The tort wars appear to be turning in favor of insurers on the environmental liability front, at least judging from a series of recent court decisions backing risk managers and their insurers.

The decision by the City of Columbus, Ohio, earlier this month to voluntarily dismiss with prejudice its public nuisance lawsuit against former manufacturers of lead pigment is just the initial fallout of two significant, positive court decisions for property-casualty insurers and insurance buyers over the last several weeks.

In the first, the U.S. Supreme Court--in a decision involving the Exxon Valdez tanker oil spill disaster off the coast of Alaska--limited punitive damages in federal court tort cases to a 1:1 ratio of actual damages.

In the second case--the direct precursor of the Columbus decision--the Rhode Island Supreme Court unanimously dismissed a lawsuit demanding that manufacturers of lead paint pigment pay the billions of dollars needed to abate the risk of lead poisoning faced by kids who live in the older structures where lead paint remains a menace. (See NU, July 7, page 6).

Although these cases have been filed throughout the country, dismissal of the Rhode Island suit leaves only two public nuisance suits still pending--one filed by the state of Ohio, and another by Santa Clara and other California municipalities.

Mark Behrens, a partner at Shook, Hardy & Bacon in Washington, D.C., called the Rhode Island decision a "landmark."

Mr. Behrens said the Rhode Island Supreme Court's decision tossing out the state's lead paint suit was a "critical blow" to those trying to turn the law of public nuisance into a "super tort."

He said the court's opinion essentially shuts down the use of public nuisance law in Rhode Island for all product-type cases. "The 4-0 opinion sends a clear and consistent message to other courts that may consider public nuisance claims," he added.

He said the decision also must be viewed in the context of recent, similar decisions by the top courts of Missouri, New Jersey and Illinois (the latter on firearms).

"Together, these cases clearly favor the rejection of product-based public nuisance claims," he said. "There is the possibility for an aberrant ruling from some other court, but on the whole, this faux tort has been properly kept in its box."

Charles H. Moellenberg Jr., an attorney for Sherwin-Williams Company--one of the defendants in the lawsuits filed across the country against lead paint pigment makers--said that "the lawyers who sold Columbus on this lawsuit made much of similar litigation in Rhode Island."

"Now, the unanimous ruling by the Rhode Island Supreme Court that dismissed the Rhode Island case has confirmed that public nuisance lawsuits are ill-advised and without merit," he added.

Mr. Moellenberg said "extraordinary progress has been made in addressing lead risks to children from all sources," noting that "enforcement of current Ohio law requiring property owners to keep their properties in a safe condition and free of hazards will finish the job."

As for the U.S. Supreme Court decision in the Exxon Valdez case--one of the last decisions of its current term--Mr. Behrens said the decision signals "new frontiers" in the debate over punitive damages.

Mr. Behrens cautioned that the case is not a constitutionally based ruling that will have a direct impact on state law because it was decided by the U.S. Supreme Court under maritime law, sitting as a common law court.

Nevertheless, he said the Supreme Court decision signaled that courts may place limits on excessive punitive damages awards as a matter of common law, and those limits may be stricter than what the U.S. Constitution may impose under the due process clause.

In the past, he said, some state courts had used the common law to raise the burden of proof (from a preponderance of the evidence to clear and convincing evidence) and trigger (from gross negligence to actual malice) for punitive damage awards.

However, he noted, by creating a common law limit applicable to maritime cases, the U.S. Supreme Court "has thrown the door open for state courts to consider similar limits as a matter of state common law."

The decision also may impact litigation involving constitutional challenges to allegedly excessive awards, he said.

The high court was careful to examine empirical studies documenting that the vast majority of punitive damages bear a 1:1 ratio to compensatory damages, Mr. Behrens explained.

"It was this evidence that the court seized upon to set a 1:1 ratio for punitive damages in maritime actions," he said. "The analysis and studies relied upon by the court should lead other courts to view awards with higher ratios to be presumptively suspicious."

Special Reports /

Recent Court Rulings On Public Nuisance Suits, Punitive Damages Favor Insurers

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