(Article from Insurance Law Alert, March 2020)
For more information, please visit the Insurance Law Alert Resource Center.
A California trial court ruled that a state statute precluding insurance coverage for losses “caused by the willful act of the insured” applied to lead paint public nuisance claims. Certain Underwriters at Lloyd’s of London v. ConAgra Grocery Products Co., No. CGC-14-536731 (Cal. Super. Ct. Feb. 26, 2020).
In the underlying lead paint litigation, the People of Santa Clara asserted a public nuisance claim based on the promotion of lead paint. In a series of decisions, California trial and appellate courts ruled that paint manufacturer W.P. Fuller & Co. willfully promoted lead paint with actual knowledge of its hazards and that ConAgra was liable as Fuller’s successor. An appellate court directly rejected ConAgra’s assertion that Fuller lacked actual knowledge of the dangers of lead paint, finding that the factual evidence contradicted that contention.
In the present case, a California trial court held that, based on the aforementioned rulings, insurance coverage for the underlying nuisance claim was barred by California Insurance Code § 533, which states that an “insurer is not liable for a loss caused by the willful act of an insured.” The court rejected ConAgra’s argument that it was insulated from its predecessor’s knowledge, noting that under the Insurance Code, a successor entity “acquires the liabilities of its predecessor and [is] responsible as the wrongdoer.” In addition, the court dismissed ConAgra’s assertion that the findings in the previous rulings did not meet Section 533’s willfulness standard and that Fuller’s conduct was merely “reckless.” Finally, the court deemed it irrelevant that Fuller’s senior managers might not have known about the hazards of lead paint. The court stated: “This is not a punitive damages case in which such issues can be relevant. Instead, for Insurance Code § 533 purposes, an entity’s employees’ collective knowledge—not just senior managers’ knowledge—is what matters.”