Ohio Supreme Court Rules on Behalf of Lloyd’s in $102M Coverage Litigation; Third Major Win in Public Nuisance Liability Dispute
The Ohio Supreme Court ruled on December 10, 2024 that Zuckerman Spaeder LLP’s clients—Certain Underwriters at Lloyd’s, London and eleven other insurers—do not have to indemnify The Sherwin-Williams Company for its liability in, and subsequent settlement of, a lead paint-related public nuisance action brought by California municipalities and counties (the “Santa Clara Action”). Sherwin-Williams was seeking approximately $102 million in insurance coverage from Zuckerman Spaeder’s clients and its other carriers.
This is Zuckerman Spaeder’s third victory in coverage litigation related to the Santa Clara Action. In 2022, the firm prevailed on behalf of its insurer clients in a lawsuit brought by ConAgra in California for another $102 million, and in 2013, the firm defeated Millennium’s claim for coverage concerning its pre-trial settlement of the Santa Clara Action.
In 2014, after the trial in the Santa Clara Action, Sherwin-Williams and its co-defendants ConAgra and NL were held liable for promoting lead paint for indoor use with actual knowledge that the paint would poison and harm children and 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 an appeals court affirmed the companies’ liability in 2017, they agreed to a settlement in which each lead manufacturer defendant would pay $101.7 million.
Sherwin-Williams, ConAgra, and NL sought, in separate lawsuits, to have their insurers pay for their share of the liability. Zuckerman Spaeder’s clients and the other insurers argued that there was no coverage because the payments into the abatement fund were not covered “damages,” “because of property damage or bodily injury,” caused by an accident—as required for a covered loss under the insurance policies.
In the Sherwin-Williams case, the trial court ruled for the insurers on summary judgment, deciding that they did not have to indemnify Sherwin-Williams. After that ruling was overturned in a split decision by the Eighth District Court of Appeals in Cleveland, the insurers petitioned the Ohio Supreme Court, which heard the case in Fall 2023.
In its December 10 decision, the Ohio Supreme Court unanimously reversed the Eighth District and reinstated the trial court’s summary judgment ruling in favor of the insurers. In a published opinion, the Court held that the abatement payments did not constitute covered “damages” because they did not compensate any party for past bodily injury or property damage. “Unlike damages, which are designed to compensate for a past injury, an abatement remedy looks to prevent future harm.” Here, “the purpose of the payment into the abatement fund was to prevent future harm to the children represented by the California governmental entities, not to compensate the governmental entities for past injury.” Nor was Sherwin-Williams “ordered to compensate for past physical damage to properties in the governmental entities’ jurisdictions.”
The Ohio decision found no coverage for a different reason than the winning argument in the 2022 ConAgra ruling. There, the California courts held that there was no coverage because the lead manufacturers had been held liable for an uninsurable intentional tort—i.e., they promoted lead paint for indoor use in homes with knowledge that such use would harm children. Zuckerman Spaeder raised that argument in the Sherwin case as well, but the Ohio Supreme Court did not reach the issue. Nor did it reach the winning argument in the 2013 Millennium decision, which was that Millennium could not be held liable in the Santa Clara Action for property damage.
Zuckerman Spaeder has led the insurer group in the coverage litigation in Ohio and California, with partner Carl S. Kravitz delivering oral argument in the trial and appellate courts. The Zuckerman Spaeder team also included partners Jason M. Knott and Caroline E. Reynolds, as well as associate Nicholas M. DiCarlo. Zuckerman Spaeder is also defending its insurer clients in ongoing litigation in New York over whether the remaining defendant, NL, is entitled to coverage for its liability in the Santa Clara Action.