The club have now admitted Bullard's medical revealed a meniscus tear.
Bullard underwent major surgery on the same knee in Sept 2006 and was consequently sidelined for 16 months but Hull insist his latest problem is unrelated.
Duffen is convinced the club will still get value for money from Bullard and has dismissed suggestions his career could be over.
"I still think Jimmy is a tremendous value-for-money buy at £5 million," Duffen said. "We signed him for four and a half years. It is unfortunate he's injured - players get injured, it's called football. It's not unusual.
"It is very disappointing because of all the hope and expectation for Jimmy arriving at this football club.
"He still has arrived, it just means we won't be seeing him on the field until the beginning of next season. It is disappointing but we have to get on with life and move forward.
"There is no question of this being anything other than a pause in Jimmy's career and I am sure he will come back and regain his former heights once he is fit."
The arrival of Bullard was supposed to reignite Hull's season after a downturn in form since briefly going joint top of the Premier League in October.
Hull have won only one of their 16 games since and, only six points above the bottom three, are in danger of being dragged into a relegation fight.
Bullard, whose contract reportedly pays him £45,000 per week, made his Hull debut as a second-half substitute at West Ham on Jan 28 but jarred his knee and has not played since.
The club initially claimed the injury was not serious and surgery was not required but it has proved far worse than first feared.
The joint will be operated on by the world-renowned Dr Richard Steadman, who carried out Bullard's last major surgery and conducted an arthroscopy earlier this week.
Hull are putting on a brave face despite continued questioning of their judgment but Duffen has conceded the club have no insurance.
He said: "Unfortunately you don't get insurance under any circumstances with pre-existing conditions, so the answer to that is no."