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Insurers Required to Pay Up

The Sherwin-Williams Company (SWC) got into a dispute with its insurers over whether the latter were contractually obligated to cover monies SWC was compelled to pay in a court case.

Back in March of 2020, Santa Clara County (California) filed suit against SWC, and other paint manufacturers, claiming that their lead-based products constituted a “public nuisance," and these defendants were eventually ordered to pay into an “abatement fund” some $1.1 billion; a figure which was later reduced to about $401 million.

When its insurers declined to pony up the cash, SWC sued to compel contribution. But the insurers successfully argued that they were not legally obligated to remit payment, because the fund did not compensate California residents for any actual “damages” suffered as a result of the products’ use.

On appeal, because the word “damages” wasn’t clearly defined by the governing documents, and since the law required that any ambiguity or interpretation be construed in the insured's favor, the Eighth Appellate District reversed and found that the policies covered monies SWC was required to pay into the fund. [The panel relied on a New York State court case where two lead-based paint manufacturers won a similar coverage dispute. (Underwriters at Lloyd’s London v NL Industries Inc.)]

Now there's no glossing over that!

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Sherwin-Williams Co. v. Certain Underwriters at Lloyd’s London (appellate decision)