ParfumGigi@aol.com

Daniel Wise

New York Law Journal

10-31-2007

The supplier of the buttery substance used in microwave popcorn must pay a minimum $50,000 deductible for every worker at a Missouri plant who successfully asserts a claim that the flavoring caused lung problems or other respiratory ailments, a unanimous appeals panel ruled Tuesday.

In a decision by Justice Peter Tom, the Appellate Division, 1st Department, rejected the argument of the supplier, International Flavors & Fragrances Inc., that only one deductible applied to each of eight liability insurance policies issued by two companies owned by the American Insurers Group (AIG) no matter how many workers actually asserted claims.

The policies issued by the two AIG companies -- American Home Assurance Co. and National Union Fire Insurance Co. -- date to 1991, and, depending on the policy, carry a deductible of either $50,000 or $100,000 "per occurrence."

In Manhattan Supreme Court, International Flavors sought a declaratory judgment that only one deductible applied to each policy after it had been named as a defendant in a class action brought by 30 current and former employees of a microwave popcorn maker in Joplin, Mo.

Manhattan-based International Flavors has admitted making 18 shipments of the butter-like additive to the Missouri plant from 1992 to 1996.

Several federal and state agencies are examining whether there is a link between diacetyl, a chemical used in the manufacture of the butter flavoring, and a life-threatening lung condition known as bronchiolitis obliterans and other serious respiratory problems. According to The New York Times, scores of lawsuits have been filed around the country alleging that diacetyl has been the cause of ailments dubbed "popcorn lung."

Manhattan Justice Charles E. Ramos had rejected International Flavors' argument that the deductible applied separately to each worker's claims. Tuesday, the 1st Department affirmed his decision in International Flavors and Fragrances v. Royal Insurance Co. of America, 605910/01.

The policies all provided that a single deductible should apply "per occurrence," defined as applying to "all damages because of 'bodily injury' or 'property damages' as the result of any one 'occurrence,' regardless of the number of persons or organizations who sustain damages because of that 'occurrence.'"

Tom concluded that the policy language defining "per occurrence" does not "reflect the parties intent to aggregate the individual claims for the purpose of subjecting them to a single policy deductible."

There is no single "incident" to which all the workers alleged injuries are attributable, he concluded.

To the contrary, Tom wrote, "the affected employees sustained injury as a consequence of repeated deliveries of [International Flavors] flavoring compound to their workplace over a period of several years, causing them to be exposed to the hazardous chemicals at different times and for periods of unequal duration."

He added, "Had these sophisticated parties desired to aggregate all claims resulting from the exposure or series of exposures to a set of hazardous conditions, it would have been a simple matter to rewrite the definition of 'occurrence.'"

Justices Joseph P. Sullivan, Eugene Nardelli and John T. Buckley joined the opinion.

In concluding that multiple deductible applied, Tom relied on a 2005 1st Department ruling that was affirmed earlier this year by Court of Appeals in Appalachian Insurance Co. v. General Electric Co., 8 N.Y.3d 162.

In Appalachian, New York state's high court found that the exposure of individual workers to asbestos over a period of decades at different work sites lacked the requisite temporal and spatial proximity to be deemed a single occurrence, Tom wrote.

The two AIG companies were represented by Ellen G. Margolis of Mound Cotton Wollan & Greengrass.

Nicholas J. Zoogman of Dickstein Shapiro represented International Flavors & Fragrances.