Appeals Court: Insurer Only Partially Liable in Lead Poisoning Case

The 4th U.S. Circuit Court of Appeals has ruled an insurance company is only obligated to indemnify the victim of lead paint poisoning for prolonged injuries she sustained during the policy coverage, court records say.

The court recently ruled that Pennsylvania National Mutual Casualty Insurance Co. is liable for only 40% of the total damages awarded to a Baltimore girl who contracted lead poisoning while living in a rented house. A federal jury initially awarded $2 million to Lakia Roberts for her injuries, but that amount was later reduced to $850,000 under Maryland's noneconomic damages cap.

Several states in recent years have enacted noneconomic damage caps. North Carolina in July became the latest state to pass such a law when lawmakers overturned the governor's veto (Best's News Service, July 28, 2011).

Roberts lived in the rented home from her birth in January 1992 until 1998, records say. She was diagnosed with lead poisoning in September 1992 and filed a lawsuit in 2005 against her landlords

Pennsylvania National, which wrote coverage for the landlord from January 1992 until January 1994, is liable for $340,000. The court prorated the insurer for the 55-month-long damages and deemed the lead poisoning a "continuous trigger" case.

"The principle underlying our decision is a straightforward one: An insurance company cannot be held liable for periods of risk it never contracted to cover," the court wrote in its decision.

Lawyers for Roberts argued that Pennsylvania National should be in the hook for the entire amount because it became legally obligated to pay during the policy period. The court disagreed saying it would "upend insurance underwriting."

"To place the entire judgment on the insurer would be chaotic, rewarding to those who decline to purchase adequate coverage and ultimately punishing those who do," the court wrote.

Attempts to reach Pennsylvania National and the lawyer who handled the case were unsuccessful.

Pennsylvania National currently has a Best's Financial Strength Rating of A- (Excellent).

The top five writers of commercial liability in Maryland in 2010, according to BestLink, were: Travelers Group, with market share of 10.5%; Erie Insurance Group, with 9.9%; Liberty Mutual Insurance Cos., with 8.8%; Hartford Insurance Group, with 8.3%; and State Farm Group, with 5.1%.

(By Michael Buck, senior associate editor, BestWeek: Michael.Buck@ambest.com)