Opinion
1:23-cv-07526 (JLR)
08-01-2024
IRONSHORE SPECIALTY INSURANCE COMPANY, Plaintiff, v. COLOR TECHNIQUES, INC., Defendant.
OPINION AND ORDER
JENNIFER L. ROCHON, UNITED STATES DISTRICT JUDGE:
Ironshore Specialty Insurance Company (“Ironshore”) sues its insured, Color Techniques, Inc. (“CTI”), seeking a declaration that it has no duty to defend or indemnify CTI in a series of lawsuits pending in California state court. CTI counterclaims, seeking both a declaration to the opposite effect and damages for alleged breach of contract. CTI now moves for partial judgment on the pleadings on Ironshore's duty to defend. For the following reasons, CTI's motion is DENIED.
BACKGROUND
I. Facts
A. The Insurance Policies
CTI is a manufacturer, incorporated and headquartered in New Jersey, that sells “various ingredients used in cosmetic formulations, including surface-treated talcum products.” Dkt. 1 (“Compl.”) ¶¶ 5, 10. Ironshore, an insurance company incorporated in Arizona and headquartered in Massachusetts, issued a series of identically worded Environmental Protection Insurance Coverage Package policies (the “Ironshore EPIC Policies”) to CTI between December 2011 and December 2020. Id. ¶¶ 4, 19, 22. Ironshore also issued a set of Environmental Excess Policies to CTI over the same period. Id. ¶ 20.
The first Ironshore EPIC Policy, effective from December 7, 2011, to December 7, 2012, provides Coverages A through G, with each part covering different types of exposures and containing different exclusions. Id. ¶¶ 19, 23; see Dkt. 1-1 (the “Policy”). The Policy contains a liability limit of $1 million per occurrence and $2 million in the aggregate. Policy at 2.
The Ironshore EPIC Policies provide that, if the same, related, or continuous pollution incident or general harmful conditions or substances results in bodily injury that takes place during the different policy periods, all such bodily injury should be deemed to have taken place only during the first policy period. See Policy at 19. Because the underlying plaintiffs allege that they were first exposed to asbestos before Ironshore issued its first policy on December 7, 2011, and that such exposure continued thereafter, only the first of the Ironshore EPIC Policies applies.
Under Coverage A, for “General Bodily Injury and Property Damage Liability,” Ironshore agreed to “pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies,” provided that the damaging “occurrence” took place in the “coverage territory” and “during the policy period.” Id. § I(A)(1) (emphases omitted). Coverage A contains an “Asbestos and Lead” exclusion for bodily injury “arising out of the presence, ingestion, inhalation or absorption of, or exposure to, asbestos or lead in any form” or property damage “arising out of the presence of, or exposure to, asbestos or lead in any form.” Id. § I(A)(2)(b) (emphasis omitted).
Under Coverage C for “Products Pollution and Exposure Liability,” Ironshore agreed to cover CTI, with certain exceptions, for damages due to bodily injury “arising out of a pollution incident caused by your product” or “arising out of the ingestion, inhalation or absorption of, contact with, or exposure to, any fumes, dust, particles, vapors, liquids or other substances that are or originate from your product and included in the products-completed operations hazard.” Id. § I(C)(1) (emphases omitted). Elsewhere, the Policy defines “[y]our product” to include “[a]ny goods or products, other than real property, manufactured, sold, handled, distributed or disposed by” CTI. Id. § V(49) (emphasis omitted). The “[p]roducts-completed operations hazard” includes bodily injury “occurring away from a location you own or operate and arising out of your product or your work.” Id. § V(36) (emphases omitted). Like Coverage A, Coverage C contains an asbestos exclusion. See id. § I(C)(2)(a).
Under Coverage G for “Contractors Pollution Liability,” Ironshore agreed to “pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury, property damage or environmental damage to which this insurance applies arising out of a pollution incident caused by your work,” provided that the damaging “occurrence” took place “in the coverage territory” and “during the policy period.” Id. § I(G)(1) (emphases omitted). The Policy defines “[y]our work” to mean “[w]ork or operations performed by you or on your behalf; and . . . [m]aterials, parts or equipment furnished in connection with such work or operations.” Id. § V(50). The definition also includes “[w]arranties or representations made at any time with respect to the fitness, quality, durability, performance or use of your work; and . . . [t]he providing or failure to provide warnings or instructions.” Id. (emphasis omitted). Unlike Coverages A or C, Coverage G does not contain an asbestos exclusion. Compl. ¶ 33.
B. The Asbestos Actions
CTI is one of dozens of defendants in at least 10 lawsuits, all filed in California state court, where plaintiffs (the “Asbestos Plaintiffs”) allege that they have developed mesothelioma, among other injuries, due to asbestos exposure. See id. ¶¶ 2, 13-15; Dkt. 1-2 (the “Asbestos Actions”). All but two of the Asbestos Actions identify CTI as a supplier of asbestos-containing talc in cosmetic products at issue. Compl. ¶¶ 2, 16 & n.1; see, e.g., Dkt. 1-3 (“Haney Compl.”) ¶ 3 (identifying CTI “as a supplier of asbestos-containing talc” (emphasis omitted)). The Asbestos Plaintiffs allege broadly that all the defendants, including CTI, engaged in:
researching, manufacturing, fabricating, designing, modifying, labeling, assembling, distributing, leasing, buying, offering for sale, supplying, selling, inspecting, servicing, installing, contracting for installation, repairing, renting, marketing, warranting, re-branding, manufacturing for others, packaging[,] and advertising raw asbestos fiber of various kinds and grades, and/or asbestos-containing products, and/or asbestos-containing talc and/or chalk, and/or other finished and unfinished asbestoscontaining talcum powder products, and/or any other powder-like product, and/or asbestos-containing cosmetics.Haney Compl. ¶ 5; see Compl. ¶ 17. In the representative complaint submitted to the Court, the Asbestos Plaintiffs allege that these products were unreasonably dangerous because they released respirable asbestos fibers that injured users, consumers, bystanders, household members, and others. Haney Compl. ¶ 7. They allege that their exposure to asbestos arose from personally using these products. Id. ¶ 13. They claim liability under theories of negligence and strict liability based on, among other things, the defendants' failure to warn them about the dangers of these products. Id. ¶¶ 7-8, 28-30. The Asbestos Plaintiffs also allege fraud as to the defendants' representations about “the products they manufactured, supplied, or specified for use.” Id. ¶ 31(b).
CTI tendered its defense in the Asbestos Actions to Ironshore, which disclaimed coverage under Coverages A and C based on their asbestos exclusions. Compl. ¶ 32. Ironshore agreed to defend CTI in the Asbestos Actions under Coverage G but reserved its right to decline coverage “to the extent that further information clarifies” that the Asbestos Actions do not implicate CTI's “work” under the Policy. Id. ¶¶ 34-35. Ironshore denied coverage under Coverage G for other asbestos-related actions that “did not include allegations of installation or similar work.” Dkt. 28 (“Opp.”) at 9 n.3. Ironshore has subsequently defended CTI in the Asbestos Actions with this reservation of rights. Compl. ¶ 3.
II. Procedural History
Ironshore filed this action on August 24, 2023, seeking a declaration that, under the Policy, “it has no duty to defend CTI in the Asbestos Actions and that Ironshore should be permitted to withdraw from said defense.” Compl. ¶ 49. Ironshore similarly seeks a declaration that, under the Policy, it has no duty to indemnify CTI in the Asbestos Actions. Id. ¶ 56. CTI answered the complaint and counterclaimed on October 11, 2023, seeking a contrary declaration that Ironshore must defend it in the Asbestos Actions and breach-of-contract damages for Ironshore's alleged failure to provide such defense coverage without reservation. Dkt. 14 at 2022 ¶¶ 47-64. Ironshore answered the counterclaims on November 1, 2023. Dkt. 17.
On January 9, 2024, CTI moved for partial judgment on the pleadings under Federal Rule of Civil Procedure (“Rule”) 12(c), seeking a declaration that Ironshore has a duty to defend CTI in the underlying Asbestos Actions. Dkts. 21 (“Br.”), 30 (“Reply”). Ironshore opposes the motion. Opp. The Court heard oral argument on July 30, 2024.
III. Standard of Review
“After the pleadings are closed - but early enough not to delay trial - a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). A Rule 12(c) motion for judgment on the pleadings is subject to the same legal standards as a Rule 12(b)(6) motion to dismiss. See Patel v. Contemp. Classics of Beverly Hills, 259 F.3d 123, 126 (2d Cir. 2001). Applying this standard requires courts to assume the truth of all facts alleged in the nonmovant's pleading and draw all reasonable inferences in the nonmovant's favor. Lively v. WAFRA Inv. Advisory Grp., Inc., 6 F.4th 293, 301 (2d Cir. 2021). “To survive a motion for judgment on the pleadings, a [pleading] must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Goldberg v. Pace Univ., 88 F.4th 204, 210 (2d Cir. 2023) (quotation marks and citation omitted). “Judgment on the pleadings is not appropriate if there are issues of fact which if proved would defeat recovery, even if the trial court is convinced that the party opposing the motion is unlikely to prevail at trial.” Lively, 6 F.4th at 301 (brackets and citation omitted).
On a Rule 12(c) motion, a court considers “the complaint, the answer, any written documents attached to them, and any matter of which the court can take judicial notice for the factual background of the case.” L-7 Designs, Inc. v. Old Navy LLC, 647 F.3d 419, 422 (2d Cir. 2011) (citation omitted). A complaint is “deemed to include any written instrument attached to it as an exhibit, materials incorporated in it by reference, and documents that, although not incorporated by reference, are integral to the complaint.” Id. (quotation marks and citation omitted).
DISCUSSION
I. Applicable Legal Standards
A. Interpretation of Insurance Contracts
“Insurance policies are, in essence, creatures of contract, and accordingly, subject to principles of contractual interpretation.” Porco v. Lexington Ins. Co., 679 F.Supp.2d 432, 435 (S.D.N.Y. 2009) (quoting In re Ests. of Covert, 761 N.E.2d 571, 576 (N.Y. 2001)). Under New York law, the interpretation of a contract generally “is a matter of law for the court to decide.” Int'lMultifoods Corp. v. Com. Union Ins. Co., 309 F.3d 76, 83 (2d Cir. 2002) (citation omitted); accord Consol. Rest. Operations, Inc. v. Westport Ins. Corp., 235 N.E.3d 332, 336 (N.Y. 2024); Parks Real Est. Purchasing Grp. v. St. Paul Fire & Marine Ins. Co., 472 F.3d 33, 42 (2d Cir. 2006). “When construing the terms of an insurance contract, an interpretation that gives a reasonable and effective meaning to all terms of a contract is preferable to one that leaves a portion of the writing useless or inexplicable.” U.S. Underwriters Ins. Co. v. Affordable Hous. Found., Inc., 256 F.Supp.2d 176, 181 (S.D.N.Y. 2003), aff'd, 88 Fed.Appx. 441 (2d Cir. 2004) (summary order). “Courts must . . . avoid construing conflicting provisions and ambiguities within a policy in such a manner as to negate certain coverages, or in ways that render coverage provisions mere surplusage.” Id.; see Consol. Edison Co. of N.Y. v. Allstate Ins. Co., 774 N.E.2d 687, 693 (N.Y. 2002) (courts are to construe the policy “in a way that affords a fair meaning to all of the language employed by the parties in the contract and leaves no provision without force and effect” (quotation marks and citation omitted)).
The parties agree that New York substantive law applies. See Br. at 7 n.2; Opp. at 11-12. The Policy also contains a New York choice-of-law provision. See Policy § IV(6).
B. Duty to Defend
Under New York law, “the duty of an insurer to defend its insured is exceedingly broad and far more expansive than the duty to indemnify its insured.” High Point Design, LLC v. LM Ins. Corp., 911 F.3d 89, 94 (2d Cir. 2018) (quotation marks and citation omitted); accord Auto. Ins. Co. of Hartford v. Cook, 850 N.E.2d 1152, 1155 (N.Y. 2006). “An insurer has a duty to defend its insured whenever a third party states a cause of action that creates a reasonable possibility of coverage under the policy, regardless of how ‘false or groundless those allegations might be.'” Mt. Hawley Ins. Co. v. First St. Ocean Grille, LLC, No. 23-cv-01198 (VEC), 2024 WL 1364704, at *3 (S.D.N.Y. Apr. 1, 2024) (quoting High Point Design, 911 F.3d at 95); see Cook, 850 N.E.2d at 1155 (insurer disclaiming a duty to defend must “demonstrate that the allegations of the complaint cast that pleading solely and entirely within the policy exclusions, and, further, that the allegations, in toto, are subject to no other interpretation” (citation omitted)). The duty to defend “perdures until it is determined with certainty that the policy does not provide coverage.” Hugo Boss Fashions, Inc. v. Fed. Ins. Co., 252 F.3d 608, 620 (2d Cir. 2001).
To determine whether there is a duty to defend, the Court must compare the terms of the insurance policy to the “allegations within the four corners of the underlying complaint.” Allianz Ins. Co. v. Lerner, 416 F.3d 109, 115 (2d Cir. 2005) (quoting Frontier Insulation Contractors, Inc. v. Merchs. Mut. Ins. Co., 690 N.E.2d 866, 868 (N.Y. 1997)); accord Int'l Bus. Machs. Corp. v. Liberty Mut. Ins. Co., 363 F.3d 137, 148 (2d Cir. 2004) (“IBM Corp. II”). “If the allegations of the complaint are even potentially within the language of the insurance policy, there is a duty to defend.” Charter Oak Fire Ins. Co. v. N.Y. Marine & Gen. Ins. Co., 559 F.Supp.3d 244, 250 (S.D.N.Y. 2021) (quoting High Point Design, 911 F.3d at 95); see U.S. Fid. & Guar. Co. v. Exec. Ins. Co., 893 F.2d 517, 519 (2d Cir. 1990) (“If the allegations of the complaint are ambiguous or incomplete, the insurer is nevertheless obligated to defend if the case is potentially within the coverage of the policy.” (citation omitted)). However, “the insurer's duty to defend is not an interminable one, and will end if and when it is shown unequivocally that the damages alleged would not be covered by the policy.” Stein v. N. Assur. Co. of Am., 617 Fed.Appx. 28, 30 (2d Cir. 2015) (summary order) (brackets and ellipsis omitted) (quoting Sturges Mfg. Co. v. Utica Mut. Ins. Co., 332 N.E.2d 319, 323 (N.Y. 1975)). Under New York law, the duty to defend is extinguished if “there is no possible factual or legal basis on which the insurer will be obligated to indemnify the insured.” Frontier Ins. Co. v. New York, 662 N.E.2d 251, 253 (N.Y. 1995).
Whether and when facts extrinsic to a complaint permit an insurer to disclaim its duty to defend remains “unclear” under New York law. Stein, 617 Fed.Appx. at 31 n.4; see Int'l Bus. Machs. Corp. v. Liberty Mut. Fire Ins. Co., 303 F.3d 419, 426 (2d Cir. 2002) (“IBM Corp. I”) (noting “no consistent rule” as to “whether New York law allows reference to extrinsic evidence in determining the duty to defend”). The Second Circuit has suggested that extrinsic evidence may terminate the duty to defend in certain situations. See, e.g., MIC Gen. Ins. Co. v. Allen, 697 Fed.Appx. 717, 720 (2d Cir. 2017) (summary order) (insurer could rely on undisputed extrinsic evidence that conclusively established it faced no possible liability); Stein, 617 Fed.Appx. at 31 (recognizing that under New York law, an insurer may disclaim its duty to defend on the basis of extrinsic evidence where such evidence allows the court “to eliminate the possibility” of coverage in the underlying suit, but declining to do so on facts of that case (citation omitted)); IBM Corp. II, 363 F.3d at 148 (same); Burt Rigid Box, Inc. v. Travelers Prop. Cas. Corp., 302 F.3d 83, 96-97 (2d Cir. 2002) (considering evidence extrinsic to the four corners of the underlying complaint and holding that the insurer had no duty to defend); Hugo Boss, 252 F.3d at 621-23 (insurer can demonstrate that it has no possible liability, and thus no duty to defend, by seeking a declaratory judgment or discovery of evidence extrinsic to the underlying complaint).
One such exception to the four-corners rule applies where extrinsic evidence unrelated to the underlying merits unambiguously shows that there is no possibility of coverage. See IBM Corp. II, 363 F.3d at 148 (“[T]he general rule in determining whether an insurer has a duty to defend is to compare the allegations of the complaint with the operative insurance policy. A narrow[] but widely recognized exception to the rule allows an insurer to refuse or withdraw a defense if evidence extrinsic to those sources and unrelated to the merits of [the] plaintiff's action, plainly take the case outside the policy coverage.” (further brackets, quotation marks, and citations omitted)); 622 Third Ave. Co. v. Nat'l Fire Ins. Co. of Hartford, 646 F.Supp.3d 466, 476 (S.D.N.Y. 2022) (describing these circumstances as one, but not the only, extrinsic-evidence exception); Phila. Indem. Ins. Co. v. Streb, Inc., 487 F.Supp.3d 174, 187 (S.D.N.Y. 2020) (same). “For this exception to apply, the extrinsic evidence relied upon may not overlap with the facts at issue in the underlying case.” Charter Oak, 559 F.Supp.3d at 250 (quotation marks and citation omitted); Roman Cath. Diocese of Rockville Centre v. Arrowood Indem. Co., No. 20-cv-11011 (JLR), 2022 WL 17593312, at *6 (S.D.N.Y. Dec. 13, 2022) (observing that “[c]ourts have also considered extrinsic evidence outside the four corners of the complaint if the evidence is uncontroverted and does not address a disputed fact in the underlying suit” and collecting cases).
II. Analysis
In moving for partial judgment on both its counterclaim and Ironshore's claim, CTI seeks a declaration that Ironshore has a duty to defend CTI in each of the Asbestos Actions based on what is alleged in the four corners of the complaints. Br. at 3. In opposing the motion, Ironshore does not dispute that at least some of the underlying allegations, such as the references to installation and contracting for installation, could fall within the language of Coverage G of the Policy and trigger Ironshore's duty to defend. Opp. at 12. But despite these broad “boilerplate allegations,” Ironshore submits that the Court must deny CTI's motion in light of subsequent information showing that (1) CTI “did not undertake any installation or operations alleged to have caused plaintiffs' injuries” and (2) CTI's “liability is based solely on its status as a manufacturer/supplier of an allegedly defective product that contained asbestos.” Id. at 12. CTI replies that the Court cannot consider this extrinsic evidence because it is bound up with the merits of the Asbestos Actions. Reply at 3.
To resolve this issue, the Court addresses, first, the extent to which the Policy covers the underlying allegations in the Asbestos Actions and, second, Ironshore's proffered extrinsic evidence.
A. Underlying Allegations
As discussed above, the Asbestos Plaintiffs wage broad claims without differentiation against dozens of dissimilarly situated defendants, alleging that each of them engaged in “researching, manufacturing, fabricating, designing, modifying, labeling, assembling, distributing, leasing, buying, offering for sale, supplying, selling, inspecting, servicing, installing, contracting for installation, repairing, renting, marketing, warranting, re-branding, manufacturing for others, packaging, and advertising” asbestos-containing products. Haney Compl. ¶ 5. Ironshore has acknowledged that “certain activities such as installation and contracting for installation” could constitute “your work” under Coverage G of the Policy and has agreed thus far to defend CTI in the Asbestos Actions (subject to a reservation of its right to withdraw). See Opp. at 8. CTI agrees but argues that Coverage G also applies to other conduct alleged in the Asbestos Actions. See Br. at 14-18.
The Court agrees with Ironshore that Coverage G covers, at most, only a slice of the underlying allegations. Coverage G, for “Contractor Pollution Liability,” applies to bodily injury arising only out of a pollution incident - here, the alleged release of asbestos - caused by CTI's work or operations. See Policy § I(G)(1) (covering any sums that CTI must pay as damages “because of bodily injury . . . arising out of a pollution incident caused by your work” (emphases omitted)); Id. § V(50) (defining “[y]our work” as “[w]ork or operations performed by you or on your behalf; and . . . [m]aterials, parts or equipment furnished in connection with such work or operations”). By contrast, Coverage C, for “Products Pollution and Exposure Liability,” covers claims for injuries caused by exposure to CTI's products that “occurr[ed] away from a location you own or operate.” See id. § I(C)(1) (covering damages due to bodily injury “arising out of the ingestion, inhalation or absorption of, contact with, or exposure to, any fumes, dust, particles, vapors, liquids or other substances that are or originate from your product” (emphasis omitted)); Id. § V(36) (defining “[p]roducts-completed operations hazard” (emphasis omitted)).
Reading these provisions together, the Court concludes that “your work” in Coverage G -defined as “work” or “operations” or “[m]aterials, parts or equipment furnished in connection with such work or operations” - relates to services, not goods. Policy § V(50). A leading insurance-law treatise distinguishes between exclusions for “your work” and “your product.” 9A Couch on Ins. § 129:20 (updated June 2024) (“Just as the primary purpose of the ‘your work' exclusion is to prevent liability policies from insuring against an insured's own faulty workmanship, the ‘your product' exclusion is to prevent liability policies coverage for damage to the insured's own product.”). Courts have echoed this distinction when construing exclusions for “your work” and “your product.” See Tradin Organics USA, Inc. v. Md. Cas. Co., No. 06-cv-05494 (WHP), 2008 WL 241081, at *3 (S.D.N.Y. Jan. 29, 2008) (“your product” exclusion applies to “losses caused by a contaminated or defective product sold by the insured”), aff'd, 325 Fed.Appx. 10 (2d Cir. 2009) (summary order); Apache Foam Prods. Div. of Millmaster Onyx Grp. of Kewanee Indus., Inc. v. Cont'l Ins. Co., 528 N.Y.S.2d 448, 449 (4th Dep't 1988) (policy exclusion for damage arising out of insured's product did not apply to damage from work performed by others, even where the damaging work used the product in question).
A similar distinction applies when those terms specify affirmative grants of coverage. As the New York Court of Appeals has explained, “[t]he insurance industry has segregated productliability hazards and the premiums charged therefor by categorizing them as either risks arising while work is in progress, or as those arising from the defective nature of a completed product that has been placed in the stream of commerce.” Frontier Insulation Contractors, 690 N.E.2d at 869. For the first type of risk, an insured can purchase coverage “designed to protect a manufacturer from injuries to third persons on the business premises, or from those that occur during operations away from the normal business premises while the insured retains control of the jobsite.” Id. By contrast, products-hazard coverage applies to a product defect that “manifests itself only after the insured has relinquished control of the product and at a location away from the insured's normal business premises”; it “generally protects a manufacturer or seller against claims of injury due to a product defect.” Id. The Policy reflects this distinction, with Coverage C applying to product-related injuries occurring away from CTI's worksite and Coverage G applying to injuries caused by CTI's work or operations in progress. Policy §§ I(C), (G).
In Continental Casualty Co. v. Employers Insurance Co. of Wausau, 871 N.Y.S.2d 48 (1st Dep't 2008), the First Department similarly distinguished claims “brought against [the insured] as a manufacturer, seller and distributor of an inherently dangerous product, asbestos” from “non-products” claims that could trigger “‘operations' coverage.” Id. at 50. There, “products hazard” language - similarly worded to Coverage C - applied to, but capped coverage for, claims against the insured “as a manufacturer, distributor[,] and seller.” Id. at 51, 56. In each of the underlying actions, the insured argued unsuccessfully “that it was an installer (which should have triggered ‘operations' coverage for alleged negligent installation).” Id. at 56. The court acknowledged that evidence of negligent installation would amount to a “legal basis on which the insurer [could] eventually be held liable for operations coverage under its policy.” Id. at 58. The court's analysis is consistent with the Court's conclusion that Coverage G's “work” and “operations” coverage applies to “non-product” claims. To the extent that the Asbestos Plaintiffs claim injuries from their exposure to CTI's products - that is, its talc - CTI does not have coverage for those claims due to Coverage C's asbestos exclusion. See Policy § I(C)(2)(a). CTI can seek coverage under Coverage G only insofar as the Asbestos Actions allege injuries caused by CTI's work or operations, as opposed to injuries caused by its products. Therefore, Coverage G plausibly extends to only a handful of allegations, including those related to installation work.
CTI argues that “your work” includes “any and all of” the activities alleged in the Asbestos Actions. Br. at 15-16; see Reply at 6. In addition to “installing,” and “contracting for installation,” CTI asserts that its “work” under Coverage G includes claims of “researching,” “studying,” “fabricating,” “designing,” “assembling,” “modifying,” “distributing,” “offering for sale,” “supplying,” “servicing,” “selling,” “manufacturing for others,” and “warranting” products containing asbestos because such activities are “operations performed on” CTI's behalf or “materials, parts or equipment” furnished in connection with CTI's operations. Br. at 15. Such a broad reading, however, would see the scope of Coverage G swallow Coverage C and render Coverage C “mere surplusage.” U.S. Underwriters Ins. Co., 256 F.Supp.2d at 181. Under CTI's proposed interpretation, no claim of injury arising out of a pollution incident caused by CTI's products could trigger Coverage C's products-liability coverage (or its attendant asbestos exclusion) without also implicating Coverage G. Instead, the interpretation that “affords a fair meaning” to both coverage parts is Ironshore's, under which alleged activities done to supply an allegedly defective product that later injured its customers are not “work” under Coverage G. Consol. Edison Co. of N.Y., 774 N.E.2d at 693. Only alleged injuries caused by CTI's work itself - such as those suffered from a release of asbestos through CTI's work as a contractor or installer, or through its furnishing of materials, parts, or equipment in connection with that work - would activate Coverage G.
CTI's position is somewhat unclear given that, during oral argument, CTI acknowledged that “manufacturing for others” would not fall under Coverage G.
CTI argues that this reading “would render [Coverage G] meaningless for any non-construction company, like CTI, that purchased the coverage.” Reply at 7. Yet Coverage G could well apply to a different set of facts and plaintiffs, such as those injured from other types of work done on CTI's behalf by subcontractors.
Finally, the Court concludes that the Asbestos Plaintiffs' failure-to-warn allegations do not trigger Ironshore's duty to defend. These claims are for CTI's alleged failure to warn the Asbestos Plaintiffs “of the health hazards of using Defendants' Products,” not a failure to provide warnings as to CTI's work. Haney Compl. ¶ 8. Therefore, the claims relate squarely to CTI's “product” as defined in the Policy, see Policy § V(49) (defining “[y]our product” to include “[t]he providing of or failure to provide warnings or instructions” (emphasis omitted)), and are subject to Coverage C's asbestos exclusion, Id. § I(C)(2)(a).
B. Extrinsic Evidence
Having determined that only a subset of the allegations in the underlying Asbestos Actions could obligate Ironshore to defend CTI, the Court next considers CTI's request for a declaration that Ironshore must defend CTI despite Ironshore's assertion that it no longer has a duty to defend because extrinsic evidence clarifies that the claims brought against CTI are not covered by the Policy.
Ironshore claims that “evidence extrinsic to the Asbestos Action Complaints has confirmed that CTI never engaged in installation-related activities” and that “CTI is a color manufacturer that sells color products.” Compl. ¶ 37; see id. ¶ 12 (“CTI does not perform any installation or related construction work with regard to any asbestos-containing materials that are alleged to have injured the Asbestos Action Plaintiffs.”). In its Complaint, Ironshore cites to deposition testimony from CTI's representatives. See id. ¶¶ 38-46. For example, one of CTI's founders testified in one of the Asbestos Actions that CTI's purpose was to “sell cosmetics, cosmetic colors into the cosmetic industry.” Id. ¶¶ 38-39. A CTI representative also testified in the same action that CTI “is a color manufacturing company” that sells surface-treated talc to cosmetic companies. Id. ¶¶ 40-42. During that deposition, the representative was shown a capital-stock valuation of CTI that characterized the nature of its business as “the manufacture of various ingredients used in cosmetic formulations.” Id. ¶ 44.
Ironshore also alleges that “[d]iscovery by the [Asbestos P]laintiffs confirms they are asserting liability against CTI based on its sale of products.” Id. ¶ 47. Ironshore cites, as an example, one Asbestos Plaintiff who responded to CTI's interrogatories that he was alleging that CTI “supplied asbestos-containing talc that was incorporated into the various talcum powder products used by his wife” that, in turn, caused his asbestos exposure. Id. (emphasis omitted).
The parties disagree as to whether the Court can consider this evidence when assessing Ironshore's duty to defend. CTI argues that the Court cannot consider Ironshore's evidence because it is related to the merits of the underlying Asbestos Actions. See Br. at 10-14; Reply at 2-5. Ironshore insists that its evidence neither addresses a disputed fact in the Asbestos Actions nor goes to the merits of the underlying claims. See Opp. at 13.
Both positions have some merit. The Court does not agree with Ironshore that the Court can look to the extrinsic evidence - such as the deposition testimony cited above - to confirm that CTI never engaged in installation or contracting work that could trigger Coverage G. See Compl. ¶ 37. If a claim in the underlying Asbestos Actions is that CTI engaged in installation work that harmed the Plaintiffs, then a defense that CTI did not engage in such work, even if true, would relate to the merits of that claim. In other words, in seeking to end its defense obligations, Ironshore cannot rely on extrinsic evidence to refute the merits of the underlying allegation, however “false or groundless,” that CTI engaged in installation work. High Point Design, 911 F.3d at 95 (citation omitted).
However, Ironshore may cite to extrinsic evidence to confirm that, amid such broadly worded allegations as set forth in the Asbestos Actions, no claim based on CTI's work exists, and that every underlying claim against CTI falls outside of the Policy's coverage. Ironshore pleads that most of the Asbestos Actions, including the one attached to Ironshore's declaratory-judgment complaint, identify CTI “as a supplier of asbestos-containing talc.” Compl. ¶ 16; see id. ¶ 36; Haney Compl. ¶ 3. The plaintiffs in those actions attribute their injuries, including their mesothelioma, to their use of talcum-powder products and cosmetics by CTI. Haney Compl. ¶¶ 12-14, 25-26. Ironshore points to an Asbestos Plaintiff's response to an interrogatory in the underlying actions, which stated that his claim against CTI was that it “supplied” the “asbestos-containing talc” used in the products that caused his asbestos exposure. Compl. ¶ 47 (emphasis omitted).
Where the underlying allegations are pleaded broadly against an undifferentiated group of dozens of defendants, such evidence helps define the claims brought against CTI as one of those defendants; it does not relate to whether those claims against CTI have any merit. The merits of the Asbestos Actions as to CTI will likely turn on questions common to most products-liability cases: whether CTI's products contained asbestos; whether CTI knew that its products contained asbestos; whether CTI failed to warn the Asbestos Plaintiffs of asbestos in its products; and whether any plaintiffs were exposed to CTI's products. Ironshore's proposed evidence does not touch these issues; rather, it seeks to clarify that the Asbestos Plaintiffs are suing CTI only as a supplier of products that allegedly injured them, not as a contractor or installer performing work that caused their injuries. Insofar as the Asbestos Actions have allegations that could, read broadly, suggest that an injury was caused by CTI's work and thus trigger a duty to defend, the proposed evidence is presented to establish that no Asbestos Plaintiff brings such a claim against CTI. The evidence does not challenge the strength or merits of the claims against CTI as much as it seeks to clarify that all the claims actually brought against CTI do not fall within the Policy's coverage.
In this respect, the extrinsic evidence is analogous to a bill of particulars that “permits the insurance company to extricate itself early” by having the Asbestos Plaintiffs clear up their otherwise ambiguous claims. Hugo Boss, 252 F.3d at 622. CTI further acknowledges that a voluntary dismissal of all triggering claims would amount to extrinsic evidence that plainly eliminates the chance of coverage under the Policy. See Br. at 13. The Asbestos Plaintiffs' acknowledgement of the claims brought against CTI - and confirmation of those that are not - is akin to those circumstances. Although the Court does not decide here whether the evidence referenced in Ironshore's complaint amounts to a definitive acknowledgment or confirmation, it draws all permissible inferences in Ironshore's favor on CTI's motion for partial judgment on the pleadings.
The Court is guided by New York cases that signal an openness to extrinsic evidence when used to dispel uncertainty as to potentially triggering allegations. See Hugo Boss, 252 F.3d at 622 (suggesting that an insurer can end its duty to defend by demanding a bill of particulars to explicate the allegations against the insured in the underlying complaint); cf. Streb, 487 F.Supp.3d at 187 (considering extrinsic evidence that injury occurred on a trampoline for purposes of coverage exclusion even though no mention of trampoline in the complaint). In Town of Moreau v. Orkin Exterminating Co., 568 N.Y.S.2d 466, 467 (3d Dep't 1991), for example, a town sought damages and abatement of the public nuisance related to disposal of hazardous waste by an extermination company. The extermination company brought third-party claims against its insurers, alleging that they had a duty to defend and indemnify the extermination company under their policies because the dumping was an “occurrence” - that is, an accident which results in injury or damage “neither expected nor intended” by the insured. Id. While the underlying complaint alleged that the extermination company “knew or should have known that the manner in which the wastes were disposed of would result in their release into the environment,” the trial court “took judicial notice of the criminal convictions” and “found that [the extermination company's] dumping was intentional and therefore outside of the policy coverage.” Id. The trial court held that the convictions precluded the insured from claiming that the burial of pesticides was unintentional and therefore there could be no “occurrence” such that the insurers had no duty to defend or indemnify. Id. at 468. The Third Department agreed, noting that the convictions were outside the “boundaries of the complaint,” but that a court “need not ignore positive proof, extrinsic to the complaint, that assists in clarifying an ambiguous allegation.” Id. Just as the convictions in Town of Moreau resolved any plausible ambiguity in the underlying allegations as to the company's intentionality, the extrinsic evidence here seeks to dispel any lingering uncertainty as to what claims the Asbestos Plaintiffs are bringing against CTI given the pleadings in the underlying actions.
Similarly, in Northville Industries Corp. v. National Union Fire Insurance Co. of Pittsburgh, 679 N.E.2d 1044, 1046, (N.Y. 1997), property owners sued a petroleum company for an oil spill. The New York Court of Appeals held that even where an underlying complaint could be “read as . . . potentially bringing the claim within the sudden and accidental exception to the exclusion of pollution coverage” and where such a reading is “linguistically conceivable,” a court may consult “judicial admissions in the insured's responsive pleadings in the underlying tort action or other formal submissions in the current or underlying litigation to confirm or clarify the nature of the underlying claims.” Id. at 1049. After consulting the complaint as well as motion papers and affidavits in the underlying action, the court determined that the occurrences alleged by the plaintiffs were anything but sudden and that the insured therefore “failed here to sustain its burden of showing that the sudden and accidental exception to the pollution exclusion clauses in defendant insurers' policies applies.” Id. Similarly, here, where the underlying actions contain scattershot allegations against multiple defendants, extrinsic evidence clarifying the claims actually brought against CTI may be consulted to determine whether coverage applies to those claims. See also Avondale Indus., Inc. v. Travelers Indem. Co., 774 F.Supp. 1416, 1424 (S.D.N.Y. 1991) (“While it is true that a court should be hesitant to leave the boundaries of the complaint in making its determination on an insured's duty to defend, it need not ignore positive proof, extrinsic to the complaint, that assists in clarifying an ambiguous allegation.” (brackets omitted) (quoting Town of Moreau, 568 N.Y.S.2d at 468)).
In sum, assuming the truth of all facts alleged in Ironshore's pleading - as it must on CTI's motion for partial judgment on the pleadings - the Court cannot conclude that CTI is entitled as a matter of law to a declaration that Ironshore is obligated to defend these actions. With all reasonable inferences drawn in Ironshore's favor, the discovery from the Asbestos Plaintiffs (as identified by Ironshore) suggests that those plaintiffs are bringing only productliability claims against CTI as a supplier of an allegedly defective product, not claims based on CTI's work. See Compl. ¶ 47. In that case, Coverage G is not triggered and the claims may fall under the asbestos exclusions elsewhere in the Policy.
This is not to say that Ironshore is absolved of its duty to defend CTI in the Asbestos Actions - far from it. The Asbestos Plaintiffs assert claims against CTI based on its installation work, which could fall under Coverage G, as Ironshore acknowledged when it commenced its defense. To end its duty to defend, Ironshore will need to prove, not just plead, with certainty that each Asbestos Plaintiff is suing CTI solely as a manufacturer and supplier of asbestos- containing products and that no claim of the Asbestos Plaintiffs falls within the Policy's coverage. See Hugo Boss, 252 F.3d at 620. The duty to defend is broad, but, at this procedural juncture, the Court cannot grant judgment on the pleadings to CTI.
CONCLUSION
For the foregoing reasons, CTI's motion for partial judgment on the pleadings is DENIED. The Clerk of Court is respectfully directed to terminate the motion at Dkt. 20.
SO ORDERED.