Insurance

• Author: International Law Group

In the so-called "Benzodiazepine Litigation," up to 11,000 users of drugs such as Ativan and Serenid sued John Wyeth & Brothers Ltd. (Wyeth) in the courts of England, Scotland, Wales and Ireland in the late 1980s. The English courts ultimately struck out all their claims after the withdrawal of legal aid. The actions pending in the other jurisdictions remain dormant and without much prospect of getting to a judgment against Wyeth. The current situation, therefore, is that plaintiffs have not proven any claims against

Wyeth nor has it paid any claims. Nevertheless, Wyeth's litigation costs in England added up to about BP 17.34 million plus an additional $2.44 million in the United States. According to Wyeth, several of its insurers or their predecessors have a duty to pay both under the policies governed by the law of New York state and under the policies governed by English law. The companies contended that the New York policies did not bind them to pay any, or a proportion, of these litigation expenses.

From May 1972 to October 1977, there was a two-layered insurance structure. The Guardian Royal Exchange (GRE) provided for the first layer and two AFIA companies furnished coverage for the second layer. St. Paul Mercury Insurance Company (St. Paul) coverage was in effect from May 1972 to July 1975 and Aetna Insurance Company (Aetna) coverage applied between July 1975 and October 1977. From November 1977 to 1980, there was also two-layered coverage where an AFIA company, Home Insurance Company (the Home) did the primary layer and Aetna the secondary level.

In Wyeth's suit against the insurance carriers, it was common ground that English law governed the Home policy in the primary layer while New York law governed the issues arising under the second layer, the excess policies. From January 1984 onwards, the Cigna Group had taken over AFIA. Other defendant companies assumed the interests and liabilities of St. Paul, Aetna and the Home, hereinafter referred to collectively as Cigna.

Under the GRE primary layer policies for the period May 1972 to October 1977, GRE had a right to "buy-out" by annually paying 200,000 of Wyeth's litigation expenses during their coverage period. GRE did exercise the right by making substantial payments to Wyeth in 1990 and 1991, thus ending its liability. According to Wyeth, AFIA is bound to pay 100% of its coverage until March 1994. Wyeth filed this insurance litigation in the English Commercial Court in May 1996...