American Insurance Co. must pay out on a $50 million policy covering St. Jude Medical Inc. (NYSE:STJ) against claims involving its Silzone coating for artificial heart valves.
AIC held the sixth "layer" of an eight-layer product liability policy covering St. Jude between
Jan. 31, 1999, and Jan. 31, 2000. That means the insurer would provide the $50 million once claims to the five prior insurance companies in the plan reached $150 million.
St. Jude recalled the valves Jan. 21, 2000, after results from the Avert clinical trial of the device showed "a significantly higher incidence of explants due to paravalvular leakage," according to court documents. Product liability claims started mounting, triggering successive layers of the policy. AIC sued the St. Paul, Minn.-based medical device maker in January 2008, "seeking declarations that it has no duty to defend or reimburse St. Jude for its defense of the Silzone litigation," according to court documents. St. Jude filed a counter-claim a month later, charging AIC with breach of contract and seeking legal costs, fees and expenses for claims that fall within the AIC layer.
Judge David Doty of the U.S. District Court for Minnesota agreed with St. Jude, finding that "AIC is liable to St. Jude for payment of claims arising from Silzone-coated products that were settled or litigated in AIC’s layer," according to court documents.