$500 Million Sought From Five Insurance Companies for Payment of Zyprexa Claims

In a September 2, 2005 article by Jeff Swiatek, of The Indianapolis Star, it was reported that Eli Lilly and Co. filed a lawsuit in March 2005 against some of its product liability insurance carriers in an attempt to get $500 million from those insurers.  In turn, those funds could cover half of the one billion dollars that Lilly has estimated is necessary to pay for the settlement of thousands of Zyprexa legal claims involving diabetes-related side effects.

Lilly is suing five of its insurers: SR International Business Insurance Co.; North American Specialty Insurance Co.; Winterthur Schweizerische Versicherungs AG; Gerling-Konzern Allgemeine Versicherungs AG; and, ELCO Insurance Co.  The lawsuit is pending in the federal district court in Indianapolis.  A May 2007 trial date has been set by the court.

According to The Indianapolis Star article, four of the insurance carriers — all but for ELCO, a Lilly fully-owned subsidiary — are fighting Lilly’s federal lawsuit.  According to court documents, those insurance carriers argue, essentially, that when Lilly bought its Zyprexa product liability coverage from them in 2000 Lilly failed to disclose that the drug company knew Zyprexa could cause diabetes and other serious side effects in some patients.  As detailed by Jeff Swiatek in his article:

Hiding that information was "egregious" behavior by Lilly and voids the coverage, the insurers say in court motions.

The insurers argue in several nearly identically worded filings that if they had known about Zyprexa’s serious side effects, the insurers "would not have agreed to insure Lilly at all, would have excluded coverage for Zyprexa . . . or would have provided insurance coverage to Lilly on terms and conditions substantially different."

"Lilly knew Zyprexa represented a serious liability exposure to it and to any insurer that provided coverage to Lilly," said SR International Business Insurance Co., one of the companies Lilly is suing.

In June 2005 Lilly announced a large settlement concerning Zyprexa by which it would settle most of the 8,000 legal claims filed against it by lawyers representing Zyprexa patients. Those lawsuits, for the most part, allege that the use of Zyprexa caused these patients to develop diabetes-related side effects. At the time of their announcement, Lilly had said that this Zyprexa settlement plan would cost the company about one billion dollars.

(Posted by: Tom Lamb)