Lead-Based Paint Hazards

Millions of property owners face significant financial risks because liability insurance for lead hazards is becoming increasingly difficult to obtain. A number of owners and their insurers have already made payments--some amounting to millions of dollars--to the families of lead-poisoned children. To avoid the growing number of claims, property owners can attempt to remove lead hazards--which can be costly--but no nationally accepted methods or standards for such abatement exist. Consequently, owners cannot be sure their abatement efforts will reduce their liability and insurance companies are reluctant to insure against unpredictable claims for damages resulting from lead hazards. Thus, until the Environmental Protection Agency establishes reasonable standards for the inspection and abatement of lead hazards in privately-owned property, little progress will be made toward providing insurance for property owners or abatement contractors.

GAO found that: (1) property owners face large financial risks because of the increasing difficulty in obtaining liability insurance; (2) the Department of Housing and Urban Development (HUD) has developed guidelines for lead hazard containment and reduction in all public housing and a list of cost-effective methods to use in lieu of total lead abatement; (3) owners cannot be sure that their costly lead abatement activities will reduce their liability, since the Environmental Protection Agency (EPA) has not established acceptable abatement methods and standards; (4) insurance companies are avoiding covering lead hazards because of the unpredictability of lead damage claims in the face of increasing and expensive lawsuits; (5) owners may abandon their properties because of the financial risks, which will reduce the supply of affordable housing; (6) except for large contractors with proven records, contractors generally have difficulty obtaining insurance for their lead abatement activities; (7) most lead abatement is done by small firms; (8) states have taken the lead in increasing lead hazard insurance, since they regulate property insurance; (9) industry officials believe that the availability of insurance is unlikely to increase until abatement standards and property owners' liability limits are established; (10) HUD is now focusing on developing criteria for housing authorities to use in obtaining lead hazards coverage; and (11) a federal task force is studying lead-based paint problems and plans to issue its report in early 1995.