Lead exclusion limited in toxic tort case, court rules
Rob Lenihan 6/13/2017 3:03:00 PM
Lead exclusions in a school district’s liability policies may not exclude losses resulting from a toxic tort class action class action that alleges the district should have known there were excessive levels of lead and copper in its water supply, a federal judge ruled June 9.
Ruling in The Netherlands Insurance Co., Peerless Insurance Co. v. The Butler Area School District, U.S. District Court Judge Arthur J. Schwab in Pittsburgh, ruled that the two units of Liberty Mutual Holding Co. Inc. must defend the Pennsylvania school district in the class action suit that alleges the district concealed dangerous levels of lead and copper in its water.
“The court will not countenance the insurers' invitation to turn Pennsylvania law relative to the duty to defend on its head so as to allow the potential exclusion of a single type of claim to relieve them of their duty to defend, when the law actually requires a defense when a single potentially covered claim is alleged,” Judge Schwab wrote in his ruling.
The school district installed a chlorinator prior to the 2016/2017 school year into the Summit Elementary School's potable water system and failed to operate it properly, according to court records.
As a result, the water system quickly corroded and resulted in a slow and continuous movement of dangerous levels of lead and copper into the school’s water system, court records say.
In January, the school district informed parents in a letter that students and staff at the elementary school had been told not to drink the water from a well on the property because it had been contaminated with lead. Attorneys suing the district in federal court in February said the administration knew of the problems in August last year.
Peerless issued a commercial umbrella insurance policy to the district, while Netherlands issued a commercial package policy. The policies had pollution exclusions and lead exclusions. The two insurers told the defendants in February that they would not participate in their defense or pay any amounts to satisfy any settlement achieved or judgment rendered in the litigation and later sought a declaration that they have no duty to defend or indemnify.
Judge Schwab’s ruling said the pollution exclusions were “ambiguous in the context of an alleged exposure to lead or copper in drinking water; and therefore, must be interpreted in favor of coverage.”
The lead exclusion, which excludes coverage for losses “arising, in whole or in part” from exposure to lead, do not exclude losses from exposure to copper, the ruling states.
“There are allegations of potential injury from copper that are not dependent on lead injury nor stem from lead injury. Copper is potentially a separate and distinct cause of injury,” Judge Schwab’s ruling states. “Liberty Mutual does not publicly comment on litigation," a spokesman said.
A federal judge has ruled that two insurance companies are required to cover any potential financial losses tied to a lawsuit against the Butler Area School District surrounding lead-tainted drinking water that came from a well at Summit Elementary School.
U.S. District Judge Arthur J. Schwab ruled that The Netherlands Insurance Co. and Peerless Insurance Co. can't shirk their coverage duties. Lawyers for both companies contended that they were not obligated to pay or defend the district or former Superintendent Dale Lumley, also a defendant.
“We are pleased with the decision and believe the court properly applied the law,” Butler Area School District solicitor Tom King said Monday.
A federal lawsuit filed in February against the school district contends Lumley and administrators concealed information for months that Summit Elementary's water supply from a well on school property contained dangerous amounts of lead. An executive summary of an internal investigation noted a possible cover-up or negligence in addressing and communicating the lead problem.
Three school district administrators, including Lumley, resigned during the scandal, and a criminal investigation is ongoing.
After the initial lawsuit, attorneys for the insurance carriers filed a separate action in federal court, arguing both companies are exempt from claims because their policies with the district did not cover lead exposure.
“The pollution exclusion at issue here is ambiguous.” he wrote.
Summit closed at the end of January because of the lead problem, and its approximately 250 students began attending the formerly shuttered Broad Street Elementary in Butler.
Jennifer Tait sued the district and Lumley after her daughter, Jillian, who attended Summit, tested positive for lead exposure. The case filed by attorneys Brendan Lupetin and Douglas Olcott seeks class-action status, which would let families of other students exposed to lead in the water join the lawsuit. The suit seeks medical monitoring and damages for anyone exposed to lead and copper in the water at Summit.
Lupetin said Monday he was pleased with Schwab's ruling regarding the insurance companies.
“Judge Schwab's decision on the ancillary insurance coverage dispute was the right decision and will hopefully pave the way for fair compensation for the affected students,” he said.
Philadelphia attorney John C. Sullivan, who represents both insurance companies, declined to comment.
Lead is a neurotoxin that can impair child brain development and cause kidney damage, mood disorders, weight loss and other ailments.
In April, the Butler Area School District finalized plans to bring public water to Summit Elementary with hopes of reopening the school by Sept. 1.
A third Butler Area School District administrator has resigned in the midst of an investigation involving lead-tainted water that forced closure of an elementary school.
Mary Wolf, assistant superintendent, resigned effective Monday night, the district's solicitor Tom King said.
Board members voted 6-3 to accept the resignation. Former superintendent Dale Lumley and maintenance director Glenn Terwilliger stepped down earlier this month.
King also released a summary of an internal investigation conducted by attorney Michael Witherel, that outlines possible misconduct among district employees including unauthorized access and removal of emails.
"The potential misconduct related to the employees' alleged failure to perform their respective job responsibilities; their alleged unauthorized access to the district's email system; their alleged unauthorized retrieval and removal of emails, including the emails of board members, legal counsel and others; and, their alleged making of false statements, under oath and during the investigation," the summary of Witherel's report said.
He was hired by the school board to investigate on Jan. 24.
The school district announced in a Jan. 20 letter to parents that students and staff at Summit Elementary School had been told not to drink the water from a well on the property because it was contaminated with lead. But the possible cover-up of the lead problems might date back to August.
A federal lawsuit against the school district contends that Lumley and administrators concealed information for months that Summit Elementary School's water supply contained dangerous amounts of lead.
Further testing last week found E. coli bacteria in the well that supplies the school, prompting the building to be closed indefinitely. Students at Summit are attending classes in the shuttered Broad Street School until the water issues are resolved.
The lawsuit, filed as a class-action complaint on behalf of all of the students, alleges the district and Lumley took no action to correct the water issue and didn't inform families. Their lack of action created "a school full of poisonous drinking water," the lawsuit contends.
"While we commend the district for conducting an internal review we are shocked to learn of the steps high-ranking Butler school officials took to cover up this disaster," Pittsburgh attorney Brendan Lupetin, the plaintiff's attorney, said Tuesday after reading the summary. "It is time to step up and make things right for the children that unwittingly suffered through all of this."
King declined further comment on the report, but said the board also voted to explore possibly serving Summit with public water in the fall. Summit was currently the only operating school with well water.
King told the Tribune-Review Tuesday that Wolf will use sick days and vacation through June 30, to remain on the payroll. She has been assistant superintendent since 2014.
The report indicated that separate investigations by the Butler County District Attorney's office and state Department of Environmental Protection are ongoing.