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Lex Loci Contractus: Brownlee v. Liberty Mutual

August 5, 2020

The Plaintiffs, five individuals, all claimed they were exposed to lead-based paint at a property owned by the Salvation Army and located at 1114 North Calvert Street in Baltimore City, Maryland.  Plaintiffs resided at the property in years ranging from 1995 to 2001 and all claimed elevated blood lead levels and permanent brain damage as a result of their alleged exposure to deteriorated lead-based paint.  Plaintiffs sued the Salvation Army, which asserted charitable immunity, unless Liberty Mutual indemnified the Salvation Army for Plaintiffs’ damages.

As a defense, Liberty Mutual asserted that the comprehensive general liability policies for the property were purchased in Georgia, and that, under Georgia law, the policy in effect at the time of the alleged exposure did not cover claims for lead-based paint poisoning (due to the Supreme Court of Georgia’s interpretation that a pollution exclusion provision would exclude coverage for ingestion of lead-based paint). 

The United States District Court for the District of Maryland ruled that the doctrine of lex loci contractus applies and determined that application of Georgia’s interpretation of the pollution exclusion as excluding coverage for bodily injuries from lead poisoning did not violate Maryland public policy.  The doctrine of lex loci contractus requires that, “when determining the construction, validity, enforceability, or interpretation of a contract, we apply the law of the jurisdiction where the contract was made.”  Although, the court recognized a narrow exception to this doctrine, demonstration of a strong public policy to the contrary, it determined that Georgia’s law did not violate a strong Maryland public policy. The court reasoned that Georgia’s decisions that lead-based paint is a pollutant is not against Maryland public policy and that insurance policy pollution exclusions are not, by themselves, at odds with Maryland’s public policy where our General Assembly has not indicated otherwise.