Insurance Law, Pages 469–475

American Home Products Corporation v. Liberty Mutual Insurance Company

United States District Court for the Southern District of New York, 1983

Facts:

Plaintiff AHP was sued in 54 different products-liability suits from drugs it made and sold. Defendant Liberty Mutual used to provide the plaintiff with insurance but refused to assume its burden of defense or to indemnify it in these lawsuits because the harm resulting from the drugs did not manifest until after its insurance policies were terminated.

The policies said they provided coverage for “occurrences” resulting in “injury, sickness, or disease” during the policy period.

Issue:

When does an “injury, sickness, or disease” from a drug occur?

Reasoning:

Some things, like asbestos, actually harm the body once ingested even if no symptoms manifest. However, these drugs did not actually cause harm when ingested. Only later did an injury actually result therefrom. Therefore exposure theory cannot be valid. Manifestation theory is also inconsistent with insurance law principles however. When an injury occurs cannot just be reliant on when it is discovered.

Rule/Holding:

A drug’s injury occurs when a diagnosable and compensable injury is proven to have actually resulted therefrom.

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