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Contractors Beware - New EPA Rule on Lead Paint

Today's miracle can be tomorrow's nightmare.  Some breakthrough medicines are later found to have dangerous side effects unknown at the time.  Long-established land and water management practices sometimes later prove unwise.  In recent headlines, sophisticated computers which improve gas mileage, assist in braking and other vital functions in automobiles, are under scrutiny for possibly causing acceleration, braking or other problems.

For many years, paint manufacturers found that adding lead to their paints would increase drying speed and durability, provide an effective barrier to moisture, and give the painted surface a freshly-painted look for a long time.  However, it was later discovered that lead was very harmful to humans, and even the lead in paints could cause many serious health problems if ingested or inhaled, even in relatively small amounts.  Therefore, the federal government banned lead-based paint from housing in 1978.

As prudent as that seemed to be, the ban did not totally eliminate the lead hazard inherent in paint.  Houses built before the 1978 ban were found to still pose a lead risk when the lead-based painted surfaces where disturbed in some way, such as sanding prior to repainting, or when other repair and renovation work was done.

Over the years, there have been numerous recommendations, rules and guidelines which attempted to effectively deal with the problem of existing lead paint in homes and other structures.  The U.S. Environmental Protection Agency (EPA) has usually played a key role in lead paint mitigation efforts.  On April 22, 2010, an enhanced lead paint rule will take effect, which will directly impact renovation and repair contractors.

The EPA had produced a detailed 31-page booklet which outlines the scope of the new rule, including who must comply, what the certification requirements are for contractors, what types of structures are within the rule, and the guidelines for the required distribution of an EPA information pamphlet to consumers, when renovation or repair work is being done by a contractor, etc.  The EPA booklet is titled: "Small Entity Compliance Guide to Renovate Right - EPA's Lead-Based Paint Renovation, Repair and Painting Program" (document #: EPA-740-F-08-003 - December 2008).  The EPA shorthand title for the rule is the "RRP Rule" (Renovation, Repair and Painting Rule).  The booklet is available from the EPA's web site:
http://www.epa.gov/lead/pubs/sbcomplianceguide.pdf

Here are some key points.  Excerpts from the EPA booklet are italicized below.

What types of structures and facilities does the lead paint rule apply to? 

The RRP Rule applies to "residential houses, apartments, and child-occupied facilities such as schools and day-care facilities built before 1978."  In addition, the rule must be followed when "repair or maintenance activities disturb more than 6 square feet of paint per room inside, or more than 20 square feet on the exterior of a home or building."

Who must follow the rule? 

According to the EPA booklet, the rule applies as follows:  "In general, anyone who is paid to perform work that disturbs paint in housing and child-occupied facilities built before 1978, including but not limited to: residential rental property owners/managers; general contractors; special trade contractors including painters, plumbers, carpenters and electricians."  As to landlords and property managers, the EPA booklet says, "The receipt of rent payments or salaries derived from rent payments is considered compensation under the EPA's lead paint rule.  Therefore, renovation activities performed by landlords or employees of landlords are covered [by the rule]."
The EPA booklet outlines activities which are excluded from the rule, such as "minor repair or maintenance."  However, the booklet specifically states that "window replacement" is not minor repair or maintenance.

What steps are required for a repair/renovation contractor to comply with the rule? 

First, the firm must be certified by the EPA to work on pre-1978 homes and other buildings.  Obtain an "Application for Firms" from the EPA:  www.epa.gov/lead/pubs/renovation.htm

Second, a "certified renovator" must be assigned to each renovation project, and "must be available, either on-site or by telephone, at all times renovations are being conducted."  This person must have completed an 8-hour course approved by the EPA.  A full list of providers is listed at: http://www.epa.gov/lead/pubs/traincert.htm

In addition, the EPA pamphlet "Renovate Right:  Important Lead Hazard Information for Families, Child Care Providers and Schools" must be provided to "residents, or the facility operator before the job begins, and to families whose children attend the child care facility."

Lastly, the EPA booklet for repair/renovation contractors provides details on the types of mitigation steps and procedures which must be used before, during and after the work.

What is the penalty for a firm that does not comply with the EPA rule? 

$32,500 per violation, per day.

Is there an insurance requirement for contractors? 

No.  While the EPA rule requires that the contractor take an 8-hour course approved by EPA on how to work safely with structures containing lead paint, there is no requirement in the new lead paint rule that the contractor carry insurance.  However, as news of this new EPA rule is making the rounds among contractors, landlords and property managers, agents and insurers, the most immediate issue is whether or not the unendorsed CGL would provide coverage for the contractor, should someone in the home or the child care facility become ill by ingesting or inhaling dust containing lead paint as a result of the repair/renovation work.

At issue is whether or not the CGL pollution exclusion would apply.  The pollution exclusion has been heavily litigated for many years, and different jurisdictions around the country have reached different conclusions, in part because there are so many layers to the onion.  In addition, some insurers have for years attached some version of an exclusion to many classes of risks where there might be work involving lead-based paint, asbestos, etc.  Recently, some insurers have been distributing information flyers to agents announcing new specialty policies for "Contractor's Pollution - Lead Based Paint," as a result of the new EPA rule.

It is beyond the scope of this article to address the CGL pollution issue regarding lead-based paint.  And it is important to note that nothing in the EPA rule appears to have any impact on the insurance policy anyway.  The basic thrust of the rule is to increase public safety by requiring certain mitigation efforts by contractors working on pre-1978 homes where lead-based paint might be present.  In other words, contractors who currently do repair/renovation work to pre-1978 homes may or may not have CGL coverage for any lead-based paint injuries to third parties, irrespective of the EPA rule.  Therefore, in jurisdictions where it seems the pollution exclusion would apply, the insured should procure coverage through some sort of contractor's pollution or similar policy.

From:  Mike Edwards, CPCU, Virtual University

[Thanks to John Eubank, ARM, CPCU, of Professional Insurance Education, and Chris Bunbury, eS, of Environmental Risk Managers, for their valuable assistance in the research for this article.]
Additional Resources:
"EPA Lead Information"
"EPA Contractor Brochure"
"Professional Remodeler"