Troutman Sanders LLP: 4th Circuit Limits Insurer’s Liability for Lead Poisoning

Troutman Sanders LLP: 4th Circuit Limits Insurer’s Liability for Lead Poisoning

By Karen Ventrell and Gabriela A. Richeimer

Relying on the plain meaning of an insurance contract, the United States Court of Appeals for the Fourth Circuit held that an insurer's obligation to indemnify its insured is limited to that portion of a judgment attributable to the claimant's injury during the policy period. In Pennsylvania National Mutual Insurance Company v. Roberts, et al., the claimant in the underlying lead poisoning case had obtained a $2 million judgment against two owners of the property at which she resided from her birth in 1990 through 1998. Penn National's insured (Attsgood) owned the property until November 1993 when it sold it to the other (uninsured) defendant. The court rejected the claimant's argument that Penn National should be liable to pay the entire $2 million judgment because its insured was jointly and severally liable for the entire judgment.

First, it held that the terms of the insurance contract plainly indicated that the insurer never agreed to cover the risk of the entire state judgment. Instead, the contract limited the obligation to indemnify to damages for bodily injury that occurred during the policy period at premises that the insured owned, rented or occupied. The court also found that claimant's argument conflicted with Maryland law. In lead paint or continuous trigger cases, Maryland courts apply a "pro rata by time-on-the-risk allocation" of liability, allocating damages to each insurer based on the period of time it was on the risk compared to the entire period during which damage occurred and allocating damages to the insured for uninsured periods.

In this case, the insurer was required to pay only 40% of the judgment representing damages for injury that began when the insurer's policy incepted in January 1992 (when the claimant was one-year old) until the property was sold by the insured. While that "regrettable reality" meant the claimant might not be able to recover the remaining 60% of the judgment from the defendant property owners, it did not allow the court to ignore Maryland law. Under the claimant's theory, an insurer who collected premium based on one year of coverage could be liable for the same amount as an insurer who collected premium for ten years of coverage. The court reasoned that this theory would upend insurance underwriting and provide disincentives to businesses to insure their liability. Citing to numerous opinions from and outside of Maryland, the court agreed that neither logic nor precedent supported the claimant's argument.

Finally, the court rejected the claimant's attempt on appeal to contradict her own evidence in the trial court demonstrating that her exposure and injury began long before her first elevated blood lead level. On appeal, the claimant asserted that her injuries did not begin at birth but instead 20 months later with her first blood lead level reading of 28 mcg/dL. According to the 4th Circuit, the trial court's finding that claimant's injuries began at birth was soundly based on evidence that the claimant was exposed to substantial amounts of lead-based paint, chips and dust from birth, which, based on expert testimony, impaired development of her brain as an infant and toddler. Given such evidence, the court found claimant's "change in tune" not credible and driven instead by an effort to minimize the total period of exposure and thereby increase the insurer's share and maximize her recovery.

© TROUTMAN SANDERS LLP. ADVERTISING MATERIAL. These materials are to inform you of developments that may affect your business and are not to be considered legal advice, nor do they create a lawyer-client relationship. Information on previous case results does not guarantee a similar future result.

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