Will Lead Paint Affect My Homeowners Insurance?

RISK MANAGEMENT

WHY Adhere A LEAD PAINT EXCLUSION TO CGL

"Whether a lead pigment exclusion is necessary with a liability
policy hinges on the nature of the risk."

By Donald S. Malecki, CPCU

paint A common question of late is: Why is it necessary for a liability policy to include a atomic number 82 pigment exclusion when the policy already contains a pollution exclusion? A related question is: To what extent can this exclusion exist deleted for an additional premium, or a split up policy purchased to provide coverage?

Information technology's easy to answer the second question. It is doubtful an insurer will sell the coverage, since it is likely to involve a case of adverse selection; that is, only those persons who are confronted with a potential loss are likely to want to buy the insurance. It may always exist possible to obtain coverage, of class. But from a toll standpoint, it may be a matter of trading dollars.

Whether a lead paint exclusion is necessary with a liability policy hinges on the nature of the risk. The owner or lessor of an apartment house or other form of habitational occupancy is probable to be loftier on the underwriter's list of targets to be issued an exclusion. Within this category are older buildings and structures where young children accept been exposed to metallic lead-based paint resulting in mental injuries.

How this exposure comes about can vary. Children tin actually eat portions of painted wood in these buildings or they can be exposed from lead paint dust that is generated when the walls are sanded for purposes of re-painting. There have fifty-fifty been some cases where infants allegedly sustained injuries from chewing on painted cribs.

Bodily cases

The number of cases involving atomic number 82 pigment injuries is growing. One such instance is Lefrak Organisation, Inc., v. Chubb Custom Insurance Visitor, 942 F. Supp. 949 (S.D.Due north.Y. 1996). The insured filed suit because its insurer refused to defend an activity in negligence alleging atomic number 82 paint poisoning.

The insured was sued for $three million in compensatory, and $one one thousand thousand in punitive damages by the parents and guardian of an infant. They alleged that their infant was exposed to lead pigment within the interior of the apartment complex in violation of the New York City Health Code. Their complaint, yet, did not say how the baby was exposed to the pb paint, i.e., whether she ingested paint chips or inhaled lead grit, or whether stripping the walls precipitated her injuries.

The insurer denied defense force based on its pollution exclusion which is quite like to exclusion f. of the standard 1988 edition of ISO commercial general liability forms. The court, however, held that the pollution exclusion was cryptic. The court questioned whether pb paint reasonably could be characterized as a pollutant, as divers in the policy.

In the terminal analysis of this instance, the courtroom held that in that location was more than a reasonable possibility that the insurance policy provided coverage for the atomic number 82 poisoning claims asserted against the insureds in the negligence activity. The insurer therefore had the obligation to provide defense.

Another example where a CGL policy'due south pollution exclusion was not broad plenty to encompass atomic number 82 paint is Insurance Visitor of Illinois v. Stringfield, et al., 685 N.E.2d 980 (App. Ct. IL. 1997). This accommodate was also brought by the parents of a pocket-sized who allegedly sustained injuries due to his consumption of pb-based paint and plaster that had chipped, flaked, broken and fallen away from diverse exposed surfaces of the premises.

The insurer of the building owners and others who had an interest in the realty denied coverage based on the pollution exclusion. The court, all the same, ruled that the exclusion was ambiguous for purposes of this fact pattern, since the injuries did not ascend from the discharge, dispersal, release or escape of a pollutant, every bit defined in the policy.

Undoubtedly, information technology is cases such as the two preceding ones that have prompted insurers to add together lead pigment exclusions to their policies, peculiarly in cases involving habitational occupancies, such as apartment houses. Pb-based paint cases also are particularly troublesome to insurers considering in that location is not likely to be any trail to a detail paint manufacturer enabling insurers to exercise their rights of subrogation.

Insurers also may have to argue with a long-tail exposure, since infants or minors technically are not precluded from bringing adapt until they reach majority and this may entail many years or decades. Habitational risks, such as apartment houses and other rental property, long viewed as potentially favorable liability insurance risks from an underwriting standpoint, are no longer viewed as such without some kind of lead paint exclusion in lite of adverse cases being rendered against insurers.

Lead paint exclusion cases

A case where a lead paint exclusion was upheld is Peerless Insurance Co. v. Gonzalez, et al., 697 Atl.2d 680 (Sup. Ct. CT. 1997). A minor child, again the victim, allegedly sustained injuries afterwards having been exposed to toxic levels of lead paint that had been applied to the interior and exterior walls of a domicile that was leased to the pocket-sized's female parent.

The liability policy exclusion on which the insurer relied to deny defense force and indemnity to its insured read:

"LEAD EXCLUSION...A. This insurance does non utilize: (1) To Bodily Injury, Belongings Impairment or Personal Injury arising in whole or in part out of the mining, processing, manufacture, storage, distribution, sale, installation, removal, disposal, handling, use or beingness of, exposure to, or contact with lead or pb contained in appurtenances, products or materials...."

The insureds maintained that the above exclusion did not utilize to injuries arising from lead paint poisoning because the exclusionary provision contains no express reference to lead paint, and paint does not autumn within the meaning of "goods, products or materials." In support of this argument, the insureds contended that once paint has been practical to a building, information technology could not be considered a "skilful, product or material."

Referring to a lexicon of these terms, the court disagreed with the insureds and held that paint could fall within the definition of goods or materials. In affirming the trial courtroom's decision, this higher court stated that "the average policyholder could not reasonably reach a decision of coverage in the particular circumstances hither in light of and having in mind the language of the exclusionary provision."

Lead poisoning exclusions are not limited solely to commercial general liability or excess liability policies. Some insurers issue them likewise with their homeowners and other personal lines policies peradventure to prevent payment with respect to inter-family unit suits. All the same, the major target of adding this kind of an exclusion to personal lines packages is likely to be occupants of rental properties.

I such case is Nationwide Mutual Burn down Insurance Co. v. Mekiliesky, 976 F. Supp. 351 (D. Physician. 1997). The insurer of a homeowners policy sought a declaratory judgment that its exclusion for lead poisoning applied to the occupant of an insured's rental property.

Briefly, the facts were as follows: In 1991, the insured added a pb exclusion to all of its homeowners policies, including those with liability coverage for rental properties. The endorsement excluded personal liability for claims "arising out of the ingestion or inhalation of lead or lead compounds." The insurer alerted its insureds with the new endorsement, issued at renewal, by mailing a stuffer highlighting the exclusion and its impact. This particular notice was mailed to the insured in July 1991 to become effective on August 27, 1991.

The claimant was a tenant of the insured'due south rental holding for the one-year period ending March 1991. The claimant'south girl was diagnosed with an elevated blood pb level on November 24, 1992. It was in 1996 that the insured was sued for damages of $one million. The insurer denied coverage based on its exclusion and the adapt ensued.

The claimant alleged that the insurer'south stuffer did non found adequate notice. The court disagreed. The claimant also lost her second argument for coverage because there were no allegations that the exposure to lead occurred prior to the inception of the exclusion. The allegations, instead, were based on exposure after the exclusion became constructive. The court therefore concluded that the insurer owed no duty to defend or indemnify the insured.

Lead poisoning is hazardous to the health of people. And atomic number 82 exclusions without a doubt can cause financial problems to property owners, because defense costs today, non to speak about the potential for compensatory and castigating damages. Fortunately, the stuffers commonly issued by insurers save producers a lot of time and expense that would otherwise have to be expended in notifying their clients about this exclusion, when issued.

It might exist a good idea for those producers who still outcome newsletters to their clients--as a means to keep in bear on and to provide personal service--to alarm clients to this exclusion, if applicable, and explain why a market for this insurance might exist difficult to find or cost-prohibitive. *