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A German insurer is refusing to cover Baxter International Inc.’s share of a settlement for thousands of suits brought by patients infected by tainted blood in the 1970s and ’80s, exposing the Deerfield, Ill.-based maker of medical products to millions of dollars in losses.
The cases were filed by about 2,700 hemophiliacs given contaminated blood plasma manufactured by Baxter and five other drug companies. The terms of the settlements could not be determined, but Baxter said it has spent $12 million defending itself in the case, and payments to victims “will ultimately cost Baxter millions more,” according to a complaint filed by Baxter against Cologne, Germany-based AXA Versicherung A.G.
Called the second-generation litigation, the cases come after a round of lawsuits involving about 6,200 patients that were settled in 1997. Baxter’s share of that settlement was about $130 million, according to a 2003 company filing with the Securities and Exchange Commission.
Baxter must overcome several obstacles if it hopes to prevail in its case, which was filed Dec. 23 in U.S. District Court in Chicago.
Baxter is arguing to keep the case in Illinois’ Northern District, an apparent attempt to pre-empt a fight over venue and jurisdiction. AXA Versicherung, a unit of Paris-based financial services company AXA Group, is likely to challenge the case on procedural grounds, saying American courts don’t have jurisdiction over an insurance contract issued in another country to cover claims outside of the United States.
Complicating matters more, the policy was written in German, which could allow AXA Versicherung to challenge the meaning of the policy’s legal terminology, said Jill Berkeley, chairwoman of the insurance policyholder practice group at Chicago-based law firm Neal Gerber & Eisenberg L.L.P.
“This language, as translated, may not really trigger the same case law that you would use to interpret cases,” she added.
A Baxter spokeswoman declined to comment on how much the settlements could cost Baxter if the cases aren’t covered by the insurance policy.
A spokeswoman for AXA Versicherung declined to comment.
Both first- and second-generation cases were filed by patients with hemophilia, a genetic disorder that prevents blood from clotting. The first-generation cases were filed by U.S. patients who contracted HIV as a result of transfusions. The rest were filed by U.S. patients infected with the hepatitis C virus and overseas patients infected with HIV or hepatitis C or both.
In addition to Baxter, the defendants in the second-generation cases are Armour Pharmaceuticals Co. Ltd., Bayer Corp., Alpha Therapeutic Corp., Aventis Behring L.L.C. and Aventis Inc.
Baxter’s part in the second-generation lawsuits involves plasma sold before 1996 by Immuno International A.G., a Zurich-based company acquired by Baxter that year, and by its own Hyland Therapeutics division. The complaints, which were filed in federal courts across the country, allege that the drugmakers continued to sell tainted blood products in Europe and Asia after they stopped marketing them in the United States.
A global settlement was reached in 2009 that would encompass about 95% of the 2,700 second-generation claims, and payments are still being doled out to plaintiffs.
Andrew Wang is a reporter for Crain’s Chicago Business, a sister publication of Business Insurance.
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