Dow Corning Insurers Must Pay Up, Jury Says

A Michigan jury ruled Wednesday that insurers must pay Dow Corning Corp.’s claims for settling and defending against breast implant lawsuits. The company said the decision will make more money available to compensate women pursuing liability claims.

The decision by the Wayne County Circuit Court jury, which came after 2 1/2 days of deliberation, ends a three-month trial over who will pay a major portion of claims against Dow Corning, once the industry’s largest maker of silicone gel breast implants.

Dow Corning, based in Midland, Mich., is a 50-50 joint venture between Dow Chemical Co. and Corning Inc.

Dow Corning spokesman T. Michael Jackson said the insurance proceeds will be used to reimburse the company for the settlement of claims made by women who allege that their Dow Corning-made implants caused health problems.

An insurance company attorney said there will be an appeal.

Dow Corning sued its insurers after they refused to pay claims for settling and defending against the lawsuits.

The insurers, who sold policies to Dow Corning from 1962 to 1985, argued that they should not have to pay the claims, maintaining that Dow Corning misrepresented the litigation risks posed by the implants. During the trial, the insurers said the company ignored doubts expressed by some doctors and failed to adequately test the implants before introducing them in 1964.

The jury disagreed, finding that Dow Corning neither misrepresented the risks of implants nor concealed any significant facts from the insurers that may have affected the silicone maker’s ability to gain liability coverage. The vote of the six men and three women was unanimous.

The insurers first refused to reimburse Dow Corning for its implant claims after the company was deluged with lawsuits in 1992. The onslaught followed the Food and Drug Administration’s moratorium on silicone gel implants and two big jury verdicts against Dow Corning based on the reasoning that the implants cause immune-system-related diseases.

Dow Corning said complications caused by the implants, such as hardening of breast tissue and ruptures, were widely known long before the insurers balked at paying Dow Corning’s claims. The company said it provided the insurers with all the information they sought.

More than 19,000 implant lawsuits were frozen last May, when Dow Corning sought Bankruptcy Court protection from creditors, citing costs of the litigation and the insurers’ refusal to pay claims.

Robert Marsac, a Dow Corning attorney, said that to the extent that the women have legitimate claims, “they’ll be in a better position to be compensated, because this will allow Dow Corning to access a substantial amount of insurance proceeds.”

But some attorneys for the women said they fear the verdict could hurt their cases should they go to trial, because the jury found that Dow Corning did not withhold information on risks. That has been a key allegation in most of the lawsuits against Dow Corning and Dow Chemical.

Corning has benefited from a 1993 federal court ruling concluding that there was insufficient evidence that it took part in implant manufacturing decisions.

Marsac said the verdict bolsters Dow Corning’s contention that the implants are safe and that there is no scientific proof they cause disease.

“The result of this favorable verdict vindicates Dow Corning legally with respect to its products and upholds the integrity of Dow Corning’s people,” he said.

Forty-three insurance companies remained in Dow Corning’s lawsuit at trial, but the verdict is expected to affect only 30. Thirteen reached tentative settlements during the civil trial. Those deals must still be approved by the U.S. Bankruptcy Court in Bay City, Mich.

Mike Thoits, an attorney for Home Insurance Co., said the insurers will appeal. Other attorneys for the insurers declined to comment. The American Insurance Assn. said it was disappointed with the verdict.

“Insurance is not intended to protect manufacturers who misrepresent critical product information to insurers,” said Janet Bachman, the trade group’s vice president. “In that regard, this decision appears to be a bailout for irresponsible manufacturers. Wrongheaded decisions like this one will shift costs to insurers that should be borne by manufacturers.”

Before the trial, Dow Corning settled out of court with more than a dozen insurers for about $545 million in claims. Among the 13 insurers settling during the trial was American International Group Inc., which partly resolved its claims.

The second phase of the trial will continue before Judge Robert J. Colombo Jr. He will decide if Dow Corning’s defense costs in the implant litigation have been reasonable and, if so, how they will be allocated among insurers.

Marsac said Wednesday’s verdict will provide Dow Corning with about $700 million worth of insurance proceeds. If the company also wins in the second phase, that could bring the total to about $1 billion, he said.