In 1992 the U.S. Congress passed the Residential Lead-BasedPaint Hazard Reduction Act to require disclosure of knowninformation on lead-based paint and lead-based paint hazards beforethe sale or lease of most housing built before 1978. Lead-basedpaint was banned for residential use in 1978.

The U.S. Environmental Protection Agency (EPA) reports thataround "three-quarters of the nation's housing stock built before1978 -- approximately 64 million dwellings -- contain somelead-based paint." In March 2001, the U.S. Department of Housingand Urban Development (HUD) published a field guide about leadpaint safety, noting that approximately 98 percent of the homesbuilt before 1940 probably contained lead-based paints.

HUD further stated that while poor maintenance of lead-basedpaint primarily endangers children "repainting and/or renovationthat disturb lead-based paint in a well-maintained homecan also expose children to unsafe levels of lead. . . . Lead-basedpaint can also pose a threat to workers by causing damage to theirbrains, and nervous and reproductive systems.

In this same field guide, HUD put forth the principle that oneshould assume that paint in homes built before 1978 contain lead,unless a lead-based paint inspection shows it does not. The guidealso covers many potential problems and recommends solutions andsafety measures to prevent lead-based paint contamination to theproperty.

In September 1999, the EPA put out a handbook intended forcontractors, property managers, and maintenance personnel titledThe Lead-Based Paint Pre-Renovation Education Rule. Therule applies to residential houses and apartments built before1978. The handbook requires, among other things, the distributionof a pamphlet -- Protect Your Family from Lead in YourHome -- to owners and occupants and obtaining confirmation ofreceipt of the pamphlet before starting renovation work involvingpainted surfaces, either inside or outside of the building.

In April 2008, the EPA issued a rule requiring the use oflead-safe practices. In December 2008, the EPA required contractorsperforming work that disturbed lead-based paint distribute toowners and occupants of the property a safety pamphlet titledRenovate Right: Important Lead Hazard Information for Families,Child Care Providers, and Schools. This rule applied topre-1978 housing and pre-1978 child-occupied facilities.

On October 20, 2009, Wisconsin became the first state in thenation to administer and enforce a Lead Renovation, Repair andPainting (RRP) program. Other states may enact similar legislationbefore or after April 2010. Be sure and keep track of both federaland state requirements.

By April 2010, contractors working on properties involvinglead-based paint will be required to be lead-certified by the EPAand use lead-safe work practices. Contractors should completetraining, learn the laws, keep records about employee training, andapply to the EPA and submit a fee for certification. A copy of thecertification (EPA or state, as applicable) should be supplied toclients. You can also learn more about lead-based paint and theEPA's lead program at the EPAsite.

While these guidelines and requirements specifically targetproperty owners, sellers, maintenance workers, and contractors,they are not limited to only those parties. A number of thepublications refer to other unnamed parties that might be involvedin the renovation and repair of properties that contain or maycontain lead-based paints. A section of the Federal Register, EPA40 CFR Part 745, states that the listing of contractors, owners,specialty trades, and so on is not intended to be exhaustive, butprovides a guide for readers regarding entities likely to beaffected by this action.

Insurance companies and adjusters are closely involved withcontractors and property owners and have a special relationship --quasi-fiduciary, good-faith, fair-dealing, and so on -- withpolicyholders, and therefore it should be anticipated that theregulations may encompass them as well. If nothing else, insuranceindustry standards and the implied covenant of good faith and fairdealing require that insurers be aware of the lead-based paintissues and try to make sure that claim-handling practices avoidproblems and issues that could result from lead-based paintcontamination.

Insurers and adjusters are very much involved with covereddamages to properties built before 1978 and are tasked with theresponsibility of determining the nature and extent of damagescovered; approving the cost of remediation and repair; and payingpolicy benefits under insurance policies. They should be aware ofthe hazards involved in failing to properly recognize and establishdamages. The presence or possible presence of lead-based paint maydramatically affect the method and the cost of repairing thedamage. This can also impact the health of all who come intocontact with the damaged lead-based paint property.

Failure to take lead-based paint into consideration -- bytesting or otherwise -- may lead to a severe underestimation of thedamages to (and consequently the cost of) safely repairing thedamages. It is assumed that properties built before 1978 containlead-based paint. The adjuster should make sure that any vendor(especially one suggested, recommended, or required by theinsurance company) working on the property determine whetherlead-based paint is present before performing any destructivetesting, tear-out, repairs, or painting. Failure to test may resultin the contamination of the involved property and the exposure ofthe occupants and the workers, including any adjuster that visitsthe property, to potentially hazardous substances.

The hazards of lead-based paint were known prior to 1978 whensteps were taken to reduce or eliminate the use of lead-basedpaints. The EPA and HUD, among others, have been issuing factsheets, guidelines, pamphlets, and handbooks since at least 1996.Rules concerning work and repairs involving lead-based paint havebecome more and more stringent since at least 1999.

The requirement that anyone working with the renovation orrepair of lead-based paint properties be certified by the EPA orappropriate state agency by April 2010 means that the insuranceindustry must educate its adjusters about how to deal with thelead-based paint issues and what to expect and ask of thecontractors performing work involving insurance benefits forcovered damages.

Insurance industry standards set forth by the NationalAssociation of Insurance Commissioners, most Unfair ClaimsSettlement Practices regulations enacted at the state level,and nationally recognized claim-handling text books require thatinsurers adopt and implement reasonable standards forclaim-handling and investigation. The proper and timelyestablishment of the covered damages is one of the standards. Theadjuster's investigation into the cause, nature, and extent of theloss includes the determination of whether the physical damageinvolves issues such as lead-based paint, asbestos or mold, andwhich damages are covered under the policy.

Long-term and expensive litigation has resulted fromasbestos-related health issues. Extensive and expensive litigationconcerning mold has resulted in most carriers writing mold damageout of their policies or placing limitations on the coverage formold damage. These actions resulted from the litigation, which, atleast in part, arose from the failure of the insurance industry toeducate the adjusters about how to properly deal with asbestoscontamination and water damage causing mold growth andcontamination. The litigation and claim-handling issues stillpersist.

While mold contamination issues resulted almost solely fromwater intrusion problems, lead-based paint contamination issues mayresult from a myriad of covered causes of loss. Almost any coveredcause of loss may result in the disturbance of lead-based paint.This could refer to a disturbance such as fire, wind, water, smoke,vehicle damage to building, vandalism and malicious mischief(V&MM), theft, and so on.

The disturbance of paint, or the need to re-paint, is almostalways open and obvious. It is difficult to see how an adjuster,upon seeing or learning of the disturbance of paint in a pre-1978property, can expect to disclaim responsibility for not at leastrequesting that the contractor or vendor check for the presence oflead-based paint before proceeding with tear-out or a repair.

Even if the claim is being handled by an inside adjuster orclaim representative, the claim file or coverage file almost alwayscontains information about the age of the building. For a pre-1978building, it is a simple matter for the adjuster to request a leadpaint test before agreeing to the scope, extent, or cost of anydamage, demolition, tear-out, or repair that might affect a paintedsurface.

Insurance companies and adjusters deal with properties involvinglead-based paint on a very frequent -- if not daily -- basis. Theindividual home owner or property owner may be completely unawareof the lead-based paint hazards, or at least have a level ofawareness significantly below that of the insurance company.

Unless the damage, involving paint, to a pre-1978 property hasbeen checked or tested and determined to be free of lead-basedpaint, the insurance company should (at minimum) do thefollowing:

• Request and obtainthe results of a lead test.
• Stipulate that nounnecessary tear-out or repairs proceed without clearance.
• Determine if theowners/occupants have been provided with information about leadhazards.
• Ensure that propersafety and containment procedures are allowed for in the estimateif lead-based paint is present.
• Be certain that thecontractor/vendor is properly qualified or certified for dealingwith lead-based paint.

A quick Internet search will show that a few vendors, experts,and insurance Continuing Education (CE) sites are advertisingservices and trying to educate the insurance industry concerningthe dangers of lead-based paint; the requirements of the EPA, HUD,and others regarding the rules and regulations in place; and theApril, 2010 requirement that contractors be certified prior toperforming renovation or repair work on properties that havelead-based paint.

More work and education by the insurance industry about theseissues is needed. Proper claim handling and the adequate trainingof adjusters is necessary to avoid a repeat of the claim problemsand litigation seen previously with asbestos and mold.

Everette Lee Herndon Jr. is a claim consultant and expertwitness who works primarily with claim handling, coverages, andbad-faith cases. Herndon was an adjuster for more than 25 years andis a member of the California Bar. He can be reached at www.leeherndon.com; [email protected].