Conning the IADC Newsletters.

Recognizing that a wide range of practical and helpful material appears in the newsletters prepared by committees of the International Association of Defense Counsel, this department highlights interesting topics covered in recent newsletters and presents excerpts from them.

Federal Protection Comes to Biomaterials Suppliers

Writing in the June issue of the newsletter of the Drug, Device and Biotech Committee. W. Kennedy Simpson of Stites & Harbison, Louisville, Kentucky, discusses the newly enacted Biomaterials Access Assurance Act:

The Biomaterials Access Assurance Act (BAAA) became law in August 1998. It provides protection to suppliers of raw materials and component parts for implantable medical devices from liability in civil product liability litigation. The national product liability legislation vetoed by President Clinton in 1996 contained a provision that would have protected suppliers of biomaterials for implantable medical devices. At the time of the veto, the president expressed approval of a biomaterials access provision of the legislation.

In early 1997, specific legislation was sponsored by Rep. George Gekas, R-Pa. While the measure had broad bipartisan support, passage was delayed because some members of Congress wanted the measure included in an expansive national products liability reform bill.

The BAAA was the result of intense lobbying by the medical device industry, led by the industry's trade association, the Health Industry Manufacturers Association (HIMA). In addition, the act was supported by a number of national medical organizations, including the American Heart Association. On the other hand, the act was opposed by a number of public interest groups, most notably Public Citizen.

Biomaterials "crisis"

Proponents of the legislation cited a biomaterials access "crisis" they attributed to the inclusion of suppliers of medical device raw materials and component parts as defendants in product liability litigation. While suppliers are rarely found liable, the cost of defending the litigation was considered prohibitive by many suppliers. The HIMA estimated that approximately 75 percent of raw material suppliers had stopped selling materials to medical device manufacturers. Opponents of the legislation complained that there was no evidence of any shortage of biomaterials for medical devices and that the medical device industry was more than secure financially.

The BAAA was approved by the House in a unanimous voice vote on July 28, 1998, and the Senate did the same two days later. The president signed the bill into law on August 13, 1998, stating that the BAAA "should help to ensure the continued availability of life-saving and life-enhancing medical devices."

The BAAA contains specific congressional findings that raw material and component parts buyers had ceased to supply materials and parts for implantable medical devices based upon "concerns about the cost of [product liability] litigation" and that the unavailability of such material and parts "would lead to unavailability of lifesaving and life-enhancing medical devices." The BAAA defines "biomaterials supplier" as an entity that supplies a component part or raw material for use in the manufacture of an implantable medical device.

Dismissal of supplier

The backbone of the BAAA is a mechanism that requires dismissal of a biomaterials supplier from any civil action, in federal or state court "on the basis of any legal theory" for harm allegedly caused by an implant. The only general exceptions are if the biomaterials supplier is a manufacturer or seller of the implant itself, or if the component part or raw material does not meet contractual requirements or specifications. The act contains a specific exception; it does not apply to suppliers of silicone gel for breast implants. The act lays out a procedure for deciding motions to dismiss and motions for summary judgment and includes a provision for stay of discovery.

Not unexpectedly, the BAAA was hailed by the medical device industry and the medical community as a significant victory for the health of the approximate 800,000 patients who receive implantable medical devices annually and decried by the plaintiffs' bar as a response to a fictional public health crisis fabricated by the industry.

The effect of the BAAA is not entirely predictable. One likely result is that raw material and component part manufacturers will no longer automatically become defendants in a product liability litigation involving medical devices. To the extent that such companies are sued, many suits will be dismissed during the early stages of litigation, particularly in federal court where judges are more familiar with federal law and willing to grant summary judgment. Consequently, biomaterials suppliers should weigh the effect of the BAAA carefully in determining whether to remove a case to federal court.

Some plaintiffs will no doubt craft their pleadings to include allegations that the biomaterials supplier fits into one of the three exceptions to the BAAA, particularly the exception that the material or part did not meet specifications. Plaintiffs may also use the procedural provisions of the BAAA to conduct discovery on the issue of biomaterials supplier liability in order to pit the supplier against the device manufacturer.

Reduction of litigation

While the BAAA is little more than a codification of the common law doctrine that a part or material supplier who played no role in the design of a finished product should not be liable, the net effect of the BAAA should be to reduce litigation expenses for biomaterials suppliers. Whether the legislation will affect the market availability of such materials and parts is a question that can only be answered by the passage of time.

(This article was originally published as W. Kennedy Simpson, Federal Protection for Biomaterials Suppliers, 16 Food, Drug, Cosmetic and Medical Device law Digest 35 (1999) (New York State Bar Association) and is edited and reprinted with permission. Copyright 1999 by the New York State Bar Association.)

Likely Issues in Y2K Claims in London Reinsurance Market

Writing in the June issue of the newsletter of the Reinsurance Committee, Michael Dobias and Graham Brown of the Davies Arnold Cooper (London) Reinsurance and Professional Indemnity Group look at the end of 1999 and the reinsurance market:

Whether Y2K proves to be the doomsday scenario envisaged by some or the damp squib anticipated by others, it is almost certain that claims will arise citing the change in date as the cause of the loss. Many of those claims are likely to be reinsured into the London Market.

Loss settlement clause

The first question is to what extent a London Market reinsurer will be bound by a judgment or compromise reached in a foreign jurisdiction. This will be dependant in large part on the terms of the reinsurance policy and on the jurisdiction governing the reinsurance policy.

As regards jurisdiction, London Market reinsurers are more likely to be subject to the jurisdiction of the English courts and the application of English law following two recent decisions--the first instance decision last year in AIG Group (UK) Ltd. v. The Ethniki, [1998] 4 All E.R. 301 (Q.B. (Comm Ct)), and the recent Court of Appeal case, Gan Insurance Co. v. Tai Ping Insurance Co. Ltd. [1999] 2 All E.R. 54 (Comm Ct). In both cases it was decided that a jurisdiction clause applying foreign law in the underlying contract of insurance was not incorporated into the reinsurance policy by a "terms as original" provision in the reinsurance contract. Where reinsurance policies are silent as to the choice of law or forum, the usual rule is that the principal place of performance of the obligation in question governs the choice of law and jurisdiction.

On the assumption that the reinsurance will be interpreted in accordance with English law, two broad scenarios arise:

* Where there is what could be referred to as a standard loss settlement provision, for example, "All loss settlements by the reinsured will be unconditionally binding on reinsurers provided that such settlements are within the terms and conditions of the original policies and within the terms and conditions of this agreement" or similar provision.

* Where the policy includes a more wide-ranging "follow the settlements" or "follow the fortunes" provision.

The first scenario was examined in Commercial Union Assurance Co. Ltd. v. NRG Victory Reinsurance Ltd., [1998] 2 All E.R. 434 (C.A.), where the wording included the fairly standard loss settlement provision. The issue was the extent to which a reinsurer could challenge whether a settlement actually fell within the terms of the underlying policy. The Court of Appeal provided a fairly limited basis on which foreign judgments could be challenged by the reinsurer, notably where (1) the foreign court was not, in the eyes of the English court, a court of competent jurisdiction; (2) the judgment was obtained in breach of an exclusive jurisdiction clause or a clause by which the original insured was prevented from proceeding in the court delivering the judgment; (3) the reinsured had not taken...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT