California Courts Rule in Favor of Zuckerman Spaeder Clients in $102M Insurance Coverage Dispute Over Public Nuisance Liability
The First District of the California Court of Appeal held in a 31-page published opinion that Zuckerman Spaeder’s clients—Certain Underwriters at Lloyd’s, London and three other insurers—do not have to indemnify ConAgra for its liability in, and subsequent settlement of, a lead paint-related public nuisance claim brought by California municipalities. ConAgra was seeking approximately $102 million from Zuckerman Spaeder’s clients and its other insurers.
ConAgra and two other lead paint manufacturers, Sherwin-Williams and NL Industries, were held liable in California state court for causing a public health hazard/nuisance by promoting lead paint for indoor use with actual knowledge that the paint would create a public health hazard. The trial court ordered the companies to pay into a government-administered fund to abate lead in homes to prevent future health harms to children. After the companies’ liability was affirmed on appeal in 2017, they settled with the plaintiffs and each agreed to pay $101.7 million into the abatement fund. ConAgra sought to have its insurers pay its share of the fund, arguing that it did not know that wrongful promotion of lead paint for residential interior use would cause a health hazard with deadly consequences to children, and that it also could not be held responsible because its corporate predecessor, W.P. Fuller and Co. (Fuller), made and promoted the paint.
In February 2020, the San Francisco Superior Court granted summary judgment for Zuckerman Spaeder’s clients and the 47 other insurers named in the suit, holding that ConAgra’s public nuisance liability was uninsurable because its predecessor had “actual knowledge that lead paint on residential interior surfaces would pose a public health hazard” and California law prohibits coverage for losses caused by the willful act of an insured (i.e., where the insured was substantially certain that its acts would cause the harm).
On April 19, 2022, the California Court of Appeal affirmed the Superior Court, ruling that ConAgra could not distance itself from the actions and knowledge of its predecessor, ConAgra knew that harm to children was “inevitable” from lead paint in homes, and ConAgra’s actions were therefore willful and uninsurable under California law. The California Supreme Court denied ConAgra’s Petition for Review on July 18, 2022.
Zuckerman Spaeder led the insurer group in the case, with partner Carl S. Kravitz handling the briefing and delivering argument on the winning issue in both the trial and appellate courts. The Zuckerman Spaeder team also included partners Jason M. Knott and Caroline E. Reynolds and associate Nicholas M. DiCarlo.