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Lawyer: Lead-paint cases prove need for insurance

The Housing Authority of Baltimore City should not have had to use federal money meant for low-income housing to satisfy several lead-paint poisoning judgments, a lawyer for the successful plaintiffs said Tuesday.

The use of federal funds was necessary only because HABC failed to insure or self-insure against lead-paint liability, as required by state law, said Brian S. Brown, of Saul E. Kerpelman & Associates P.A. in Baltimore.

HABC’s failure to have lead-paint insurance was “outrageous in the extreme,” Brown added. “They put themselves in this position.”

The housing authority last week paid $6.8 million to satisfy six lead-paint verdicts dating from 2006 to 2011.

The money came from the U.S. Department of Housing and Urban Development, which originally earmarked the funds for low-income housing or subsidies to low-income residents in private housing.

Because of their source, the payments had to await HUD’s approval, HABC Executive Director Paul T. Graziano said in a statement Wednesday.

But HABC “would not have had to wait for [HUD] approval if they followed the law to begin with,” Brown said.

For more than 16 years, the authority has been without insurance for lead paint.

Though HABC carries liability insurance for the properties it maintains, the rider dealing with lead-paint liability was terminated by the insurance carrier, the Housing Authority Risk Retention Group, on April 18, 1996. The coverage ultimately continued through July 18, 1997, as HABC bought a 15-month rider.

The authority last year explained its lack of insurance, saying that “no commercially reasonable” amount of insurance or self-insurance could cover the potential legal exposure in the outstanding claims, which HABC estimated at about $900 million.

Brown, however, said the authority is well aware of its obligation to have insurance. He cited the Maryland high court’s November 2009 decision in Brooks v. HABC that the authority is not immune from lead-paint liability when sued as a landlord.

In that decision, the Court of Appeals said “the General Assembly expressly authorized housing authorities to satisfy judgments either by purchase of adequate insurance coverage or by self-insurance and to generate funds for that purpose through a variety of fundraising means, without capping in any way the extent of the obligation.”

HABC, in announcing the multimillion-dollar payments, said it “has not refused to pay judgments” in lead paint cases. Rather, HABC “had not received approval from HUD to make such payments,” the authority stated.

That approval from HUD came in a letter dated Aug. 7 and the payment of $6,786,955.86 was made the next day.

The authority, which receives all its public housing funds from HUD, said the payment will affect its ability to provide housing vouchers for about 700 families this year.

“It has always been our desire to satisfy these judgments,” Graziano said in the statement. “We explored a number of options to address these cases and resolve all remaining claims (filed and unfiled) in a global manner while continuing to serve the most vulnerable households in Baltimore. Unfortunately, a global resolution was not possible and payment of the judgments involved complicated and lengthy matters including litigation in federal court, as well as HUD review and approval.”

Baltimore Mayor Stephanie Rawlings-Blake said in the same statement that she is “pleased that HUD has allowed HABC to satisfy these judgments and thereby provide relief to these families.”