## Facts

- American Home Products Corporation (AHP) manufactured and sold several pharmaceutical products and faced 54 products-liability suits alleging latent, progressive injuries from use or exposure.
- Liberty Mutual Insurance Company issued AHP successive comprehensive general liability (CGL) policies from 1944 through November 1, 1976.
- The underlying suits alleged exposures during Liberty’s policy years, but the claimed diseases did not become manifest until after Liberty’s coverage ended.
- AHP requested that Liberty defend and indemnify it in the suits; Liberty denied coverage and refused to defend.
- AHP filed a diversity declaratory-judgment action seeking a declaration that Liberty owed defense and indemnity obligations.
- The policies defined an “occurrence” to include “an accident or injurious exposure to conditions which results, during the policy period, in bodily injury or property damage.”
- On cross-motions for summary judgment, the district court declared Liberty had a duty to defend suits whose complaints could support proof of covered injury during the policy period and a duty to indemnify only for injuries shown to have occurred during the policy period; the court rejected Liberty’s proposed categorical exclusion for post-termination manifestations.
- Both sides appealed; the Second Circuit affirmed the judgment.

## Issues

1. Under New York law, what event triggers CGL coverage for latent or progressive bodily injury claims: exposure, manifestation, or injury-in-fact during the policy period?
2. Whether the insurer’s duty to defend is triggered when a complaint alleging exposure during the policy period could allow proof that bodily injury occurred during that period, even if disease manifests later.
3. Whether policy language relied on by the insurer excludes coverage for claims involving post-termination exposures or post-termination manifestations so broadly as to bar defense and indemnity for latent injuries tied to the policy years.

## Decision

- The Second Circuit affirmed the declaratory judgment entered on cross-motions for summary judgment.
- Liberty had a duty to indemnify AHP for diagnosable and compensable bodily injuries that actually occurred during the policy period as a result of exposure to AHP products, without regard to when the injuries later became manifest or were discovered.
- Liberty had a duty to defend any suit in which the complaint could reasonably be read to permit proof of such injury occurring during the policy period.
- Liberty’s interpretation of post-termination language as a categorical bar to coverage for late-manifesting claims was rejected; post-termination manifestation did not defeat coverage where injury-in-fact occurred during the policy period.

## Legal Principles

- For latent or progressive bodily injury claims under occurrence-based CGL policies, New York law ties coverage to injury-in-fact: the policy is triggered if actual bodily injury occurred during the policy period.
- Exposure during the policy period, standing alone, is insufficient to establish indemnity absent proof that bodily injury resulted during that period.
- Manifestation after the policy period does not preclude coverage if the insured can prove that diagnosable and compensable injury existed during the policy period.
- The duty to defend is broader than the duty to indemnify and is owed when the allegations, reasonably read, permit proof of a covered injury during the policy period.
- Ambiguous policy provisions asserted to limit occurrence coverage are construed against the insurer and cannot be read to nullify the coverage grant for injuries occurring during the policy period.

## Conclusion

The court held that occurrence-based CGL coverage for latent disease claims turns on whether actual, diagnosable, and compensable injury occurred during the policy period, and it required the insurer to defend any suit whose pleadings could allow proof of such injury, while limiting indemnity to injury shown to have happened during the coverage years.


Am. Home Prods. Corp. v. Liberty Mut. Ins. Co., 748 F.2d 760 (2d Cir. 1984)