Meningitis outbreak – who will pay?
Reports of deaths and illness from the fungal meningitis tainted steroids continue to accelerate. With nine deaths and reports of up to 13,000 potentially at risk in 23 states, the wrongful death claim settlements will likely exceed $20 million. Tens of millions more may accumulate for injuries and new reported cases.
All of which begs the insurance question – who will pay the claims? The pharmacy at the center of the case is small, and probably does not carry sufficient insurance for all the likely claims.
That will take the matter into the dark corners of bankruptcy, contract and common law. Any insurance held by the pharmacy will most likely be exhausted quickly in bankruptcy as claimants scramble for any and all assets that are available to satisfy their claims.
Then come the contracts – suppliers, customers, distributors and others will have contracts that speak to liability. All but extremely one-sided contracts not in favor of the pharmacy will be in play as plaintiffs’ lawyers play these parties against each other for settlements to fund the cases against the deep pockets.
In this case, the deep pockets will probably be the hospitals. Since the steroids were administered in hospitals, the decision to buy what has been described as ‘lower-cost steroids’ will set the stage for big hospital settlements.
It will take years, of course, to play out. But there are plenty of lessons for many parties. Hospitals, in particular, should review their contracting guideline.
About the Author
Phil Edmundson is the Chairman and CEO of William Gallagher Associates (WGA), insurance brokers and consultants for businesses with over 30 years in the insurance industry. He manages strategy, talent acquisition and development, and management / acquisitions at WGA.