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Although lead-based paint is a pollutant, a pollution exclusion clause in a commercial general liability policy does not preclude coverage for injuries allegedly caused by human ingestion or inhalation of the paint, a unanimous Pennsylvania Supreme Court has ruled. The decision is one of first impression for the state high court and means that an insurance company must now defend two insured landlords in a lead-based paint suit. “One would not ordinarily describe the continual, imperceptible and inevitable deterioration of paint that has been applied to the interior surface of a residence as a discharge …, a release … or an escape …,” Justice Thomas Saylor wrote for the court in Lititz Mutual Ins. Co. v. Steely. The court said the deterioration of lead-based paint could arguably constitute a “dispersal,” a condition of the exclusion, but because its definition was ambiguous, the language should be interpreted in favor of the insured. The Pennsylvania Superior Court had reversed a Lancaster County, Pa., Common Pleas Court judge’s grant of summary judgment in favor of the minor plaintiff Steven Brown, his mother and the landlords of two properties in question. Sometime after the intermediate appellate court’s decision in Lititz, an en banc panel of the court decided the issue in a separate case, siding with the Lititz court that lead-based paint is a pollutant and falls under a pollution exclusion clause. Rory O. Connaughton of the Lancaster firm Hartman Underhill & Brubaker had argued the Lititz case before the high court on behalf of the landlords. Robert M. Frankhouser of Hartman Underhill also represented the landlords. Timothy J. Huber of Lebanon, Pa., firm Buzgon Davis had argued the case on behalf of Lititz and could not be reached for comment Monday. Other counsel included: Paul F. Lantieri of Bennett Bricklin & Saltzburg in Lancaster, representing one of the landlords, and Peter R. Kohn of Monheit Monheit Silverman & Fodera in Philadelphia, representing the minor plaintiff and his mother. The case has been closely watched by a number of groups across Pennsylvania. Lawyers representing amici in the case were: John A. MacDonald for United Policyholders; Guy A. Cellucci for the Environmental Litigation Association; Matthew H. Haverstick for Federal Home Loan Mortgage Co.; Paul W. Kisslinger and Barry J. Fleishman for Valspar Corp. & National Paint; and James R. Segerdahl for PPG Industries Inc. LEAD POISONING From 1988 to 1993, Steven Brown and his mother lived in a rental property that Clifford and Barbara Steely owned. From mid-1993 to 1995, Brown lived in a property that Jack and Shirley Yeager owned. While a resident in these two properties, Brown’s mother alleges the child suffered from lead poisoning due to the inhalation or ingestion of lead-based paint dust or chips. In November 1996, Brown’s mother filed a lawsuit against the Steelys and the Yeagers, alleging negligence, breach of implied warranty of habitability and misrepresentation. Lititz Mutual insured both the Steelys and the Yeagers. Each policy contained a pollution exclusion clause that said Lititz was not responsible to cover any injury that arose “out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants at or from premises owned, rented or occupied by the named insured.” When the landlords turned to the insurer for a defense, Lititz refused and instead filed a declaratory judgment action so the court could determine whether the company had a duty to defend in light of the pollution exclusion provision. The trial court ruled in favor of the landlords, saying the exclusion’s wording was ambiguous. The court granted summary judgment on both the coverage and duty-to-defend issues, dismissing the latter without prejudice. Lititz appealed to the Superior Court, asking it to decide whether the trial court was correct ruling it should defend the landlords. In overruling the trial court, the Superior Court cited the Pennsylvania Supreme Court’s decision in Madison Construction v. Harleysville Mutual Ins. Co., where a split high court ruled that a pollution exclusion clause of a commercial liability insurance policy precluded coverage for injuries caused by a worker’s exposure to fumes of a “useful product.” Writing for the majority in Madison, Saylor said the fumes that were emitted from a concrete-curing agent called Euco Floor Coat should be considered a pollutant as defined in an insurance policy provided by the Harleysville Mutual Insurance Co., and the pollution exclusion thus relieved Harleysville of the duty to defend its insured, Madison Construction Co. Justices Ralph J. Cappy, Russell M. Nigro and Sandra Schultz Newman each filed separate dissenting opinions in Madison. POLLUTION EXCLUSION In Lititz, the pollution exclusion provision contained the following definition: “Pollutants means any solid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.” Under the analytical framework of Madison, the high court first set out to determine if the policy’s definition of “pollutant” applied to lead-based paint. If it is a pollutant, the second task for the court is to then decide if the exclusion precludes coverage for injuries allegedly caused by the pollutant. The Superior Court reasoned that lead-based paint is indeed a pollutant. But, under Madison, it also found that the insurer did not have a duty to defend under the exclusion. “The Superior Court considered whether the exclusion’s requirement that the alleged injury arise out of the ‘actual, alleged or threatened discharge, dispersal, release or escape of pollutants’ was similarly unambiguous given the facts of the case,” Saylor wrote. “It was unambiguous, the Superior Court concluded, because this court had determined in Madison that the language of the exclusion, listing as it did numerous similar terms such as ‘discharge’ and ‘dispersal,’ encompassed ‘all types and degrees of movement.’ “ Saylor then began the court’s analysis under Madison, asserting that the first question is “the simpler of the two policy terms to construe.” After reviewing several sources and definitions, the high court concluded that lead-based paint is “unambiguously encompasse[d]” in the definition of “ pollutant” under the policy’s pollution exclusion clause. The high court next turned to examining whether the exclusion’s requirement of “discharge, dispersal, release or escape” of pollutants is unambiguous with regard to the process of how lead-based paint becomes available for human ingestion. Saylor said the critical question in examining the issue is to assess “the form of movement in question.” “Thus, we clarify that the critical question is whether the process by which lead-based paint becomes available for human ingestion/inhalation unambiguously involves a type of motion that can be characterized as a discharge, dispersal, release or escape,” Saylor wrote. The court concluded that the process through which lead-based paint becomes available for human ingestion/inhalation does not occur quickly. “Rather, the process of surface degradation occurs continually, but at a slow rate,” Saylor wrote. “This, in our view, is the natural, plain and ordinary meaning of the exclusionary language as it applies (or, more precisely, does not apply) to the dissemination of lead-based paint in a residential setting.” The court said that although the deterioration of lead-based paint could be deemed a “dispersal,” the court would not make such a conclusion. “Arguably such deterioration could be understood to constitute a ‘dispersal,’ the definition of which … may imply a gradualism not characteristic of the other terms,” Saylor said. “Any such inconsistency in meaning simply indicates, however, that the exclusionary language does not clearly include or exclude the physical process here at issue, but is, as to that process, ambiguous.” The court said such ambiguity requires the policy language be interpreted in favor of the insured. The high court, therefore, reversed the decision of the Superior Court. REACTION Connaughton, who represented the landlords, said he is pleased with the court’s decision. He said he is particularly happy about the fact that Saylor, who penned both Madison and the instant decision, was convinced that the pollution exclusion does not apply to lead-based paint. He also wanted to thank all the amici who participated in the case, saying he thinks their contribution played a significant role in the decision.

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