Insurance Company Disputes Obligation to Provide Diacetyl Damages or Defense

A company that issued Citrus and Allied Essences Ltd. a commercial umbrella
insurance policy in 2006 and 2007 has filed suit in a New York state court
seeking a declaration that it is not obligated to defend the food-flavoring
company in suits by those alleging respiratory injury from diacetyl exposure
or to pay damages. Cont’l Cas. Co. v. Citrus & Allied Essences Ltd., No.
650158/2013 (N.Y. Sup. Ct., N.Y. Cty., filed January 17, 2013). According to
the complaint, Citrus and its other insurers have claimed that the primary
insurance policies for those years have been exhausted by settlements
with plaintiffs in the underlying lawsuits. According to the umbrella insurer,
however, because the bodily injury did not take place during the policy
period, those other policies have not been exhausted. The insurance plaintiff
also seeks to recover the amount it paid under a reservation of rights to cover
a “shortfall” to one of the settling plaintiffs in the underlying litigation.