Insurer Seeks Declaration in Coverage Dispute over Diacetyl Litigation

Arch Specialty Insurance Co. has filed a declaratory judgment action in a New York state court against a company identified as a distributor of food product ingredients, including the butter-flavoring chemical diacetyl. Arch Specialty Ins. Co. v. Citrus & Allied Essences, Ltd., No. 652670/2011 (N.Y. Sup. Ct., N.Y. County, filed September 29, 2011). The insurance company contends that it has no obligation to defend or indemnify the defendant in the personal injury actions “asserted by numerous claimants against Citrus & Allied in several jurisdictions around the country.”

Among other matters, the insurer claims that the events giving rise to the underlying claims did not occur during the policy period; the claims involve “damages or injuries which were expected, intended or non-fortuitous from the standpoint of Citrus & Allied”; the claims fall within a pollution exclusion clause or arise from a recall as defined by the policy; and the insured failed to timely notify the carrier about the underlying claims. The personal injury actions referred to in the complaint involve the claims of food-industry workers who have alleged that occupational exposure to diacetyl caused a debilitating lung injury, bronchiolitis obliterans, often referred to as “popcorn lung.”