodily injury are not elements of the representative public nuisance claim, there is a connection between the lead poisoning injuries to children residing in buildings containing the lead paints promoted by NL and property damage to those buildings as a result of NL’s promotion of lead paint,” the order reads.
This finding is directly at odds with a 2013 Ohio Court of Common Pleas ruling, which found that insurers had no obligation to contribute to the discount fund on behalf of the company that made Glidden paint because no property damage was covered by the policies.
The appeal panel said in its opinion that it agreed with Masley that the Ohio decision was incorrect, assuming that the insurance policies issued to the Glidden manufacturer had exactly the same language as the policies. from NL Industries.
“Liability for nuisance is based on the widespread bodily injury/property damage that the lead paint hazard in homes has caused and continues to cause,” the appeals court said.
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