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Paul Hilding is a graduate of Duke LawSchool 0.0. 1983). He was the founder

and chairman of the InsuranceCoverage/Bad Faith Section of the SanDiego County Bar Association from 1990-1998.Formerly a partner with the firm ofBrobeck.Phleger S Harrison, he has been apartner with Hilding Kipnis Lyon SKellysince 1993- He specializes in insurancecoverage litigation.

Are You Covered For ADA Lawsuits?Introduction

Among the most common lawsuits filed in SanDiego County are cases alleging violations of theFederal Americans with Disabilities Act and similarstate statutes designed to protect the rights of dis-abled people. The defense and settlement of thesecases can be quite expensive, yet many businessesoverlook the fact that their existing liability insur-ance policies may cover these claims. The purposeof this article is to review the insurance policiesthat most commonly cover these claims and a num-ber of coverage issues that often arise.

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Commerdal General Liability PoUdesMost businesses carry commercial general liabil-

ity (CGl) policies that cover "bodily injury" claims.Plaintiffs in ADAlawsuits frequently seek recoveryfor their physical pain, discomfort and emotionaldistress resulting from inability to utilizerestrooms or other facilities. Such physical dis-comfort may fall within the bodily injury coverage.Emotional distress, particularly when accompaniedby resulting physical symptoms, also may be cov-ered by bodily injury.

Many CGl policies also cover "personal injury,"which is often defined to include "wrongful entry,wrongful eviction or other invasion of the right ofprivate occupancy" and, sometimes, "discriminationor humiliation" and "invasion of privacy." Any ofthis policy language may apply to an ADAclaim,depending on the specific facts of the case (e.g.,tenants complaining of wrongful eviction, cus-tomers complaining of humiliation or discrimina-tion, and employees complaining of invasion oftheir privacy rights).

A number of insurers routinely defend thesetypes of claims in San Diego and pay for the plain-tiffs' pain and suffering damages. But, obviously,they have no obligation to conduct a defense untilthey are put on notice of such claims.

Themoredifficultissue is whether insurers have

a duty to pay for remediation costs, such as struc-tural alterations necessary to bring buildings intocompliance with state and federal law. Surprisingly,there are no published decisions in California orelsewhere in the United States addressing thisissue. Insurers commonly deny they have any oblig-ation to pay ADAremediation costs because thesecosts are not awarded to the claimants as moneydamages. The insurance policies, they point out,only cover the policy holder for sums it is "legallyobligated to pay as damages."

However, a convincing argument that ADAreme-diation costs are covered can be made by analogyto the California Supreme Court's decision in AIU v.Superior Court ('99°) 5' Cal.]d 807. In AIU,a gov-ernment agency sought injunctive relief and reim-bursement of environmental cleanup costs fromthe insured. The issue was whether the remediessought by the government were "damages." Thecourt took a liberal view of the "as damages"clause, and held that the cost of an agency-orderedenvironmental cleanup may constitute damages. Inreaching this conclusion, the court first rejectedthe insurer's argument that "legally obligated topay" does not include equitable relief. The courtnext rejected the insurer's argument that "as dam-ages" does not cover injunctions. Ultimately, thecourt adopted the insured's position holding that"injunctions requiring remedial and mitigativeaction result in costs that constitute 'damages'under CGl policies." (Id. at 84d.

The Supreme Court expressly rejected the insurer'sargument that the cost of complying with a regula-tory statute is an uninsurable cost of doing business.Id. at (831-32).The court also rejected the insurer'sargument that mitigative expenses are uninsurablebecause they are preventative rather than compen-satory. The court stated, "It would be illogical formitigation costs not to be covered and remedial coststo be covered." Id at (833.fn. 14).

The holding of the AIUcourt has been followed

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by courts in California and numerous otherjurisdictions in pollution-cleanup cases.Significantly, at least two courts also haveapplied the holding in discrimination cases.In City of Pomona v. Employers' SurplusLines Ins. CO. (199Z)5 CaI.Rptr.zd 910, 918(unpublished decision), the court held thatthe cost of complying with a potentialinjunction to remedy racial discriminationis covered "as damages." Noting that injunc-tive costs incurred in redrawing districtlines would be similar to the injunctiveresponse costs discussed in AIU,the courtheld that the costs of complying with aninjunction to remedy the discriminationwould have been covered as "damages,"which the city was "legally obligated" topay. See also Lopez v. New Mexico PublicSchool Ins. Authority (N.M. 1994) 870 P.zd745, 748. (The policy defines "personalinjury" as including discrimination and vio-lation of civil rights, and arguably includescoverage for injunctive relief in civil-rightsand personal-injury cases.)

Umbrella PolidesMany companies carry umbrella policies,

which contain broader coverage than theirCGLpolicies. Umbrella policies often con-tain coverage for "discrimination andhumiliation," even if the CGLpolicy doesnot. like the CGL policies, these policiesmay also apply to remediation costs.

Errors and Omissions Polides

A number of reported dedsions from other

jurisdictions have addressed the issue of coveragefor ADAclaims under errors and omissions (ffiO)

polides. These polides are typically issued to pro-fessionals to protect them from liability for mal-practice and similar claims. However, in at leasttwo cases, insurers conceded that their ffiO poli-

des afforded coverage for ADA claims. North

Clad<amasSchool Dist No. lZ V. Oregon School

BoardsAssn Property and 0Js. Trust (OrApp. 1999)

991 P.zd 10&],1092 (asOSBAexplains"...thepoli-cy...clearly covers...claims...arisingunder theAmericans with Disabilities Act"}. CanutiJ/oIndependent SchoolDist v. NationalUnionFireIns. Co. (sth Or Tex., 1996) 99 F.JC16<}s~("National Union...offers several examples ofclaimsfor which it would be liableto indemnify(the insured)...for example...claims...undertheAmericanwith DisabilitiesAct'l

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Employment Practices Uabillty PolidesIn recent years, many companies have begun purchasing

employment practices liability policies (EPU).These policiescommonly cover ADAdiscrimination claims by employeesand, sometimes, by third parties. Unfortunately, many ofthem expressly exclude remedial costs and thus cover onlylitigation costs and pain-and-suffering damages.

However, by comparing the express exclusion for reme-dial costs in the EPLIpolicies with the failure to excludesuch costs in a company's other policies, the argument thatthe other policies were intended to cover such remediationcosts may be enhanced.

Conclusion

As with any lawsuit, defendants sued for ADAviolationsshould promptly and thoroughly review their insurancepolicies to determine whether they may have insurancecoverage applicable to the claim. If in doubt, they shouldconsult their insurance broker or an attorney specializingin insurance coverage. Given the significant expense of ADAclaims and the risk that belated notice may be used byinsurers as an excuse to deny policy benefits, notice of suchclaims should be made immediately. Depending on the factsof the case, and the language of the applicable policies, poli<.yholders should consider insisting that their insurer pay forremediation costs in addition to defense expenses and pain-and-suffering damages.

HILDJ~G .

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Finn: Hilding Kipnis Lyon 6 KellyAddress: 8910 University Center Lane,

Suite 220, San Diego, CA92122Phone: (858) 623-2326

Fax: (858) 623-9114E-Mail: hildingii>hklk.com

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