962 F. Supp. 2d 479
E.D.N.Y2013Background
- Lapolla seeks a declaratory judgment that Aspen must defend and indemnify in Markey v. Lapolla Industries, Inc., No. 12-4622(JS).
- Aspen denied coverage under both the Primary CGL policy and the Excess policy based on pollution exclusions.
- Policies run from Nov 11, 2011 to Nov 11, 2012 and cover worldwide general liability claims.
- Primary policy contains a total pollution exclusion; Excess policy contains its own pollution exclusion identical in effect.
- Underlying action (the Markey Lawsuit) asserts personal injury and property damage from Lapolla’s spray polyurethane foam off-gassing and seeks damages, remediation, costs, and related relief.
- Policies were issued through CRC Insurance Services; Lapolla is domiciled in Texas, and the policies reference Texas law, with no explicit choice-of-law provision.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Conflict of laws for pollution exclusion interpretation | Lapolla contends NY law should apply with no real conflict | Aspen asserts TX law governs the interpretation | There is a conflict between TX and NY law on pollution exclusions |
| Choice of law to apply to interpret the exclusions | New York law should apply to determine coverage | Texas law should apply as the location of the risk and policy domicile | Texas law applies; interprets exclusions to bar coverage |
| Whether the pollution exclusion unambiguously bars coverage | NY cases treat pollution exclusions as ambiguous outside environmental pollution | TX law treats such exclusions as unambiguous | Under TX law, the exclusion is unambiguous and bars coverage; thus no duty to defend/indemnify |
| Effect of worldwide risk and domicile on law selection | Domicile supports NY as location of risk | Domicile and global risk support TX law | Texas law governs due to domicile and global scope of risk, leading to exclusion of coverage under TX interpretation |
Key Cases Cited
- National Union Fire Ins. Co. of Pittsburgh, PA v. CBI Industries, Inc., 907 S.W.2d 517 (Tex. 1995) (pollution exclusion deemed absolute and unambiguous in environmental context)
- Certain Underwriters at Lloyd’s London v. C.A. Turner Constr. Co., Inc., 112 F.3d 184 (5th Cir. 1997) (pollution exclusion applied beyond traditional environmental pollution)
- Belt Painting Corp. v. TIG Ins. Co., 100 N.Y.2d 377 (N.Y. 2003) (pollution exclusion ambiguous outside traditional environmental pollution)
- Stoney Run Co. v. Prudential-LMI Commercial Ins. Co., 47 F.3d 34 (2d Cir. 1995) (pollution exclusion ambiguous in non-environmental context (New York))
- Noble Energy, Inc. v. Bituminous Cas. Co., 529 F.3d 642 (5th Cir. 2008) (Texas courts consistently treat total pollution exclusions as unambiguous)
- Clarendon America Ins. Co. v. Bay, Inc., 10 F.Supp.2d 736 (S.D. Tex. 1998) (pollution exclusion unambiguous in Texas decisions)
- Zaiontz v. Trinity Universal Ins. Co., 87 S.W.3d 565 (Tex. App. 2002) (pollution exclusion bars coverage in many TX cases)
- Foster Wheeler Corp. v. London, 36 A.D.3d 17, 822 N.Y.S.2d 30 (1st Dep’t 2006) (New York grouping of contacts approach cited in choice-of-law analysis)
- Stoney Run Co. v. Prudential-LMI Commercial Ins. Co., 47 F.3d 34 (2d Cir. 1995) (NY ambiguity on non-environmental pollution)
- Ocean Partners, LLC v. North River Ins. Co., 546 F.Supp.2d 101 (S.D.N.Y. 2008) (New York view on pollution ambiguity outside environmental pollution)