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Polarome International, Inc. v. Greenwich Insurance Co.

December 17, 2008


On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-4207-06.

The opinion of the court was delivered by: C.L. Miniman, J.A.D.



Argued: September 10, 2008

Before Judges Fisher, C.L. Miniman and Baxter.

Plaintiff Polarome International, Inc., formerly known as Polarome Manufacturing Co., Inc. (Polarome), appeals from a declaratory judgment dismissing its complaint on the ground that neither defendant Greenwich Insurance Company (Greenwich) nor defendant Zurich Insurance Company (Zurich) owes Polarome any duty to defend or indemnify it with respect to two actions, one instituted in Pennsylvania and another in Missouri. We apply the "continuous trigger" doctrine of Owens-Illinois, Inc. v. United Insurance Co., 138 N.J. 437 (1994), and conclude that because the time of initial manifestation of the toxic-tort personal injuries at issue predated the applicable coverage periods, neither insurer had a duty to defend or indemnify, even though further progression of the disease may have occurred while the relevant policies were in effect. Thus, we affirm.


Polarome is a distributor of food flavorings and fragrances, including diacetyl, a chemical used as a butter flavoring in the food industry. In 2005, Polarome was named as a defendant in multiple lawsuits alleging serious, continuing bodily injuries as a result of diacetyl inhalation, two of which are at issue here. Among other commercial general liability (CGL) policies obtained by Polarome at various times, it was insured by Zurich from December 30, 1994, through December 17, 1998, and by Greenwich from December 31, 2003, through December 31, 2005.*fn1

A. The Kuttner Litigation*fn2

The Kuttner action, which was commenced on December 21, 2004, alleged injuries caused by exposure to diacetyl. Kuttner claimed he suffered from fatigue and shortness of breath, was diagnosed as having bronchiolitis obliterans, and underwent a lung transplant, all as a result of inhaling diacetyl beginning in 1973 while working at Shafco-Haakenson, Inc. Kuttner claimed he did not know until 2004 that he had been injured by diacetyl. The complaint was silent as to the date of last exposure, the date of diagnosis, and the date of the lung transplant.

Polarome demanded that Greenwich provide a defense in light of the two Greenwich policies covering the period beginning December 31, 2003, and ending December 31, 2005, which were CGL policies with a limit of $2 million for product liability. The "Insuring Agreements" in both Greenwich policies provide in pertinent part:

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" . . . to which this insurance applies. . . . However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" . . . to which this insurance does not apply. . . .

b. This insurance applies to "bodily injury" . . . only if:

(1) The "bodily injury" . . . is caused by an "occurrence" . . .;

(2) The "bodily injury" . . . occurs during the policy period. . . .

The Greenwich policies define "bodily injury" and "occurrence" as follows: "'Bodily injury' means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time," and "'[o]ccurrence' means an accident, including continuous or repeated exposure to substantially the same general harmful conditions."

Greenwich issued a reservation of rights and denial of coverage notice to Polarome, asserting that it could not determine when Kuttner was diagnosed with respiratory ailments and so it was reserving the right to deny coverage in the event that it discovered that he was diagnosed before the start of the policy period on December 31, 2003.

Polarome also demanded that Zurich provide a defense in the Kuttner action. The first Zurich policy covering the period beginning December 30, 1994, and ending December 17, 1995, was a CGL policy with a limit of $1 million for product liability. The insuring agreements in both Greenwich policies limit coverage to those injuries that occur during the policy period in the following way:

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" . . . to which this insurance applies. . . . This insurance applies only to "bodily injury" . . . which occurs during the policy period. The "bodily injury" . . . must be caused by an "occurrence." . . . We will have the right and duty to defend any "suit" seeking those damages.

The second through fourth Zurich policies covering the period beginning December 17, 1995, and ending December 17, 1998, were also CGL policies with a $1-million limit for product liability. The "Insuring Agreement" provisions in these policies are identical to ¶¶ (a), (b)(1), and (b)(2) of the Greenwich "Insuring Agreement." All four Zurich policies define the terms "bodily injury" and "occurrence" identically to the Greenwich policies.

On August 24, 2005, Zurich advised Polarome that it would participate in the defense of the Kuttner action under a reservation of rights.*fn3 It advised Polarome that it had issued four policies between December 30, 1994, and December 17, 1998, that applied to bodily injury occurring during the policy periods and that there was insufficient information available in the Kuttner action to determine whether there was an occurrence resulting in bodily injury during the policy period. As a result, Zurich reserved its right to deny coverage "should it later be determined that there was not an occurrence resulting in bodily injury or that the bodily injury did not occur during the policy period." Zurich advised Polarome to tender the litigation to all other primary carriers.

During the course of discovery in the Kuttner action, Greenwich and Zurich obtained copies of medical records, which included a medical expert's August 21, 1987, report that opined that Kuttner had "severe obstructive lung disease." In another report, dated February 24, 1992, Dr. Harold I. Palevsky wrote that Kuttner "has a lengthy history of exposure to dusts and powders involved in the manufacturing of flavoring chemicals." Kuttner had been evaluated during a hospitalization in April 1991 and was diagnosed with severe chronic obstructive pulmonary disease (COPD) and was placed on home oxygen. Dr. Palevsky reported that Kuttner was a candidate for a single lung transplant and that he had "end stage lung disease with marked functional impairment." Kuttner had an x-ray performed on February 21, 1994, and the radiologist reported that the x-ray showed that Kuttner's left lung was normal but the right lung was hyperinflated due to COPD. On April 11, 1994, Dr. Palevsky wrote that Kuttner underwent a single lung transplant on October 28, 1993, that his post-operative course was relatively uncomplicated, and that "Kuttner has done very well since his transplant."

On July 26, 1994, Dr. Steven S. Scherer sent a consultation note to Dr. Palevsky, indicating that Kuttner "developed a peripheral neuropathy rather acutely" that spring. Kuttner had been diagnosed with diabetes and was hospitalized in June 1994 for stabilization of his diabetes. He noted that Kuttner had an EMG as an inpatient which documented "a mild to moderate axonal neuropathy apparently with superimposed proximal weakness that could either have been due to so-called diabetic amyotrophy or lumbar radiculopathy." On March 29, 1995, Kuttner's lungs were reevaluated by x-ray and the radiologist reported to Dr. Palevsky that his left lung was normal and the right lung showed continued COPD. Similar findings were made on May 31, 1995.

In his deposition, Kuttner testified that he began to experience daily shortness of breath as early as 1986. From 1986 through 1992, he had a persistent cough and he would often get up during the night and spit up fluids. Kuttner was diagnosed with COPD in April 1991 and by March 1992 understood that it was a "blockage in the pulmonary system." At that time, his doctors informed him that he had end-stage lung disease and, without a lung transplant, he would die. Kuttner was aware that his exposure to chemicals at work was a possible cause of his COPD. However, he claims he did not learn that his condition may have been caused by diacetyl exposure until viewing a March 2004 news program about butter flavoring causing lung damage and lung transplants.

Kuttner also testified to his state of health in 2006: The lung transplant caused permanent numbness and pain on his left side and limited left-arm motion. Sometime after the transplant, he began to lose vision, was declared legally blind in 2005, and received specialized therapy for macular degeneration in 2006. He also developed gout in 1996 and continues to suffer painful attacks. He has neuropathy in his hands and feet, can no longer write or get dressed, and began taking pain medication for the neuropathy in 2003 or 2004. He developed a "necrosis" of his skin and on two occasions has had cancerous skin growths removed. He has unspecified kidney and prostate problems, swelling of the gums, and other dental problems. He has not had a sexual relationship with his wife since 1999.

B. The Blaylock Litigation*fn4

Blaylock's action, which was filed on August 26, 2005, alleged that he suffered severe, progressive, and permanent lung damage from inhaling diacetyl at St. Louis Flavors in Missouri from September 2000 through November 2001. Polarome notified Greenwich of the lawsuit on October 12, 2005, and sought indemnification and defense under its policies.

On December 20, 2005, Greenwich wrote to Polarome and agreed to participate in the defense of the claim along with Polarome's other carriers while reserving its right to disclaim coverage.*fn5 Specifically, Greenwich notified Polarome, among other things, that its policy would only cover injuries that Blaylock sustained during the policy period, which began on December 31, 2003. It observed that Blaylock's complaint did not allege the date when he was diagnosed with his condition. Because the Greenwich policy would only cover injuries Blaylock sustained between December 31, 2003, and the date of his diagnosis, Greenwich cautioned Polarome to "place all insurance carriers on notice as the trigger of coverage would be from all dates of exposure beginning in September 2000 through the current policy."

During the course of discovery in the Blaylock action, Greenwich obtained copies of medical records, the first of which was a February 25, 2002, medical report indicating that Blaylock underwent a lung biopsy on February 12, 2002, which revealed bronchiolitis obliterans. That report referred to Blaylock's "small airway inflammatory disease" and asserted "his prognosis for recovery of pulmonary function is uncertain." The writer recommended that he not return to the work environment.

Blaylock was also evaluated for workers' compensation purposes on September 6, 2002. The compensation carrier's doctor discussed with Blaylock the relationship of his symptomatology to possible occupational exposure and reported to the carrier that a CT scan performed one month earlier showed "only mildly bronchiectatic changes in some large to mid-sized airways as had been typically found but certainly no evidence of interstitial disease or mosaic pattern or Swiss cheese type pattern which would be seen with bronchiolitis obliterans."

Blaylock alleged that, since the date of his diagnosis, he has had difficulty sleeping, suffers from anxiety, and continues to have difficulty breathing. On November 14, 2002, the Social Security Administration disapproved Blaylock's claim for disability benefits because it determined that Blaylock's condition did not keep him from working as a "diary packer." On May 12, 2003, the Social Security ...

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