The vast majority of courts have interpreted the absolute pollution exclusion to bar coverage for environmental pollution damage. However, this clause has been construed by courts to not exclude coverage for claims arising out of injuries caused by the presence of lead paint in a residential setting. In this article, we examine the process by which courts have determined that lead paint within a home is not a pollutant as well as explore the future of lead paint poisoning claims under homeowners policies.

Background On Lead Paint

The Environmental Protection Agency (EPA) and the Federal Department of Housing and Urban Development (HUD) have determined that as many as 64 million homes and apartments contain lead-based paint. Most were built before 1978 when the sale of lead-based paint was banned. Lead poisoning occurs when lead enters the bloodstream either by ingestion or inhalation of lead dust or fumes. Children between six months and six years are at the highest risk of lead poisoning XL Environmental Claims Administrators use of their rapidly developing brains. According to HUD, lead poisoning has been linked to reduced intelligence and developmental problems in young children.

Overview Of The Pollution Exclusion

In 1970, the insurance industry first formulated a standard pollution exclusion. This "sudden and accidental" pollution exclusion clause denied coverage for:

bodily injury arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids, or gasses, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water; but this exclusion does not apply if such discharge, dispersal, release, or escape is sudden and accidental; . . .

The purpose of the "sudden and accidental" exclusion was to eliminate coverage for damages from pollution of the environment. However, inconsistent judicial interpretations of the "sudden and accidental" exception in the standard pollution exclusion clause led the insurance industry to revise the pollution exclusion. In 1985, the insurance industry eliminated the "sudden and accidental" language and adopted the absolute pollution exclusion which denied coverage for "bodily injury or property damage arising out of the actual, alleged or threatened discharge, release, or escape of pollutants" and defined "pollutant" as "any solid, liquid, gaseous or thermal irritant or contaminant including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste."

Application Of Absolute Pollution Exclusion To Lead Paint Poisoning Cases

In D. Paul Sullins, et al v. Allstate Insurance Co., No. 7, Sept. Term 1995, Md. Ct. of App., the Maryland Court of Appeals considered the issue of whether an absolute pollution exclusion in a homeowners policy applied to a lead paint poisoning claim brought by a tenant on behalf of her infant daughter. The absolute pollution exclusion in the Deluxe Homeowners Policy excluded coverage for:

bodily injury or property damage which results in any manner from the discharge, dispersal, release, or escape of:

• vapors, fumes, acids, toxic chemicals, toxic liquids, or toxic gasses;
• waste materials or other irritants, contaminants or pollutants.

In determining that the absolute pollution exclusion did not obviate the insured's duty to defend, the Maryland Court of Appeals analyzed the history of the pollution exclusion. The court concluded that the insurance industry's intent was to exclude only environmental pollution damage from coverage. The court agreed with the reasoning of the Supreme Judicial Court of Massachusetts in Atlantic Mut. Ins. Co. v. McFadden, 413 Mass. 90, 595 N.E. 2d 762, 764 (1992), where the court held that the term "pollutant" was ambiguous as applied to a lead paint poisoning claim. In McFadden the court stated that:

The definition of "pollutant" in the policy does not indicate that leaded materials fall within its scope. Rather, the terms used in the pollution exclusion, such as "discharge," "dispersal," "release," and "escape," are terms of art in environmental law which generally are used with reference to damage or injury caused by improper disposal or containment of hazardous waste.

The Maryland and Massachusetts decisions are to be contrasted with the holding in U.S. Liab. Ins. Co. v. Bourbeau, 49 F. 3d 786 (1st Cir. 1995). In Bourbeau, the First Circuit affirmed the District Court's ruling that the absolute pollution exclusion precluded coverage for property damage caused by alleged lead paint contamination. The court held that lead paint is unambiguously a "pollutant" where the paint, stripped from the outside of a building, contaminates the surrounding soil. In distinguishing McFadden, the Bourbeau court stated that McFadden concerned personal injury caused by the presence of lead in a household and thus was not an environmental pollution case. On the other hand, "this case concerned injury to property caused by the alleged negligent discharge of lead paint onto property. [Bourbeau] is a classic example of 'pollution' - the discharging of a harmful substance onto land - while [McFadden] is most demonstrably not. An objectively reasonable person simply would not ascribe the word 'pollution' to the presence of lead paint in a house." Id. at 789.

The Sullins decision demonstrates judicial reluctance to apply the absolute pollution exclusion in contexts other than environmental pollution cases.

Residential Lead-Based Paint Hazard Reduction

To protect families from exposure to lead, Congress passed the Residential Lead-Based Paint Hazard Reduction Act of 1992. The Act, which takes effect later this year, requires that owners of homes built before 1978 must disclose to buyers or renters any knowledge or information they have concerning the existence of lead-based paint in the dwelling. Starting September 6, 1996, owners of more than four residential dwelling units must comply with federal regulations requiring disclosure of known lead-based paint hazards in dwellings. On December 6, 1996, owners of nearly every other kind of residence, including single-family homes, will be required to comply with the regulations. The Act does not require any testing or removal of lead-based paint by sellers or landlords.

It remains to be seen whether the introduction of the Residential Lead-Based Paint Reduction Act will register an impact on the number of lead paint claims under homeowners policies. Equally important will be the insurance industry's reaction to this Act and whether insurers will offer property owners specific incentives to eliminate lead-based paint problems.