(Article from Insurance Law Alert, October 2017)
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A Maryland federal district court ruled that, for purposes of calculating an insurer’s pro rata, time-on-the-risk indemnity obligation for lead paint-related injuries, the “entire period of damages” is calculated by looking at when the claimant moved into the premises and when he permanently vacated the premises. Penn. Nat’l Mut. Cas. Ins. Co. v. Jacob Dackman & Sons, LLC, 2017 WL 4098749 (D. Md. Sept. 14, 2017).
Daniel Heggie lived on East Hoffman Street from January 12, 1994 until September 9, 1998. It is undisputed that Heggie was exposed to lead paint during that time. Heggie sued the building’s landlord, and was ultimately awarded damages exceeding $1 million. In ensuing litigation between the landlord and its liability insurer, Penn National, the parties disputed the proper method for calculating Penn National’s indemnity obligation. The parties agreed that Penn National’s policies were in effect for 426 days and that its indemnity share is based on its pro rata time on the risk. However, the parties disagreed as to the “denominator” of the calculation – i.e., the “entire period during which damages occurred.”
Penn National argued that the damage period was the 2,589 day period between January 12, 1994, when Heggie moved into the building, and February 13, 2001, the last date on which Heggie had an elevated blood lead level. In contrast, Heggie argued that the damage period ran from August 18, 1995, when Heggie’s blood lead level was first elevated, to July 8, 1997, the date of Heggie’s last elevated blood lead level before he vacated the premises. The court adopted a compromise position.
The court held that the damages period began on January 12, 1994, when Heggie moved into the lead-polluted premises, reasoning that the move-in date best reflects the date of first exposure. The court held that the damage period ended on September 9, 1998, when Heggie vacated the premises. Although Heggie’s blood lead levels remained elevated after that time, the court explained that there was no known exposure after September 9 that would trigger insurance coverage since Heggie had vacated the premises. Thus, the court concluded that the “entire period of damages” was the 1,701 day period during which Heggie actually resided at the contaminated premises. Based on this finding, Penn National was responsible for indemnifying approximately 25% of the total loss.