Thursday, April 22, 2010

New Lead-Based Paint Law - Effect on Contractors - What to Do?

Well, today is the day. It isn't just Earth Day; it is the day the new law concerning lead and lead-based paint goes into effect.

We have received inquiries from all over the industry. So we saw a need for a greater conversation and thought this is as good as a place as any.
Here's the skinny: This new law will immediately impact all sorts of contractors, demolition, construction, renovation, emergency response, disaster recovery, etc. to name several.

The following are some links offering EPA documents that are designed to cover both the basics and specifics of what needs to be done as well as the penalties for noncompliance:

Lead Contractor's Guide
Renovate Right

These EPA pieces provoke questions: Can contractors get coverage for these changes? What will the insurance cover? What is the market likely to do, and what is the pricing likely to be? Will the claims really be covered, or will the policies merely cover to defend? Is this the next "mold"?

There are answers. Contractors can get insurance coverage. If they already have Contractors Pollution coverage (CPL/CPO), and if lead is not excluded on the existing policy, the risk is probably already covered. If they do not currently have CPL/CPO, then I recommend that they get it - and quickly.

Why quickly? The market hasn't had time to react yet, but it will. I predict that initial reaction will be somewhat akin to the former reaction to mold in the marketplace. If history tells us anything, the carriers willing to cover this exposure may price this coverage in one of two ways (1) very inexpensively as an add-on to a larger policy or (2) very expensively. Other carriers are likely to go the way they did when mold was the flavor of the day and exclude it with an expensive buyback.

Why is this coverage likely to be expensive, and why are those carriers that price it cheaply likely to regret doing so?

Well, just think about lead and how it works. Lead builds up in the body over time. We all have lead in our blood. If we were left alone in a playpen at a young age, and we liked to gnaw on things (e.g., window sills, teething rings/binkies, plastic toys, wooden toys), we've ingested lead. The body doesn't get rid of lead; it accumulates it. Not until lead reaches a critical level will we start to notice the symptoms of lead poisoning. As adults, we can also walk past renovation or construction work without even thinking about it and inhale lead dust.

So, what is likely to happen now when, for instance, a homeowner who has new windows installed, has water damage repaired, or remodels their bathroom? The contractor, now properly certified, informs the homeowner of the likely presence of lead and the likely exposure to that lead as a result of their operations. The contractor may even include a line item covering lead abatement. The homeowner, now having on their radar that they and their family may have been exposed to lead, runs out and gets everybody tested. Sure enough, they all have varying levels of lead in their blood, and they sue the contractor.

If the contractor has pollution coverage, how is the carrier going to respond? If lead is not excluded, then the carrier should respond with defense of the claim.

Is the contractor really liable? We will have to see how the law develops around this, but let's think about the cause of the presence of lead in the blood of the plaintiffs. Certainly one exposure to a little bit of lead dust over the course of one project is not likely to be the cause. Remember, lead builds over time. So, the carrier will engage in an expensive defense and may ultimately succeed.

Post-market reaction, retentions on these policies are likely to be high, as are premiums.

It's time to review your CPL/CPO policies for lead exclusions; and check applications for lack of disclosure issues. Last, we assert to get uncovered contractors covered ASAP. Here’s one solution:  Bonding Alternative:
An insurance solution for Donley’s

Mary Busby, Esq., Environmental Practice Leader, (216) 367-4920,

1 comment:

Anonymous said...

Good Article...Very helpful