Landmark Lead Paint Ruling Imposes Nuisance Liability Because Defendants “Must Have Known” Product Dangers, and Even If Their Product Not Used

The California Court of Appeal in People v. ConAgra Grocery Prods. Co. has upheld in part and reversed in part a decision that put the three defendants, ConAgra Grocery Products Company, NL Industries, and the Sherwin-Williams Company, on the hook for a $1.15 billion fund for the abatement of residential lead paint in parts of California. While the amount of the abatement fund will be reduced on remand, the decision stands as the first major lead paint public nuisance award, with implications for other companies that market products considered “defective” in hindsight.

Plaintiff, the State of California, representing 10 jurisdictions throughout the state, filed suit in 2011 alleging that the defendants created a public nuisance through their manufacture, promotion, and sale of lead pigment and lead paint for use in California homes. The trial court found that the defendants had actual knowledge of lead paint hazards when they promoted their products for residential use for decades before the sale of lead paint was eventually banned in 1978.

Defendants appealed the trial court judgment on multiple grounds. The appellate court agreed with defendants that there was insufficient evidence demonstrating that defendants promoted lead paint for residential use after 1951, and remanded the matter to the trial court to recalculate the amount of the fund so that it covered remediation only in pre-1951 homes. The rest of the trial court’s decision, however, was affirmed, with costs awarded to plaintiff.

An important takeaway from this decision is that the appellate court was satisfied that “must have known” was an adequate replacement for actual knowledge. The decision opined that it was neither speculation nor conjecture to infer that because the defendants were leaders in the paint industry at the time, they “must have”been aware of potential hazards of lead paint. “Indeed,” the panel stated, “it would be unreasonable to infer that, notwithstanding general knowledge of the hazard of their products within the industry, defendants somehow managed to avoid learning of this hazard.” Evidence that the defendants received information from a trade group in the 1930s on lead’s dangers of and children’s susceptibility was among what was found to constitute “substantial support” for the trial court’s actual knowledge findings. Acknowledging that the evidence presented by plaintiff on this point was circumstantial, the appellate court essentially all but admitted that its hands were tied under the deferential standard of review and it had no choice but to uphold the trial court’s actual knowledge findings.

Another startling portion of this opinion was the rejection of the defendants’ argument that they should not be held liable because plaintiff could not establish that their products were in any of the homes in the 10 jurisdictions. The court ruled that this “contention misconstrues the basis for defendants’ liability. Defendants are liable for promoting lead paint for interior residential use. To the extent that this promotion caused lead paint to be used on residential interiors, the identity of the manufacturer of that lead paint is irrelevant.” The court found that while the evidence plaintiff presented consisted of “generic” promotions that didn’t refer to any specific manufacturer, it nonetheless was a substantial factor which resulted in “the use of lead paint on residential interiors,” and that the evidence supported the court’s finding of causation on that basis.

Perhaps the greatest significance of this decision is that plaintiff prevailed on a public nuisance theory. Public nuisance claims in other contexts traditionally reserved for product liability (including asbestos abatement, MTBE, and firearms) have proven largely unsuccessful in part because of the difficulty of establishing the link between the alleged injury to a public rig ht and the manufacturer’s conduct, two occurrences often temporally separated by decades. In fact, many earlier lead paint cases filed in other jurisdictions under various theories of public nuisance often failed because the plaintiffs could not establish, among other things, the requisite proximate cause.

It is of stark importance that the ConAgra court rejected defendants’ arguments concerning actual knowledge and causation in this public nuisance claim. Plaintiff prevailed despite the absence of direct evidence that defendants had actual knowledge of the hazards of interior lead paint at the time they were promoting it, and without having to show that any of defendants’ products were present in any of the homes. Will courts begin to construe other “industry leaders” as having knowledge of all risks for all purposes? Can participation in trade groups which promoted the use of generic categories of products like asbestos-containing brake pads or herbicides expose specific companies to future liability? Could the reasoning that defendants were liable regardless of whether their paint was in fact used in any of the homes seep into the product liability arena, where such tenuous evidence would be insufficient to establish duty? This decision will likely have a short term impact on pending high-profile public nuisance cases, like opioids and climate change. We may also see long term ripples across industries in California where companies may face liability years—or even decades—down the road for a future, but presently unknown, harm in the form of public nuisance claims with vague legal standards and the potential for massive awards.

Georgia Supreme Court Denies Coverage for Lead-Based Paint Injuries Based on the Pollution Exclusion

In a matter of first impression, the Georgia Supreme Court recently held that personal injury claims arising from lead poisoning due to lead-based paint ingestion were excluded from coverage under an absolute pollution exclusion in a commercial general liability insurance policy covering residential rental property.  The decision in Ga. Farm Bureau Mut. Ins. Co. v. Smith, S15G1177, 2016 Ga. LEXIS 245 (Ga. Mar. 21, 2016) is significant for insurers since it expressly rejects the notion that a pollution exclusion clause is limited to traditional environmental pollution.leadpainthork

The facts are straightforward.  Amy Smith (“Smith”), individually and as next friend of her daughter Tyasia Brown (“Brown”), sued her landlord, Bobby Chupp (“Chupp”), for injuries Brown allegedly sustained as a result of ingesting lead from deteriorating lead-based paint at the house Smith rented from Chupp.  Georgia Farm Bureau Mutual Insurance Company (“GFB”) insured the house under a CGL policy issued to Chupp.  Chupp tendered Smith’s claims to GFB,  and the insurer filed a declaratory judgment action against Smith and Chupp seeking a determination that Brown’s injuries were not covered under the policy and that it had no duty do defend Chupp against Smith’s claims.

GFB contended, among other things, that Brown’s injuries from lead poisoning were excepted from coverage by the policy’s pollution exclusion, which defined “Pollution” as “‘[b]odily injury’ or ‘property damage’ arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ . . . .”  The policy defined “pollutant” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”

In granting summary judgment to GFB, the trial court relied on the Georgia Supreme Court’s decision in Reed v. Auto-Owners Ins. Co., 284 Ga. 286 (2008), which addressed the proper construction of an identical pollution exclusion in a CGL policy insuring residential rental property wherein a tenant sued her landlord for carbon monoxide poisoning.  Although not explicitly listed in the policy as a pollutant, the Reed Court held that carbon monoxide gas fell within the policy’s definition of a pollutant and concluded that all of the plaintiff’s injuries arising therefrom were excluded from coverage under the pollution exclusion.

lead-paint-epa-dangerOn appeal, the Georgia Court of Appeals reversed the trial court’s grant of summary judgment to GFB.  The Court of Appeals observed that the specific issue of whether lead-based paint should be considered a “pollutant” under the pollution exclusion clause was one of first impression in Georgia, and noted that a conflict existed among other jurisdictions on this issue.  The Court of Appeals sided with those foreign courts holding that a pollution exclusion similar to the instant one did not bar coverage for injuries arising out of the ingestion or inhalation of lead-based paint. The Court of Appeals rejected the trial court’s interpretation of Reed, finding that while a straightforward reading of the pollution exclusion in Reed compelled the conclusion that carbon monoxide gas was a pollutant, it was unclear whether identical language in the instant policy was expansive enough to unambiguously include lead, lead-based paint or paint as a pollutant.

In its analysis, the Georgia Supreme Court found that GFB’s CGL policy contained an absolute pollution exclusion that precludes recovery for bodily injury or property damage resulting from exposure to any pollutants.  Overviewing the genesis and development of the absolute pollution exclusion, the Court highlighted the litany of Georgia decisions, including Reed, that have repeatedly applied such clauses outside the context of traditional environmental pollution.  Further, the Court rejected the notion that the pollutant at issue must be explicitly named in the policy to be enforceable.

In reversing the Court of Appeals, the Georgia Supreme Court followed Reed and found that GFB’s CGL policy unambiguously governed the factual scenario.  Simply put, the Court of Appeals failed to apply the plain language of the contract.  Accordingly, the Georgia Supreme Court held that lead present in paint unambiguously qualifies as a pollutant and that the plain language of the policy’s pollution exclusion excluded Smith’s claims against Chupp from coverage.

*** On March 3, 2016, this author published a related blog article on a recent Vermont Supreme Court decision holding that the plain language interpretation of a pollution exclusion in a homeowner policy barred coverage for property damage to a home rendered uninhabitable by an over-application of a bed bug pesticide.

Lead Pigments in Paint and Public Nuisance Law

Lost in the learned treatises written in the wake of the Rhode Island Supreme Court’s decision in State of Rhode Island v. Lead Industries Association, Inc.  (July 1, 2008),  which properly held that manufacturers of lead pigment are not liable under a nuisance theory for the harm caused by the use of lead paint, is discussion of the significant loss of market capitalization and shareholder value to Sherwin Williams and other manufacturer defendants who have been defending these nuisance claims for the past several years.  Apparently, there is no mechanism in Rhode Island for a defendant to file an interlocutory appeal to challenge a trial court’s denial of a defendant’s motion to dismiss a complaint as a matter of law.  Had an interlocutory appeal been available to the lead pigment manufacturers, there is no doubt that the Rhode Island Supreme Court would have ended years ago the State Attorney General’s misguided crusade to have the defendants pay billions of dollars to remediate lead contamination in an estimated 240,000 houses  and apartments, 12,969 seasonal housing units, 419 child care centers and 339 elementary schools.  Notions of basic fairness suggest that a defendant facing a potential liability of this magnitude should be able to obtain appellate review of the plaintiff’s right to proceed before having to incur the cost and uncertainty of a court trial.  A defendant with less resources than the lead pigment manufacturers might have been forced into a premature settlement with the State or even sought bankruptcy protection prior to waiting out the lengthy appeals process.