Litigation The Future of CCA Claims… and What Target Defendants Can Do About Them BY MICHAEL DORE

Consider this a heads-up: Ongoing regulatory, litigation and “public relations” developments on chromated copper arsenate (CCA)-treated wood make it all but inevitable that these products will give rise to extensive and significant toxic claims. Indeed, a recent episode of ABC TV’s “The Practice” included a story line that deals with children allegedly injured by contaminants leaching from their playground equipment. As the newsletter of one lumber products trade association noted, “Unless The Practice’s producer…decides to allow Ally McBeal to come to the defense of CCA- treated wood products, it is clear that the industry has not heard the end of personal injury claims based on exposures to ‘defective’ CCA-treated wood products.”

Future CCA Claims Environmental Working Group and The Healthy equipment, playsets, and treehouses are not Recent regulatory and judicial activity Building Network) to ban arsenic-treated wood some of them. Thus, we urge the Commission regarding CCA-treated wood products will in playground equipment and review the safety to move swiftly to ban the sale and use of almost inevitably pale before the scope of of arsenic-treated wood for general use. At least chromated copper arsenicals in playground claims anticipated in the future. And the partly in response to these regulatory efforts, in equipment.” characteristics of CCA claims all but ensure July 2001 the industry voluntarily agreed to that this product will give rise to numerous place warnings on all CCA-treated wood Unique Product Components and significant toxic tort actions. Those products advising consumers to wear gloves, The principal risks associated with CCA features include: goggles and dust masks when working with allegedly stem from exposure to arsenic, CCA-treated wood, and never to burn it. classified by the EPA and the World Health Regulatory Scrutiny This regulatory activity has not been Organization as a known human CCA-treated wood products have been the restricted to federal government agencies. In readily taken up by the body, causing a wide focus of intense regulatory scrutiny. All 1987 California passed a law requiring CCA- range of adverse health effects at high, registered before November 1984 treated structures to be coated with paint or moderate and low doses. The relevance of are required to undergo re-registration review sealant every two years. In September 2001, those characteristics of arsenic which has not to ensure that the data supporting their use the Wisconsin Department of Agriculture, Trade been bound to wood through the CCA-fixation meet current safety standards. As part of this and Consumer Protection stated in support of process will be the subject of significant process, EPA has engaged in a comprehensive the petition pending before the Consumer scientific and legal dispute. In addition, complex re-evaluation of CCA-treated wood products. Product Safety Commission to ban the use of and crucial exposure, dose, fixation, leaching In addition, the Consumer Product Safety CCA-treated wood in playground equipment and related questions will be presented in CCA Commission is considering a May 2001 petition that “Clearly, there are legitimate uses for CCA- toxic tort cases. And the fact that at least one from two environmental groups (The treated lumber. Children’s playground component of this product can produce

REPRINTED WITH PERMISSION FROM THE MARCH 2002 BUILDING MATERIAL DEALER MAGAZINE significant adverse health impacts outside of determine how and where the CCA litigation Sympathetic Plaintiffs and the CCA application process promises to greatly battles will be fought. Solvent Defendants expand judicial receptiveness to CCA-based Different states’ views on insurance The sympathetic nature of individual children toxic tort claims. coverage questions—such as the duty to alleging adverse health consequences as a defend, the trigger and allocation of coverage result of their exposure to a colorless, odorless, Childrens’ Health Issues and the impact of both the “sudden and and tasteless contaminant leaching from Some 50 million feet of this treated wood is used accidental” and “absolute” pollution exclusion— playground or decking materials is obvious. for playground equipment. Children’s exposure will almost inevitably determine who will wind Many others involved in CCA-treated wood to CCA-treated wood presents unique toxic tort up paying whatever compensation is ultimately transactions, however, are equally sympathetic issues, including the question of whether awarded. claimants. Government bodies, for example, that children’s response to arsenic exposures purchased and installed CCA-treated present unique and significant risks. Media Response playground equipment will clearly have Recent research has shown that children One troubling storyline on a popular television sympathetic claims if that equipment needs to may metabolize arsenic differently than adults show will not spell the death knell for any be removed in order to preserve children’s do—that they may not be able to convert consumer product. But as scientific and safety. arsenic into less toxic forms as readily as adults regulatory concerns increase with respect to a Moreover, the range and character of the and thus may be more susceptible to its harmful substance, the media’s attitude toward the potential defendants ensure that such claims will effects. Other studies have concluded that alleged toxic exposures will clearly impact the enjoy a “target-rich” defendant environment. Major people with poor nutrition—including children— magnitude and resolution of claims. To the corporations with extensive insurance resources may be more susceptible to adverse arsenic- extent that CCA becomes lumped in the public’s were and are involved in the manufacture of CCA, related health effects. Indeed, the widespread mind with substances such as or the application of this product to wood and the use of CCA in playground equipment and tobacco products, toxic tort claims will take on distribution, sale and maintenance of CCA-treated outdoor decking has led the practice director of added levels of significance. “The Practice” wood products. Thus, future CCA-treated wood the Environmental Working Group (which episode may be an isolated circumstance—or claims will clearly involve defendants with petitioned the CPSC to bar certain uses of it may be the first significant step in this process tremendous financial resources. CCA-treated wood) to claim that “by virtue of of raising public concerns. As one commentator the use of this material we pretty much set up recently noted, “Arsenic has quickly grown into Target Defendants’ Response an arsenic delivery system for kids.” one of the front page pollutants of the new In light of these factors, it’s clear that CCA millennium.” If the same turns out to be true for manufacturers, applicators, product sellers Medical Surveillance CCA, we can anticipate multiple toxic tort and servicers (along with their insurance Arsenic-related afflictions may well lend claims. carriers) need to be prepared for extensive themselves to medical surveillance remedies. CCA bodily injury, property damage, Relatively inexpensive and minimally-invasive Alternative Products economic loss and other toxic tort claims. blood, urine, hair or fingernail tests can Another crucial factor in toxic tort claims with To begin addressing those claims, target determine human arsenic levels. any product is the uniqueness and utility of that defendants should consider at least the Treatments for arsenic poisoning are product. But defending CCA products as following responses. generally accepted in the medical community, uniquely beneficial to the public will not be an meaning anticipatory medical surveillance is far easy task. For instance, earlier this year Commercial Terms more likely to be requested and ordered on PlayNation Play Systems, Inc., a leading CCA claims will almost inevitably be made CCA claims than in a wide variety of other manufacturer of wooden playground equipment, against all parties in the distribution chain. afflictions. announced that it was replacing CCA with These will probably include CCA manufacturers arsenic-free preserved wood in all of its and wood processors as well as distributors, Jurisdiction-Specific Legal Issues products. Other wood preservative sellers and services. And the solvency of each The intensity of toxic tort litigation is often manufacturers also have launched advertising party in that chain may prove vital to the other impacted by the range of outcomes possible in campaigns to emphasize that their non-arsenic participants. For this reason, dealing only with the different arenas in which the key legal containing preservatives are not restricted-use solvent and/or appropriately-insured parties in battles are fought. Specific state statutes of pesticides and do not require California CCA transactions is extremely important. repose and rules will clearly Proposition 65 Labeling. With this type of Furthermore, contractual indemnity or impact CCA claims. Different state rules on response to public concerns within the CCA contribution relationships should be negotiated sophisticated-user defense and the liability of wood treatment industry, it promises to be between parties in this chain of distribution to component-part manufacturers will impact the extremely difficult to defend the unique benefits ensure that uncertain or conflicting common liability of many target defendants. The extent of these products in individual toxic tort claims. law rules do not control critical liability- to which CCA claims are preempted by federal allocation issues. For example, a retailer may statutes or regulatory structures and the impact fail to provide voluntary CCA warning materials of primary jurisdiction defenses will clearly to his customers. The impact that should have Litigation

on either indemnity or contribution claims defense of such cases. These include Conclusion made by that retailer, however, is probably manufacturing records, fixation reports, product- CCA-treated wood will undoubtedly give rise best negotiated as part of the contract release records, sales data and insurance to large and significant toxic tort claims. To between those parties, rather than left to policies covering time frames relevant to the deal with them, target defendants need to resolution under often-conflicting state claims. prepare now by: 1) dealing only with solvent common-law indemnity and contribution and/or adequately insured parties; 2) using doctrines. Legal Preparation clear and comprehensive contractual CCA-treated wood claims promise to involve at indemnity and contribution agreements; 3) Insurance least a four-front legal battle. First, future obtaining appropriate general liability, Few business practices give rise to more product-liability litigation will almost certainly be product liability, D&O, fiduciary, product- significant insurance concerns than the framed by the regulatory decisions made on the recall and other insurance products; 4) distribution of CCA products. Anyone involved in alleged risks to the public presented. Second, monitoring existing insurance claims to this distribution should carry adequate product- damage and causation issues will be resolved ensure that they will not adversely impact liability coverage and ensure that exclusions to through litigation brought by claimants allegedly future CCA claims; 5) assembling and that coverage will not prevent defense and injured by unique and diverse product preserving CCA-related historical indemnity in the future, and that its limits are exposures. Third, within the industry itself, the documents, including insurance policies adequate. In addition, all parties in the distribution appropriate responsibility of chemical suppliers, and manufacturing and customer records; chain should ensure that they are added as product manufactures, distributors, retailers, 6) closely monitoring ongoing regulatory additional insureds to the policies of other parties trade associations and other market participants developments on CCA issues; 7) training a in that chain to the extent that such additional will be fought out. And finally, on each battlefront company spokesman; 8) ensuring that insurance protections are available. insurance coverage disputes will have to be inappropriate CCA commentary or Product liability coverage and additional resolved. These efforts will require industry-wide evaluation documents are not created; and insured provisions are not the only insurance coordination and focus on regulatory, liability 9) evaluating corporate structure, issues raised by potential CCA-treated wood protection and litigation approaches, mindful of organization and financing issues in light of claims. Other insurance products exist which the different considerations at play on each the potential for future CCA-related claims. could prove valuable. While the results of ongoing separate fronts in the litigation “war.” government investigations cannot be predicted, In handling legal issues in each area of Michael Dore is a director in the the wisdom of obtaining product-recall insurance concern to CCA defendants, counsel must Litigation/Environmental Department of for CCA products must be carefully considered. ensure that all communications are protected Lowenstein Sandler PC at 973.597.2344 or In addition, the financial exposure of corporate by the attorney/client privilege to the maximum [email protected]. The opinions and officers with respect to these claims should be extent possible. Adverse judicial findings conclusions in this article are exclusively evaluated and the wisdom of obtaining directors regarding the tobacco industry’s ability to his and do not represent the views of and officers (D&O), fiduciary and related protect scientific research conducted under the Lowenstein Sandler PC or its clients. coverages should be considered. direction of counsel, ensure that it will be very difficult to protect the results of any CCA-related Data and Fact Preservation factual investigation. To the fullest extent CCA-treated wood claims promise to be possible, however, counsel for CCA defendants extremely fact-sensitive. Unique manufacturing, should ensure that litigation or regulatory product composition, or CCA-fixation factors disclosure will not be compelled for steps taken may exist which effectively differentiate the CCA by their clients today to evaluate or deal with products of one manufacturer from those of the impact of existing and future CCA claims. another. Such differences will provide a basis At a minimum, counsel should alert their clients for avoiding the sort of “broad brush” liability to the danger that such disclosures may which will inevitably be sought by plaintiffs. ultimately be compelled, and advise them to act As with asbestos products, the ability to accordingly in the creation of documents that demonstrate precisely what products were could prove problematic. made or sold by a particular party at a particular Counsel should also consult with their time may prove crucial to the defense effort. clients to ensure that they give appropriate And the ability to demonstrate when, where and consideration to whether to remain in CCA- to whom those products were sold may be related businesses; whether existing corporate equally vital. structures adequately protect non-CCA assets Careful attention should also be paid to in the event of significant future claims; and to document-destruction policies to ensure that establishing the best possible structure for they do not require or facilitate the destruction funneling future capital to CCA-related of crucial materials which will be helpful in the businesses.