Sherwin-Williams filed an action in Ohio state court, seeking a judicial declaration that its insurers were obligated to indemnify the company for any and all lawsuits related to lead paint, including its required contribution to the abatement fund in California. The insurers filed a flurry of motions for summary judgment, all arguing there was no obligation to cover the lead paint lawsuits. The policies they had issued to Sherwin-Williams “only covered damages ‘for,’ ‘because of,’ or ‘on account of’ ‘property damage’ or ‘bodily injury’...” For one thing, argued the insurers, the abatement fund in California did not count as “damages.” For another, Sherwin-Williams had been found liable for creating a public nuisance, not causing “property damage” or “bodily injury.”

Even though the judges were skeptical of the reasoning of the California courts regarding the lead paint case, the court nonetheless “considered itself bound by that determination.” The judges held that the abatement fund was “an equitable remedy [that] provides no compensation to a plaintiff for prior harm,” while damages “were a legal remedy…directed at compensating the plaintiff for prior accrued harm that has resulted from the defendant's wrongful conduct.” (Emphasis added). The trial court ruled in favor of the insurers, and Sherwin-Williams appealed.

The appellate court, on the other hand, felt no such responsibility. The judges claimed the California lawsuit had not reviewed whether payment into the abatement fund counted as “damages” within the meaning of the insurance policies. Instead, they took guidance from New York state courts that had analyzed a similar case, also related to the California abatement fund, where the judges had determined a lead paint manufacturer was entitled to coverage for the California lawsuit. According to the appellate judges, Sherwin-Williams’s payment into the abatement fund were considered “damages” under the policies because it “essentially served the purpose of reimbursing the government's costs in responding to the lead paint hazard.”

Prevention or Compensation?

The Supreme Court of Ohio accepted the appeal from Lloyd’s on three propositions of law, but the analysis focused on the third: that “the term ‘damages’ in a CGL policy is payment for loss or injury sustained by a person, and it does not include monetary payments that do not compensate anyone for loss or injury” (emphasis added).

Lloyd’s argued that the abatement fund was intended to pay forward at least some of the costs to-be-incurred in the state government’s reducing the risk of lead poisoning in children. Sherman-Williams claimed Lloyd’s was conflating California and Ohio law, asserting that the abatement fund would not exist without the past harm of lead paint in certain buildings that exposed the general public to the risk of lead poisoning.

The justices looked askance at Sherwin-Williams’s argument. The trial court had drawn a line between damages and abatement with damages on the side of “compensating for a past injury,” while the goal of abatement was “to prevent future harm.” When the California lawsuit was settled and the lead paint manufacturers were ordered to contribute to the abatement fund, the appellate court made clear that the fund would be controlled by California’s Childhood Lead Poisoning Prevention Branch (CLPPB), a government organization specifically dedicated, as the name suggests, to preventing lead poisoning in children.

The CLPPB would disburse grants to other government entities that would inspect qualified buildings and, if necessary, implement remedial measures to prevent, or at minimum mitigate, the effects of lead poisoning in children. The court even sorted potentially contaminated properties into two groups based on the property’s lead exposure history and the presence or absence of children on that property. This structure of “priorities” indicated to the Supreme Court of Ohio that the abatement fund was aimed toward preventing any further negative impacts of the lead-based paint. Though it was not possible to compel the removal of lead paint from every residential or commercial property in every state where litigation was ongoing, there was no evidence suggesting any part of the fund had been disbursed to cover work completed prior to the creation of the abatement fund.

Sherwin-Williams’s next argument rested on whether any of the money it had paid to the abatement fund was intended to provide indemnity for physical damages. The “public nuisance” for which the lead paint manufacturers had been held liable only applied to homes built in 1950 or earlier. Since the abatement fund applied to older homes, claimed Sherwin-Williams, the fund was clearly meant “to compensate for past property damage.”

That argument, said the court, was easily dismissed. Nowhere in the pleadings had the Plaintiffs alleged any physical damage to the property. Those types of damages had not been paid for because they had not been ordered.

Sherwin-Williams then cited three cases—Stychno v. Ohio Edison Co., 806 F.Supp. 663 (N.D. Ohio 1992); Sanborn Plastics Corp. v. St. Paul Fire & Marine Ins. Co., 616 N.E.2d 988 (Ohio Dist. 1993); and Cincinnati v. Metro. Design & Dev., L.L.C., 2019 Ohio App. LEXIS 389 (Ohio Dist. Ct. 2019)—where other Ohio courts had determined that damages included costs incurred to negate the ill effects of hazardous materials.

The justices again drew a line between the allegedly supportive cases and the case at bar. Those cases, aside from the fact that none of them were binding on the Supreme Court of Ohio, all shared one thing that Sherwin-Williams lacked: physical damage. In each of the cases cited by Sherwin-Williams, physical damage had occurred. As stated earlier, the lawsuit filed by the Plaintiff against Sherwin-Williams made no allegations concerning, and the abatement fund paid no money for, physical damages.

Conclusion

The justices of the Supreme Court of Ohio, like the trial court, determined that the money Sherwin-Williams had been ordered to pay to the abatement fund was intended to help prevent future harm, not remedy past wrongs. Therefore, those funds could not be considered damages and were thus not covered by the policies.

The judgment of the appellate court was reversed, and the justices reinstated the opinion of the trial court.

Editor’s Note: The line between damages and abatement can be a fine one. In this case, the CLPPB had not spent any money to repair physical damage caused by the lead paint. They would, however, need to spend money in order to rectify the public nuisance to which Sherwin-Williams had contributed. At the time of the California lawsuit, CLPPB and other state officials did not know how many houses were eligible for inspection, nor did they know the extent of the exposure in each house. They only knew that they would need the money in the future.

Read More:

Abatement v. Dismissal

Dwellings and Lead Contamination