United States: Assessing and Managing Lead Risks in Commercial Properties

Article by Elise N. Zoli and Robert L. Brennan, Jr

Lead exposure – in drinking water, paint, dust and contaminated soils – is reemerging as a target of public concern and governmental regulation, and as a source of potential legal liability.

In October 2002, the District of Columbia Water and Sewer Authority sent letters to thousands of homeowners notifying them that it had measured lead in their drinking water at concentrations as much as 20 times the 15 parts per billion action level which the United States Environmental Protection Agency ("EPA") established for public water supplies in 1991. The Authority’s disclosures provoked considerable public outcry, and prompted a review of federal drinking water requirements both in Congress and at EPA. The results of EPA’s inquiry are due out later this summer. EPA’s acting administrator for water programs reportedly has stated that, although EPA has not found a pervasive national problem, certain public water systems, including metropolitan Boston and San Juan, continue to have elevated lead levels.

EPA’s reassessment of federal drinking water requirements is not the only area of renewed national interest in lead exposure. EPA has continued to augment and refine its regulations concerning "lead-based-paint hazards" in an effort to reduce confusion concerning their application and scope. Further, EPA continues to urge regulated entities to undertake interim control measures for conditions below those regulated limits.

Of equal concern to property owners and managers, lead-based-paint claims have been on the rise in the last decade, with a number of substantial jury verdicts recently reported. In New York, for instance, a boy alleged to have been exposed to lead paint was awarded $49.5 million in a jury verdict against New York City and two property-management firms. In Massachusetts, a state court assessed $7.7 million in damages against a landlord as compensation to a twenty-year-old allegedly exposed to lead as an infant. And in California, a landlord recently agreed to pay $1.2 million in a settlement involving medical monitoring of children living in his buildings. These examples, and national databanks on litigation trends, suggest that litigation against property owners and managers for exposure to lead is not waning.

While lead exposure traditionally has been an area of concern for residential property owners, increasingly it is becoming an issue in commercial buildings. Developers, property owners, managers and investors have taken note of renewed public and regulatory interest in lead hazards, in drinking water and through other potential routes of exposure, and they are grappling with how to evaluate and respond to these potential sources of liability.

This advisory offers a practical approach for anticipating and addressing lead exposure issues. It begins with a basic review of the sources of lead exposure and the current regulatory landscape. It then suggests a general framework to address lead conditions, including by providing guidelines on how to assess and manage lead-associated risks in an evolving regulatory climate.

Common lead-exposure pathways, largely a result of the historic use of lead in products, include lead in paint, dust, drinking water and soil. Of these, lead-based paint is, perhaps, the best known source of human exposure to lead, owing to a now decades-old federal public information campaign. Lead carbonate was used as a pigment in white paint until it was banned in 1978 by the Consumer Product Safety Commission. The sale of paint containing more than .06% lead is now prohibited, but recent U.S. Department of Housing and Urban Development estimates indicate that as many as 38 million pre- 1978 dwellings may still contain lead paint. Exposure paths for lead paint range from oral ingestion by young children to ingestion or inhalation of paint dust by construction workers.

While lead-based paint is a well-publicized source of lead exposure, EPA estimates that approximately 20% of human exposure to lead is caused by lead in drinking water. Lead in drinking water is typically caused by the presence of lead in pipes, solder, and other water system components. Household fixtures also may contain lead. Corrosion associated with this infrastructure can result in lead leaching into the water that passes through these systems. In D.C., for example, it is suspected that the high lead levels were caused by increased lead leachate associated with a switch from chlorine to chloramine for water treatment.

Another source of human exposure less frequently considered is lead in soil. Soils may be contaminated with lead through any number of manufacturing operations, including incinerator and smelting operations that release lead into the air, disposal of demolition debris, or application of pesticides containing lead arsenate. Soils also may have become contaminated as a result of auto exhaust emissions during years when leaded gasoline was still sold in the United States. Because of its widespread historical use, lead is commonly identified in soils associated with former manufacturing facilities being redeveloped as Brownfields sites.

These exposure pathways share a ubiquity – they occur in various aspects of our ambient environment.

The United States Department of Health and Human Services has called lead poisoning "the number one environmental threat to the health of children in the United States." Children under six years old are perceived to be at greater risk of health hazards from exposure because of their undeveloped blood-brain barrier. In children, harm attributed to lead poisoning may include damage to the brain and nervous system, behavioral and learning problems, slowed growth, and hearing difficulties. While children are customarily the focus of the lead-exposure debate, adults also may be affected. Conditions attributed to lead in adults include high blood pressure, reproductive problems, nerve disorders and kidney problems.

In short, whether in residential or commercial buildings, exposure to lead poses the specter of personal injuries and, consequently, increased risk of both regulatory sanctions and civil litigation.

Currently, federal law concerning lead exposure focuses on residential properties (with respect to lead paint) and public drinking water systems. Under the federal Residential Lead-Based Paint Hazard Reduction Act of 1992 ("Title X"), a landlord must disclose and provide information on any known lead paint on the property, as well as give a tenant an EPA-approved pamphlet, before signing or renewing a rental agreement. Certain buildings are exempt, including post-1978 construction, lead-free certified property, and short term rentals. Title X does not apply to commercial property owners, with the result that little practical guidance exists for commercial property owners seeking to address lead conditions on their properties.

While the focus of Title X is on lead paint, EPA’s implementing regulations (at 40 CFR Part 745) address "lead-based-paint hazards," which are defined to include residential dust and soil. Under this broader heading of "lead-based paint hazards," EPA has instituted training requirements for lead abatement workers, established the parameters for state-led programs relating to lead exposure and remediation, and provided standards generally for "dangerous levels of lead." Importantly, in promulgating these regulations, EPA acknowledged that considerable confusion exists with respect to the scope and applicability of federal regulation – confusion that has not been substantially ameliorated despite EPA’s rulemaking efforts.

The federal Safe Drinking Water Act ("SDWA") requires, as pertinent here, that operators of public water systems regularly monitor and take action to reduce lead in drinking water. In 1991, EPA promulgated maximum contaminant level goals ("MCLGs") for lead (56 FR 26460, June 7, 1991). EPA’s regulations implementing the Act are designed to reduce lead levels at consumers’ taps to as close to the MCLGs as feasible. EPA has set a treatment standard of 15 parts per billion for lead in tap water. As a result, if lead levels are higher than 15 ppb in over 10% of tap water samples, further testing and possible remedial action must be taken by the water-system operator. Remedial action may include treatment of source water, if it is found to contribute significantly to high levels of lead at the tap, and replacement of lead service lines in the distribution system, if the level of lead at the tap continues to exceed the lead levels. Water-system operators also must perform public education when the level of lead at the tap exceeds the lead action level. Again, however, these SDWA requirements do not apply to property owners, whether commercial or residential, except in limited circumstances involving the operation of certain qualifying water systems.

In addition, the SDWA proscribes the use of any pipe, any pipe or plumbing fixture in any public water system providing water for human consumption that is not "lead free," which includes solders and flux of no more than 0.2% lead, and pipes, pipe fittings, and well pumps of no more than 8.0% lead. These requirements may apply to developers and certain property owners, including commercial property owners, insomuch as they are responsible for the lead content of internal building plumbing.

The patchwork of relatively recent federal regulation relating to lead conditions, most of which is not directed at commercial buildings, is not a model of clarity and does not provide ready guidance to owners and managers of commercial property. We do not suggest that EPA undertake additional regulation. We do suggest that owners and managers develop their own programs, tailored to the circumstances presented in their specific properties, including consideration of, for example, existing and historical land use, age and construction of buildings and services, drinking water supply and configuration, and other site-specific factors. To guide development of these propertyspecific programs, following is a framework for addressing lead conditions in a manner consonant with applicable regulatory standards and evolving principles of tort law.

A primer on tort liability is in order. Lead-exposure claims typically involve allegations that a plaintiff suffered exposure to lead, and some purported harm, as a result of a defendant’s negligence. In the context of premises liability, where the action is brought against a property owner or manager, a plaintiff ordinarily will allege a breach of some common law duty requiring "reasonable care under all circumstances" to all persons lawfully on the premises. This so-called "reasonable care" standard may include a duty to warn about dangerous conditions that a property owner or manager should have discovered in the exercise of ordinary care. The standard also may include a duty to remedy unsafe conditions. Thus, if a property owner or manager neglects its duty to maintain a building in a reasonably safe condition, and someone lawfully on the premises is harmed as a result, that owner or manager may face liability for a breach of its legal duty. Plaintiffs must show that this breach of duty directly led to the harm suffered from lead exposure. Elevated lead levels in the blood, or at least evidence that the plaintiff was exposed to and then experienced symptoms medically attributable to lead, are usually required as proof.

Based on these general negligence concepts, key considerations for commercial property owners and managers are appropriate notification and handling of lead conditions that may affect tenants. When owners or managers have knowledge – or a reasonable basis to suspect – that lead may exist at a property, they should consider providing notice of the potential hazard. Because premises liability potentially extends to all individuals lawfully (and even unlawfully in limited circumstances) on one’s premises, tenants, contractors and members of the invited public should be considered in any notice of lead-exposure risks.

In considering any notice requirement, owners and managers undoubtedly will wonder: "How am I supposed to know if there is a risk of lead exposure in the building?" With respect to potential lead paint, we have identified no affirmative obligation to test for the presence of lead in commercial properties in the absence of construction or demolition activities. However, federal regulations suggest a presumption of lead presence in pre- 1978 residential construction. Though expressly not applicable to commercial buildings, the presumption may nonetheless inform judgments concerning appropriate standards of care in the commercial context. As a result, notice in commercial leases and transaction disclosures may weigh in favor of the disclosing party, if its "reasonableness" were ever challenged, and therefore may be prudent.

With respect to drinking water, a property owner or manager ordinarily does not have an obligation to test the water for lead. Given information that old plumbing systems or other conditions in a particular building may pose a risk of lead exposure, however, prudence may dictate that property owners and managers conduct their own testing. More often, media reports concerning elevated lead levels in public drinking supplies may induce tenants to lobby for testing. In turn, adverse testing results, or readily apparent conditions indicating that elevated lead levels very likely may be present in drinking water, may trigger further notice requirements and other protective measures, as described below.

Not all notice is alike. The District of Columbia water controversy arose, in part, because of perceived failures to make the public aware of elevated levels in the drinking water. Given the seeming omniscience of the media today, we encourage property owners and managers to promptly provide honest, accurate and comprehensive information before tenants acquire potentially incorrect and inflammatory information from other sources.

Drinking water testing typically targets "worst case" conditions – e.g., faucets and fountains likely used for drinking water or food preparation are sampled early or late in the day when they have not recently been used and the water has been allowed to sit in the piping system for some time. Based on the results, interim or long-term remedies can be implemented. Short-term measures include instituting daily maintenance programs to flush out the piping before it is used, eliminating use of the system for potable water and providing bottled water instead, or installing corrosion controls or "end of pipe" filtration devices. On a more permanent level, the water supplier may be persuaded to improve the quality of the water – either by reducing lead concentrations at the source or eliminating chemicals causing increased lead leachate – or the building owner may be able to replace pipes or components in the system. Follow-up testing ordinarily is performed periodically to ensure that remedial measures are successful.

Rather than addressing these issues separately and in times of crisis, building owners and managers should adopt global procedures for evaluating and communicating potential lead hazards. These procedures should include, for example, an appraisal of the likelihood and potential sources of lead exposure in each building, and depending on the results of that evaluation, procedures for determining when and what to test, how and to whom to provide notice, and risk management steps to be undertaken to minimize exposure. For investors, similar procedures also should be adopted to guide diligence and evaluate risks, particularly in large portfolios containing many older properties.

In conjunction with any lead condition, property owners and managers should not presume that insurance coverage will be available. Heringer v. American Family Mutual Insurance Co., a recent decision by a Missouri Court of Appeals, affirmed a trial court’s decision that injuries resulting from the inhalation, ingestion or absorption of lead paint were excluded from coverage by a policy’s pollution exclusion. The plaintiff in Heringer suffered harm from lead-paint exposure while working as an independent contractor on a home-renovation project. After the homeowners settled with the plaintiff for $1 million, she filed a garnishment action against the insurers to partially satisfy her judgment. The court found that there was no coverage because of the exclusion. In the policy, injury arising out of the ingestion, inhalation or absorption of pollutants was excluded, and the definition of pollutants expressly included lead. Thus, Heringer illustrates the importance of a careful examination of existing insurance coverage to ensure against unforeseen exclusions.

If lead is not explicitly defined as one of the exclusions, then it may be included in the coverage, as the Massachusetts Supreme Court found in Atlantic Mutual Insurance Co. v. McFadden.

In summation, commercial property developers, investors, owners and managers may find shelter from lead exposure liability in the safe harbor of reasonable action. This includes investigation of suspected lead exposure pathways, notice of known lead exposure risks, and remediation of lead contamination. If a claim is brought, a wellstructured and implemented program may help to establish that an owner acted reasonably and did not breach any duty owed to the plaintiff. With regard to individual and portfolio acquisitions, the assessment of lead exposure risk should be incorporated into due-diligence protocols, and insurance policies should be reviewed to determine coverage for lead-exposure claims. 

Goodwin Procter LLP is one of the nation's leading law firms, with a team of 650 attorneys and offices in Boston, New York and Washington, D.C. The firm combines in-depth legal knowledge with practical business experience to deliver innovative solutions to complex legal problems. We provide litigation, corporate law and real estate services to clients ranging from start-up companies to Fortune 500 multinationals, with a focus on matters involving private equity, technology companies, real estate capital markets, financial services, intellectual property and products liability.

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