United States District Court, E.D. New York
For Plaintiff: GEORGE A. STAMBOULIDIS, ESQ., BAKER & HOSTETLER, LLP, New York, New York; MATTHEW A. KORNHAUSER, ESQ., DYLAN B. RUSSELL, ESQ., MITCHELL A. WARD, ESQ., SIDNEY WATTS, ESQ., HOOVER SLOVACEK LLP, Houston, Texas; ROBERT M. GOODMAN, ESQ., CLIFFORD B. KORNBREK, ESQ., GREENBAUM ROWE SMITH RAVIN DAVIS & HIMMEL, LLP, Roseland, New Jersey.
For Defendants: RICHARD J. AHN, ESQ., JOSEPH A. OLIVA, ESQ., GOLDBERG SEGALLA LLP, New York, New York.
MEMORANDUM AND ORDER
LEONARD D. WEXLER, UNITED STATES DISTRICT JUDGE.
This is a declaratory judgment action brought by Plaintiff, Lapolla Industries, Inc. (" Plaintiff" or " Lapolla" ), seeking a judgment declaring that the Defendant insurers are obligated to defend and indemnify Plaintiff in connection with a personal injury action now pending in this court (the " Underlying Action" ). Presently before the court is the motion of Defendants, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the complaint on the ground that insurance policies they issued do not cover the claims made in the Underlying Action. For the reasons that follow, the motion is granted.
I. The Parties
Lapolla, a Delaware corporation with its principle place of business in the state of Texas, is engaged in the manufacture and distribution of spray foam insulation. Defendant Aspen Specialty Insurance Company is a North Dakota Corporation. Aspen Specialty Insurance Management, Inc. is a Massachusetts corporation. Both Defendants, referred to herein collectively as " Aspen," maintain a principle place of business in Boston, Massachusetts. They are subsidiaries of Aspen Insurance Holdings Limited, the ultimate parent corporation of a group engaged in the global specialty insurance and reinsurance businesses.
II. Policies and the Relevant Exclusion
The policies at issue here are: (1) a commercial general liability (" CGL" ) policy of insurance (the " Primary Policy" ) and (2) an excess policy of insurance (the " Excess Policy" ) (collectively the " Policies" ). The Policies cover the period of November 11, 2011 through November 11, 2012, and provide insurance for general liability claims made against Lapolla that may arise throughout the world. Both policies speak expressly, as discussed in greater detail below, to the exclusion of coverage with respect to claims arising out of exposure to, or requiring clean-up of " pollution" or " pollutants." The Primary Policy contains an endorsement modifying coverage for damage allegedly attributable to " pollution." This endorsement, commonly referred to as a " total pollution exclusion" clause, states that coverage is not provided for:
(1) " Bodily injury" or " property damage" which would not have occurred in whole or part but for the actual, alleged, or threatened discharge, dispersal, seepage, migration, release or escape of " pollutants" at any time.
(2) Any loss, cost or expense arising out of any:
(a) Request, demand, order or statutory or regulatory requirement that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of " pollutants" ;
. . .
The Primary Policy defines the term " pollutants" to mean:
any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
By its terms, the Excess Policy provides coverage subject to the terms, conditions and exclusions of the Primary Policy. Additionally, the Excess Policy contains its own specific exclusion with respect to pollution,
stating that, whether or not an underlying policy affords coverage, it excludes coverage for:
A. Pollution, [including any]
1. Claim, suit, demand of Loss that alleges injury or damage that, in any way, in whole or in part, arises out of, relates to or results from any:
a. Request, demand, order or statutory or regulatory requirement, or any other action authorized or required by law, that any Insured or others investigate, abate, test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, remediate or dispose of, or in any way respond to, or assess the effects of Pollutants as well as any Loss, sanctions arising out of, relating thereto or resulting therefrom.
The Excess Policy contains the same definition of " pollutants" as the Primary Policy.
The Policies were issued to Lapolla through CRC Insurance Services, Inc., a broker for Defendants that is located in Birmingham, Alabama. Lapolla, identified as the named insured party with a Houston, Texas mailing address, made payment on the Policies to CRC. Each of the Policies contain language referencing the laws of the State of Texas. That language advises Lapolla, inter alia, that the insurer is not authorized to transact business within the State of Texas, and advising the insured as to the procedure for obtaining information about the insurer through the Texas Department of Insurance. Neither of the Policies contain a choice of law provision.
III. The Underlying Action
The allegations of the action for which insurance coverage is sought are important to determine the coverage question at issue. The court therefore details below the allegations of the Underlying Action, which was commenced against Lapolla in this court, and assigned to a different District Judge, on September 14, 2012, by Neil and Christina Markey (the " Markeys" ) (hereinafter the " Markey Lawsuit" ). The Markey Lawsuit, styled as a class action, seeks compensation for personal injury and property damage allegedly attributable to the application of Lapolla's spray polyurethane foam (" SPF" ) insulation product. The action alleges that Lapolla's SPF is hazardous and defective because after application, the product emits an odor associated with the " off-gassing" of hazardous compounds and toxins. Specifically, the Markeys allege that SPF is a polyurethane open cell semi-rigid foam created by the chemical reaction of two sets of highly toxic compounds that are brought together in a spraying apparatus. While the resulting foam is intended to become inert and non-toxic after application, the Markey Lawsuit alleges that the toxicity remains. This toxicity is alleged to be released into ...