Tuesday, January 29, 2013
Ace and XL sued by AZ
A court case that got under way this week could have implications for reinsurers around the world.
The case is AstraZeneca Insurance Company (the pharmaceutical giant’s captive insurance company) versus XL Insurance (Bermuda) and Ace Bermuda Insurance.
The dispute is over whether the two Bermuda-based reinsurers can be held liable for settlements and costs incurred by the world’s fifth largest pharmaceutical company following several class-action product liability lawsuits related to its prescription drug Seroquel.
The claims alleged personal injury, namely, that Seroquel, an antipsychotic drug prescribed for schizophrenia, bipolar disorder, caused people to develop diabetes or even die suddenly.
The top-selling medicine, which had worldwide sales of $5.3 billion in 2010, was the company’s second-biggest seller after the cholesterol-reducing drug Crestor.
The London-based pharma company settled 28,461 claims in the US to the tune of $647 million. The cases settled for a reported average of about $25,000 each.
The company, without admitting wrongdoing, also agreed to pay $520 million to settle a lawsuit brought by the US federal government for illegally marketing the drug for anxiety, sleeplessness and post-traumatic stress disorder (PTSD) — for which the US military regularly prescribed it.
AstraZeneca’s captive insurance company reimbursed the costs and then turned to its reinsurers to indemnify the claim. But both XL Insurance (Bermuda) and Ace Bermuda have refused the claim on the grounds that the cases were settled, arguing that a court did not enter a liability ruling.
The reinsurers are understood to have a potential coverage exposure of $200 million.
Disputes over insurance policies are typically settled through arbitration, but this case will be battled out in the UK’s Commercial Court, with some of the biggest names in insurance law arguing their case for the reinsurers.
Lawyers said that the case would introduce new questions of reinsurance law, including whether there is a presumption that under a liability policy coverage is only for actual and not alleged liabilities.