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Lead in Drinking Water: Insurance Coverage Issues

Lead in Drinking Water: Insurance Coverage Issues

The tragic water crisis in Flint, Michigan raises grave concerns as to the lurking hazards posed by our nation’s aging infrastructure. There are an estimated six million lead service lines in operation in the United States. In addition, countless plumbing systems in homes and offices throughout the country contain lead pipes or fixtures, or lead pipe soldering. It is very likely, therefore, that Flint, Michigan is just the opening salvo in what may ultimately prove to be a national epidemic. Already similar stories have been reported in other cities such as Chicago and Cleveland. And more isolated incidents involving homes and buildings are beginning to emerge as well.

It has been estimated by the United States Environmental Protection Agency that the costs associated just with replacing our nation’s lead service lines could run between $200 to $400 billion. This does not take into account the upgrades and treatments that may be required in aging homes and buildings. Far more sobering is the potential toll that lead-contaminated water may already have had on individuals, in particular infants and children. The EPA recently estimated that babies can get between 40 to 60% of their lead exposure through drinking formula mixed with lead-contaminated water. It is not difficult to imagine, that from a personal injury perspective, lead contaminated water has the potential to be just as sizable a mass tort as lead paint, if not larger.

Class action litigation over contaminated water has already commenced against public entities and officials. It can be anticipated that private parties will be targeted in similar suits. And with mass toxic tort litigation comes inevitable questions of insurance coverage.

Obviously, insurance coverage for lead paint, at least from the perspective of commercial general liability coverage, serves as an immediate comparison. Whether and to what extent a pollution exclusion applies to claims involving harms from lead-contaminated water may very well depend on whether a particular jurisdiction limits the exclusion to traditional environmental harm, and whether this scenario qualifies as such.

While the standard Insurance Services Office general liability policy form does not contain a lead-specific exclusion, many insurers began issuing policies in the mid-1990’s with endorsements intended to exclude coverage for lead-based liabilities. Some of these exclusions, such as absolute lead exclusions, were written broadly to apply not only to claims involving exposure to or ingestion of lead paint, but also to liabilities arising out of plumbing solder, pipes and fixtures. Some lead exclusions, however, were written more narrowly to apply only to liabilities arising out of lead paint and dust, and thus would not apply to liabilities arising from lead-contaminated water.

Insurers will need to consider these and other issues such as trigger of coverage and number of occurrences, as these claims proliferate.

By Brian Margolies & Adam Krauss of Traub Lieberman Straus & Shrewsberry

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