{"id":438,"date":"2022-04-29T11:52:11","date_gmt":"2022-04-29T15:52:11","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/insurancelaw\/?p=438"},"modified":"2022-04-29T11:52:11","modified_gmt":"2022-04-29T15:52:11","slug":"lead-paint-coverage-claim-bites-the-dust","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/insurancelaw\/2022\/04\/29\/lead-paint-coverage-claim-bites-the-dust\/","title":{"rendered":"Lead Paint Coverage Claim Bites the Dust"},"content":{"rendered":"

By: Gina Foran<\/a>, Bill Baron<\/a>, and Phil Matthews<\/a><\/p>\n

Duane Morris lawyers helped secure a victory at the California Court of Appeal when the court held Tuesday that ConAgra\u2019s 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\u2019s promotion of the use of lead paint in pre-1950 homes.\u00a0 (See Certain Underwriters at Lloyd\u2019s London, et al. v. ConAgra Grocery Products Company<\/em>, et al.<\/em>, Case No. A160548, April 19, 2022, certified for publication (\u201cConAgra<\/em>\u201d).)<\/p>\n

The underlying case (the \u201cSanta Clara <\/em>Action\u201d) 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.\u00a0 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.\u00a0 In a pre-trial appeal in the Santa Clara <\/em>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.\u00a0 (See County of Santa Clara v. Atlantic Richfield Co. <\/em>(2006) 137 Cal.App.4th 292, 299 (\u201cSanta Clara I<\/em>\u201d).)\u00a0 The underlying case went to trial under that standard, and the court found the manufacturers jointly and severally liable for representative public nuisance.<\/p>\n

<\/p>\n

In 2017, the Court of Appeal in the Santa Clara <\/em>Action affirmed the finding that the paint manufacturer were liable, although the Court ruled that the amount of the judgment must be re-tried.\u00a0 (People v. ConAgra Grocery Products Co. <\/em>(2017) 17 Cal.App.5th 51 (\u201cSanta Clara II<\/em>\u201d).).\u00a0 In upholding the finding of liability, Santa Clara II <\/em>held that when ConAgra\u2019s corporate predecessor, W.P. Fuller & Co. (\u201cFuller\u201d) marketed paint for use inside homes, Fuller had \u201cactual knowledge of the hazards of lead paint\u2014including childhood lead poisoning,\u201d and specifically that \u201c(1) \u2018lower level lead exposure harmed children,\u2019 (2) \u2018lead paint used on the interiors of homes would deteriorate,\u2019 and (3) \u2018lead dust resulting from this deterioration would poison children and cause serious injury.\u2019\u201d\u00a0 (Santa Clara II, supra, <\/em>17 Cal.App.4th at 85.)<\/p>\n

The plaintiffs\u2019 public nuisance cause of action in the Santa Clara <\/em>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.\u00a0 The trial court in the Santa Clara <\/em>initially ordered the defendants to pay $1.15 billion into an abatement fund.\u00a0 On remand after the 2017 appellate opinion, the Santa Clara <\/em>trial court recalculated the amount of the abatement fund to be $409 million.\u00a0 The parties in that case eventually reached a settlement, which required ConAgra to pay $101,666,666 to resolve the plaintiffs\u2019 claims.<\/p>\n

While the underlying Santa Clara <\/em>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.\u00a0 The coverage case was stayed while the underlying case went forward.\u00a0 The insurers ultimately filed a motion seeking summary judgment on the grounds that: (1) Cal. Ins. Code Section 533 prohibits coverage for ConAgra\u2019s intentional promotion of lead paint with actual knowledge of the health hazards that would result; (2) there was no \u201coccurrence\u201d under the policies because the harm was expected or intended from the standpoint of the insured; (3) the abatement remedy was not liability for \u201cdamages\u201d or an \u201cexpense\u201d under the policies; and (4) ConAgra\u2019s liability was not \u201cbecause of\u201d or \u201con account of\u201d \u201cbodily injury,\u201d \u201cproperty damage\u201d and\/or \u201cpersonal injury\u201d under the policies.<\/p>\n

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\u2019s predecessor, intentionally promoted lead paint for use inside homes with actual knowledge that damage to children was at least highly probable.<\/p>\n

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\u2019s 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\u2019s 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.<\/p>\n

With respect to its first argument, ConAgra reasoned that its predecessor\u2019s 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.\u00a0 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.<\/p>\n

In its second argument, ConAgra contended that even if the focus is on its predecessor\u2019s conduct, Section 533 should not apply because the loss ConAgra was being held liable for was too attenuated from Fuller\u2019s promotions.\u00a0 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\u2019s promotions were held to be actionable, and the harm resulted decades after the wrongful conducts, ConAgra argued that Section 533\u2019s 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 \u201csingle conduit\u201d between defendants\u2019 actions and the current hazard. The Court of Appeal stated that the underlying litigation conclusively established ConAgra\u2019s 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.<\/p>\n

ConAgra last argued that the underlying findings did not establish that Fuller acted with the requisite knowledge under Section 533. ConAgra argued that the \u201cactual knowledge\u201d found was not the same as the subjective \u201csubstantial certainty\u201d 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.\u00a0 Because the courts in the Santa Clara <\/em>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 \u201csubstantially certain\u201d or \u201chighly likely\u201d to result in a hazard. This evidence satisfied Section 533\u2019s willful act requirement.<\/p>\n

As part of its last argument, ConAgra asserted that Section 533 could bar coverage only if it was proven that Fuller\u2019s 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.<\/p>\n

Accordingly, the Court of Appeal affirmed the lower court rulings and upheld summary judgment in favor of the insurers.<\/p>\n

See full opinion here<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

By: Gina Foran, Bill Baron, and Phil Matthews Duane Morris lawyers helped secure a victory at the California Court of Appeal when the court held Tuesday that ConAgra\u2019s 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\u2019s … <\/p>\n

Continue reading “Lead Paint Coverage Claim Bites the Dust”<\/span><\/a><\/p>\n","protected":false},"author":310,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"ppma_author":[430,416,426],"class_list":["post-438","post","type-post","status-publish","format-standard","hentry","category-general"],"authors":[{"term_id":430,"user_id":310,"is_guest":0,"slug":"gmforan","display_name":"Gina M. Foran","avatar_url":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-content\/uploads\/sites\/12\/2018\/02\/forangina-125x150.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""},{"term_id":416,"user_id":59,"is_guest":0,"slug":"wjbaron","display_name":"William J. Baron","avatar_url":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-content\/uploads\/sites\/12\/2014\/08\/baronbill-125x150.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""},{"term_id":426,"user_id":127,"is_guest":0,"slug":"prmatthews","display_name":"Philip R. Matthews","avatar_url":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-content\/uploads\/sites\/12\/2014\/08\/matthewsphil-125x150.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/posts\/438","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/users\/310"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/comments?post=438"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/posts\/438\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/media?parent=438"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/categories?post=438"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/tags?post=438"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/ppma_author?post=438"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}