Ohio Court Finds $101M Lead Paint Abatement Order Covered by Lloyd’s Policy

A court order that requires Sherwin-Williams Co. to pay $101 million into a lead paint abatement fund amounts to “damages” that are recoverable through a Lloyd’s of London insurance policy, an Ohio appellate court ruled Thursday.

The Eighth Appellate District in Cuyahoga County reversed a trial court decision that found there was no coverage because the order by the Santa Clara County Superior Court in California was not an award of damages. The appellate panel said the term “damages” should be interpreted broadly to the benefit of the insured.

The court noted that a California appellate court had ruled in favor of paint manufacturer NL Industries in a similar lawsuit against Lloyds’ underwriters.

“Just as the NL I court found, we find that an ordinary businessperson reading the policies at issue would believe that the abatement fund constitutes ‘damages’ under the relevant policy language,” the opinion says.

The dispute stems from a public nuisance lawsuit filed by several California counties against Sherwin-Williams, NL and ConAgra Grocery Products Co. for marketing the use of lead paint in interiors despite their knowledge that it would eventually degrade, chip off and present a public health hazard. After all appeals were completed, the legal action resulted in a settlement that requires each of the companies to pay $101.7 million into an abatement fund.

Sherwin-Williams sued Lloyd’s seeking coverage, but the Cuyahoga County Court of Common Pleas agreed with the insurer’s argument that the abatement order does not amount to “damages” that are covered by the policy.

The appellate panel disagreed. The opinion says even though the Santa Clara County court issued an “abatement order” rather than an “award of damages,” the effect is the same.

The Ohio appellate court noted that the California Court of Appeal had provided “thoughtful insight into the ‘damages’ conundrom” and found in favor of coverage. Another case tried in New York and known as NL II also was decided in favor of the insured.

“Turning to the case at hand, we note that, under Ohio law, ‘damages’ in its plain and ordinary meaning is necessarily broad enough to encompass a variety of remedies, including compensatory damages, injunctive relief, restitution, and other equitable relief,” the opinion says.

The decision doesn’t put an end to the lawsuit; it decides only the question of whether the California court order amounts to “damages” covered by the policy. The appellate court remanded the case to the trial court to proceed toward trial.

Photo courtesy of Sherwin-Williams.