In the Spotlight: Silica Liability and the Premises Owner

While silica liability cases may never mushroom into mass tort litigation, there is nothing to stop individual cases from causing expensive and inconvenient litigation against expanded categories of target defendants, including premises owners. Many landlords (and some tenants under certain leases) have routinely had silica-based products used on their premises, either by in-house maintenance people or contractors. Common examples are sandblasting paint or industrial pro-cesses occurring on the premises, which pose an ongoing high risk. Premises owners are thus well advised to explore protections and precautions to combat claims on behalf of workers or occupants who will allege injury from silica exposure.

Here are some general suggestions toward that end:

Step One 'If your own employees are using silica, ensure safe practices.

As a premises owner ' even one that is not engaged in outside heavy industry or construction ' your employees may still be exposed to silica dangers. A retail mall owner, for example, can easily find its employees sandblasting graffiti off an alley-side wall or drilling concrete, whether indoors or outside, to mount signs or light fixtures. Because silicosis is 100% preventable with well-known precautions, learn what the safety measures are and insist that your employees take them.

Step Two ' Review your own insurance policies for silica exclusions.

If your insurance excludes silica-related claims coverage, find another insurer, if practicable. In the wake of the 'Judge Jacks' opinion, In re Silica Products Liability Litigation, 398 F.Supp.2d 563, 567 (S.D. Tex. 2005), it is credible to say that silicosis is not an extraordinary or unusual risk that justifies these exclusions ' so tell your agent or insurer that the exclusions swallow the usefulness and value of insurance; therefore, you will take your valuable business elsewhere if the exclusions are not removed.

Step Three ' Analyze potential silica exposure risk from contractors and tenants, and respond appropriately.

Landlords that rent industrial or manufacturing space to tenants obviously have a higher silica risk. However, just because a premises is residential, retail, or light commercial, it is not without potential exposure. If a landlord (or tenant) hires someone to build or modify part of a structure, silica liability can arise from a range of processes, including demolition, concrete cutting, sandblasting, and painting.

To minimize risk, have counsel routinely review contracts and leases and impose some basic silica-related precautions. Insist that contractors have adequate coverage (naming you as an insured), and make their contracts indemnify you, before you undertake any activities. (It is critically important to avoid the pitfalls of the innocuous 'insured v. insured' exclusion in insurance policies, which often trips up parties who are relying upon being named under another party's coverage.) This exclusion is commonly considered to have its roots in abusive conduct by businesses seeking to collect under directors' and officers' liability policies to counter business losses. Typically, the exclusion excuses the insurer from covering claims made by an insured party against another party covered under the same insurance policy. Counsel should determine whether this exclusion is present, and take steps to overcome it.

For example, counsel may include obtaining an endorsement to the policy that specifically trumps the exclusion for purposes of certain types of claims or for purposes of claims running in favor of one or more specifically identified insureds under the policy. If you are a landlord with residential or small commercial/retail tenants, your silicosis risk is probably minimal. However, it may be a good idea to prohibit your residential and small commercial tenants from engaging in industrial activities on the premises, including the use of silica in any manner that may result in a hazard or potential hazard. Exceptions can be written to allow tenants to hire qualified and safe contractors, with landlord permission, to construct, maintain, and/or upgrade any physical improvements upon the land.

The greatest problem is for landlords renting industrial space to tenants that will be undertaking high-silica-risk industrial activities on a routine basis. If these or similar activities are occurring on your premises, it is essential to develop, maintain, and follow a silica risk management program. The landlord must have a full understanding of what protections high-risk tenant users of silica have in place ' and secure the benefit of those protections.

Thus, a risk management program should include consideration of the following: (a) mandatory, tenant-purchased insurance that covers silica risks and names the landlord as an insured; (b) appropriate indemnification from the tenant; and (c) clauses that mandate the safe use of silica on the industrial premises, allow the landlord a reasonable right to inspect, and give the landlord the power of economic penalties, and ultimately eviction, if the tenant violates the rules.

Experience reveals that user abuse and misuse cause injury from silica-related products. You have no reason to tolerate silica abuse on your premises any more than you would tolerate the mishandling of hazardous waste.

The landlord that reaches a level of sufficient comfort after pursuing these reasonable measures with tenants faces difficult choices. Termination of the relationship with a non-complying tenant may be the best course to take.

Conclusion

At this time, the authors do not believe that silica seems likely to reach the same level of litigation as asbestos. However, while some recent favorable decisions and silicosis tort reform legislation provide important benefits, they are not enough to avoid expensive and destructive silicosis litigation everywhere, every time ' and it is premature to assess trends in this area.

The steps outlined in this article provide some general ideas for minimizing your risks, as a landlord or tenant of commercial real estate, in encountering silicosis claims. Counsel can help premises owners and operators tailor a program to meet their individual needs.

William E. Meyer, Jr. is a partner in the Litigation Department of Schiff Hardin LLP, and concentrates his practice in defending companies against product liability and other personal injury claims. Beth Blackwood practices as an associate in the firm's Litigation Department. Andrew Young practices with Kirkland & Ellis LLP.

Part Two of a Two-Part Series

Part One of this series explored the reasons why landlords should be concerned about silicosis litigation. This conclusion suggests some measures that landlords can take to avoid ' or at least reduce ' such litigation.

Solutions

While silica liability cases may never mushroom into mass tort litigation, there is nothing to stop individual cases from causing expensive and inconvenient litigation against expanded categories of target defendants, including premises owners. Many landlords (and some tenants under certain leases) have routinely had silica-based products used on their premises, either by in-house maintenance people or contractors. Common examples are sandblasting paint or industrial pro-cesses occurring on the premises, which pose an ongoing high risk. Premises owners are thus well advised to explore protections and precautions to combat claims on behalf of workers or occupants who will allege injury from silica exposure.

Here are some general suggestions toward that end:

Step One 'If your own employees are using silica, ensure safe practices.

As a premises owner ' even one that is not engaged in outside heavy industry or construction ' your employees may still be exposed to silica dangers. A retail mall owner, for example, can easily find its employees sandblasting graffiti off an alley-side wall or drilling concrete, whether indoors or outside, to mount signs or light fixtures. Because silicosis is 100% preventable with well-known precautions, learn what the safety measures are and insist that your employees take them.

Step Two ' Review your own insurance policies for silica exclusions.

If your insurance excludes silica-related claims coverage, find another insurer, if practicable. In the wake of the 'Judge Jacks' opinion, In re Silica Products Liability Litigation, 398 F.Supp.2d 563, 567 (S.D. Tex. 2005), it is credible to say that silicosis is not an extraordinary or unusual risk that justifies these exclusions ' so tell your agent or insurer that the exclusions swallow the usefulness and value of insurance; therefore, you will take your valuable business elsewhere if the exclusions are not removed.

Step Three ' Analyze potential silica exposure risk from contractors and tenants, and respond appropriately.

Landlords that rent industrial or manufacturing space to tenants obviously have a higher silica risk. However, just because a premises is residential, retail, or light commercial, it is not without potential exposure. If a landlord (or tenant) hires someone to build or modify part of a structure, silica liability can arise from a range of processes, including demolition, concrete cutting, sandblasting, and painting.

To minimize risk, have counsel routinely review contracts and leases and impose some basic silica-related precautions. Insist that contractors have adequate coverage (naming you as an insured), and make their contracts indemnify you, before you undertake any activities. (It is critically important to avoid the pitfalls of the innocuous 'insured v. insured' exclusion in insurance policies, which often trips up parties who are relying upon being named under another party's coverage.) This exclusion is commonly considered to have its roots in abusive conduct by businesses seeking to collect under directors' and officers' liability policies to counter business losses. Typically, the exclusion excuses the insurer from covering claims made by an insured party against another party covered under the same insurance policy. Counsel should determine whether this exclusion is present, and take steps to overcome it.

For example, counsel may include obtaining an endorsement to the policy that specifically trumps the exclusion for purposes of certain types of claims or for purposes of claims running in favor of one or more specifically identified insureds under the policy. If you are a landlord with residential or small commercial/retail tenants, your silicosis risk is probably minimal. However, it may be a good idea to prohibit your residential and small commercial tenants from engaging in industrial activities on the premises, including the use of silica in any manner that may result in a hazard or potential hazard. Exceptions can be written to allow tenants to hire qualified and safe contractors, with landlord permission, to construct, maintain, and/or upgrade any physical improvements upon the land.

The greatest problem is for landlords renting industrial space to tenants that will be undertaking high-silica-risk industrial activities on a routine basis. If these or similar activities are occurring on your premises, it is essential to develop, maintain, and follow a silica risk management program. The landlord must have a full understanding of what protections high-risk tenant users of silica have in place ' and secure the benefit of those protections.

Thus, a risk management program should include consideration of the following: (a) mandatory, tenant-purchased insurance that covers silica risks and names the landlord as an insured; (b) appropriate indemnification from the tenant; and (c) clauses that mandate the safe use of silica on the industrial premises, allow the landlord a reasonable right to inspect, and give the landlord the power of economic penalties, and ultimately eviction, if the tenant violates the rules.

Experience reveals that user abuse and misuse cause injury from silica-related products. You have no reason to tolerate silica abuse on your premises any more than you would tolerate the mishandling of hazardous waste.

The landlord that reaches a level of sufficient comfort after pursuing these reasonable measures with tenants faces difficult choices. Termination of the relationship with a non-complying tenant may be the best course to take.

Conclusion

At this time, the authors do not believe that silica seems likely to reach the same level of litigation as asbestos. However, while some recent favorable decisions and silicosis tort reform legislation provide important benefits, they are not enough to avoid expensive and destructive silicosis litigation everywhere, every time ' and it is premature to assess trends in this area.

The steps outlined in this article provide some general ideas for minimizing your risks, as a landlord or tenant of commercial real estate, in encountering silicosis claims. Counsel can help premises owners and operators tailor a program to meet their individual needs.

William E. Meyer, Jr. is a partner in the Litigation Department of Schiff Hardin LLP, and concentrates his practice in defending companies against product liability and other personal injury claims. Beth Blackwood practices as an associate in the firm's Litigation Department. Andrew Young practices with Kirkland & Ellis LLP.