An insurance company wants to reclaim the $10 million it paid out to cover legal claims against DJO Global in personal injury lawsuits over pain pumps sold by the medical device distributor, claiming that DJO concealed allegations that it promoted the off-label use of pumps made by I-Flow and McKinley Medical.
Ironshore Specialty Insurance sued DJO in the U.S. District Court for Southern California this week, seeking to rescind the $10 million policy it issued to cover pain pump claims against DJO.
Plaintiffs in the personal injury lawsuits alleged that the pumps, used to deliver anesthetics after shoulder or knee surgery, damaged the joints’ cartilage. When it applied for the insurance policy, DJO allegedly claimed that it was accused only on product liability grounds and that I-Flow and McKinley Medical would defend or indemnify it in any lawsuits, according to court documents.
But the lawsuits also contained allegations that DJO promoted the off-label use of the pumps, according to the documents, and DJO knew that I-Flow and McKinley Medical wouldn’t defend or indemnify it in the cases.
"In its submissions to Ironshore during the application period, DJO represented to Ironshore that the pain pump cases were ordinary product liability claims in which the plaintiffs sought to hold DJO liable purely because DJO allegedly had distributed a defective product. During the application period, DJO knew that plaintiffs in pain pump cases were amending their pleadings or filing pleadings that asserted that DJO had engaged in independently negligent acts in marketing or testing pain pumps, had conspired with manufacturers to market pain pumps for unapproved, off-label uses, should be subject to punitive damages or otherwise were liable for acts beyond simply distributing a defective product. Despite its knowledge of the changing allegations being leveled against it, DJO failed to disclose this material information to Ironshore," according to the lawsuit. "DJO knowingly or recklessly misrepresented and concealed information from Ironshore that was relevant to Ironshore’s underwriting, including the fact that I-Flow and McKinley had denied any obligation to defend or indemnify DJO in pain pump cases, that plaintiffs in the underlying cases were alleging that DJO was liable not just as a distributor of a defective product but for independent wrongdoing, and that DJO had promoted the pain pumps for a use not approved by the FDA.
"Had DJO disclosed to Ironshore that (1) I-Flow and McKinley had refused to defend or indemnify DJO in pain pump cases; and (2) plaintiffs in the underlying cases were alleging that DJO was liable not just as a distributor of a defective product but for independent wrongdoing, Ironshore would not have offered the Policy to DJO or would have underwritten the risk on substantially different terms," according to the complaint.
Ironshore wants the court either to void and rescind the policy and order DJO to repay money the insurer paid out, excluding any premiums paid for the coverage, or to reform the policy to exclude coverage for all pain pump cases and order DJO to repay Ironshore, according to court records. Ironshore is also seeking compensatory damages, interest and legal costs.