BY MICHAEL ZELDES, KAYE INSURANCE ASSOCIATES
While lead paint horror stories seem
to have lost their place on the front page these days, (thanks, Mr. President),
the exposure faced by owners and managers ofmultifamily dwellings remains. Landlords
continue to find themselves faced with lawsuits seeking damages for alleged
neurological injuries sustained by young children residing in their buildings.
Only last year a Brooklyn jury returned an $11 million verdict, believed to
be the largest of its kind in New York State, to an 8 year old boy who suffers
from severe mental retardation as the result of his exposure to lead paint while
living in a New York City owned building. The attorney for the plaintiff demonstrated
at trial that the City had cited itself for violating two lead poisoning violations,
failed to correct the violations, and was then cited by another City agency
for failure to abate.
Far more prevalent than the reported large verdicts, however, are the growing number of frivolous lawsuits made by claimants who have little or no exposure to lead from their residences, and who are ultimately found to have negligible traces of lead in the blood. In some cases, claimants are found never to have actually resided in the apartment building in question. Unfortunately, groundless suits cost money to defend and depending on a host of mitigating factors, often settle in the $5,000 - $250,000 range.
Until recently, insurance against this dangerous exposure has been difficult to come by. In the past five years dozens of insurance carriers have applied for and been granted Lead Paint Liability Exclusions for their Commercial General Liability Policy Forms by the State Insurance Department. Some relief was offered by several specific lead paint liability policies that came onto the market within the past 5 years. Unfortunately, these policies are all written on less comprehensive policy forms than the Commercial General Liability Policy and in some cases are underwritten by carriers not licensed in New York State.
Help is now finally on the way. We are pleased to report that Commercial General Liability Policies with no specific Lead Based Paint Exclusion are now available to the small midsized owner/managers. In addition, several umbrella liability carriers have followed suit. It is now possible for an owner of a 50 unit apartment building to purchase high limits of liability insurance that will not specifically exclude lead based paint claims. Adding to the good news are several recent Federal Court decisions that have held that carriers cannot deny coverage for lead claims on the premise that the standard Pollution Exclusion included on nearly all Liability policies does not apply to lead poisoning. In Lefrak Organization, Inc. vs. Chubb Custom Ins. Co. (October 1996), the US District Court, for the Southern District of New York held that the absolute pollution exclusion is ambiguous as to whether it precluded coverage for lead paint and, thus, the insurers duty was to defend was triggered. Another case from the same Court, Sphere Drake Ins. Co. vs. Y.L. Realty Co. (October 1997) held that the pollution exclusiondid not encompass the lead paint poisoning alleged in that action.
TESTING YOUR BUILDING
Will your building(s) qualify for a Liability Policy written with no specific Lead Paint Exclusion? First, answer the following questions:
Next seek out an insurance professional whose expertise is in arranging coverage for owner/mangers of residential real estate in the New York Metro area. It only makes sense that an insurance broker who specializes in your business will be most effective in negotiating the broadest coverage terms available at the best premium value. These days that may mean high limit liability protection that does not specifically exclude lead paint claims.
Michael Zeldes is Director of
New Business and Real Estate Program Development for Kaye Insurance Associates,
Inc. In his 10 years at Kaye, Mike has arranged Insurance and Risk Management
Programs for hundreds of New York Area Property Owners, Managers, Cooperative
and Condominiums and has authored numerous articles on Lead Based Paint Liability.
Mike can be reached at 212-338-2800.