Sherwin-Williams Says Insurers Want Lead-Paint Case Exemption

Insurers want to create a “blanket rule” against abatement coverage, following Sherwin-Williams’ $100 million-plus settlement in a California lead paint case, a lawyer for the Cleveland paint giant told the Ohio Supreme Court on Tuesday.

But such a request has no basis in Ohio law, Leon F. DeJulius Jr. of Jones Day told the justices. He urged the court to reject the arguments made by the insurance companies, which include Lloyd’s of London and Berkshire Hathaway Direct Insurance Co.

“The insurers are asking for a blanket rule that would bar coverage for all public nuisance actions, notwithstanding the language of the policies, notwithstanding the type of public nuisance that was brought,” DeJulius said. “If the insurers wanted an exclusion, they should’ve negotiated for one, and in fact there are policies in which insurers have negotiated a lead paint exclusion.”

An attorney for the insurance companies, however, said that Ohio Supreme Court precedent requires a more specific finding to trigger coverage, namely that a company caused a specific injury to a specific person. He said the remedy in this case doesn’t compensate anyone for their loss.

“The remedy here is never going to involve any homeowner establishing that he or she or they suffered property damage at their property,” Jonathan D. Hacker of O’Melveny & Myers LLP said. “There’s just an assumption on Sherwin’s part that any property out there with lead paint on it must have suffered property damage.”

California Case

The Cleveland-based company argues that its insurers must indemnify it from claims it, ConAgra Grocery Products Co., and NL Industries Inc. first faced from multiple California cities and counties more than two decades ago over the neurological harms of lead house paint.

A Santa Clara County judge found after a six-week trial that the companies had created a public nuisance and tentatively set the amount the companies must pay for abatement at $409 million, a figure designed to cover the cost of inspection and abatement in homes built before 1951.

The trio settled in 2019 for $305 million, with each taking a third of that amount.

The case in front of the Ohio Supreme Court centers on whether commercial general liability insurance policies cover claims to pay into an abatement fund. It also deals with whether a policyholder is covered if it was “substantially certain” or had “actual knowledge” that it was causing harm, and whether policies with the term “damages” must cover claims that aren’t tied to a specific loss or injury.

‘Construed in Favor of Coverage’

The justices took up the case after a panel from the Cleveland-based Eighth District Court of Appeals reversed a trial judge’s decision and ruled 2-1 that the abatement money that Sherwin-Williams agreed to pay is considered damages under the policies and that the insurers must chip in.

The insurance companies argued in their brief that “if Ohio courts can ignore the actual basis for liability and expand coverage beyond contractual terms, as the Eighth District did here, insurance will become vastly more uncertain and expensive, including for businesses that did not cause expected harm to the public.”

Sherwin-Williams, meanwhile, said in its brief that the case is a contract case about insurance policies in Ohio and that “policy terms are given their plain and ordinary meaning and, when capable of more than one reasonable interpretation, construed in favor of coverage.”

The justices didn’t give any clear indication of their leanings during over 40 minutes of arguments.

Justice Jennifer Brunner asked Hacker whether this case would be different if the California litigation was brought as a class action. Hacker responded by saying, “I couldn’t agree more.”

As for whether Sherwin-Williams properly knew about the harm lead paint caused, Carl S. Kravitz of Zuckerman Spaeder LLP, who represented the insurers, noted that the California court said the paint company knew by 1900 that lead was a “deadly cumulative poison” and advertised its products knowing of the public health hazard it would create.

DeJulius, however, said a trial court in Ohio needs to determine the “expected or intended” issue because the California courts didn’t address it.

“It talks about knowledge of risks,” DeJulius said. “And it certainly wasn’t essential to judgment. It was whether there was knowledge of a hazard to be created. That’s not expected or intended.”

The case is The Sherwin-Williams Co. vs. Certain Underwriters at Lloyd’s London, Ohio, No. 2023-0255, oral argument 10/24/23.