Most of us pay our bills on time. If we break a neighbor’s rake, we promptly purchase a replacement. If our child dumps fruit punch on a friend’s carpet, we pay to have it cleaned. In fact, we don’t really think about these unwritten rules often; it’s just the right thing to do, so most of us do it instinctually: if we cause damage, we pay for the damage. But too often companies refuse to pay fair settlements to resolve product failure cases, even in the face of a mountain of evidence that (1) the product clearly failed and (2) the failure physically injured the person. For example, let’s say a sixty-eight year old retired schoolteacher learns her metal-on-metal artificial hip implant has failed; her doctor tells her that, in addition to the pain she feels in her hip and leg, she now suffers from dangerously high cobalt and chromium levels (a condition called “metallosis”). Thousands of other injured people have similar claims, but the manufacturer of the failed hip product simply won’t pay. Why not?

Well, I can’t know all the reasons, but let’s look at a few theories:

Companies Don’t Like to Pay Settlements

Companies do not like to pay claims, period. Companies are in the business of making money, not paying out money. Corporations are under enormous pressure to maximize value for their stakeholders, primarily those people who buy their stock. Paying out two billion dollars in settlements for a failed artificial hip is never good for the bottom line.

Companies Can Get Away with Not Paying

The playbook is no secret: when a company first receives complaints about a failing product, it almost always denies that the product is defective. When scholarly, peer-reviewed studies establish that the product is defective, the company invariably commissions its own studies on the product, and often those studies conclude that the product is safe or that the dangers have not been proven. When litigation begins, the company defends itself vigorously, because it is always the case that the company has much more money than any injured plaintiff and can use its superior financial position to grind down injured plaintiffs, even thousands of them.

Settlement Delays Are Profitable

Let’s say a defective product injures 12,000 people, and the company negotiated three billion dollars in a global settlement for the injured plaintiffs. And let’s say the company could pay today or, through artful delays, two years from now. Eight percent interest on three billion dollars for two years is four hundred and eighty million dollars ($480,000,000). That’s real money. If a corporation can delay settlement discussions for two or four or six years before finally paying out claims, the company comes out ahead.

Another positive result of delays is this: some injured people just give up. Some plaintiffs may walk away, or accept a reduced offer, or lose interest, or may even grow old and die. There is no question that justice delayed is justice denied for injured people. Corporations understand this.

One Example: Johnson & Johnson

Recently, Johnson & Johnson has taken a harder line against paying settlements. One Johnson & Johnson defense attorney said that J&J is inundated with lawsuits and that if the company paid every claim it could get a reputation as an “easy mark.” In 2018 alone, J&J spent two billion dollars on settlements and attorneys’ fees. According to reports, J&J is defending 100,000 lawsuits involving hip implants, surgical mesh, baby powder, prescription drugs, and other product cases. One school of thought holds that the massive number of pending lawsuits is actually a deterrent to settlement for J&J.

Medical device and drug companies like J&J can get burned with aggressive no-settlement policies. DePuy Orthopaedics, owned by J&J, lost several huge verdicts in the DePuy Pinnacle hip litigation. And last year a jury awarded damages of $4.7 billion to a group of women who used J&J’s baby powder and were later diagnosed with cancer. There is no question that J&J could have settled with these 22 women years ago for a fraction of that jury verdict. (Of course, J&J has appealed.)

Then there is the loss of goodwill in this scorched-earth litigation strategy. According to a report in Law360, in 2016 J&J was considered the sixth most reputable company in the United States. By 2018 it had dropped out of the top 100. Goodwill matters.

Finally, one important reason for companies like Johnson & Johnson to pay valid claims is this: it is the right thing to do. When corporations offer safe products that improve people’s lives, they should make a lot of money selling the products. But when one of their products turns out to be flawed and harmful, companies should want to do the right thing and pay all the valid claims, promptly.

Note: References to individuals in this article are fictional and hypothetical and do not represent any current or former clients, or any other person. Information about Johnson & Johnson was distilled from online news sources, including Law360, which own their content.

1995

In 1995, Dr. Graham Isaac released a short paper discussing the problems with metal-on-metal (MoM) artificial hips. Dr. Isaac explained how metal wear debris created from MoM hip joints was a serious problem because of poor design and manufacturing of the metal components. Dr. Isaac also stated that even with higher quality manufacturing and engineering techniques, the performance of MoM hip implants were as “unpredictable as ever, working well for a period of time before suffering catastrophic breakdown . . . accompanied by a release of a large volume of debris.” This paper and Depuy’s other internal documents suggest that Depuy Orthopaedics most likely knew of the MoM risk factors in 1995, twenty-two years ago, and ten years before the company began selling the Depuy ASR artificial hip. In fact, one doctor noted that Depuy needed “to be cautious of the legal/litigation issues and lawyers, etc…perception of metal debris and metal-ion release.” I wrote more about what Depuy may have known about the serious risks of the ASR hip here.

August 2005

In August 2005, the FDA approved the Depuy ASR artificial hip for sale by means of the 510(k) process. The FDA did not require the Depuy ASR hip to undergo clinical trials. This turned out to be a big mistake. In 2005, Depuy submitted a section 510(k) premarket notification of intent to market the Depuy ASR Hip. By representing to the FDA that the Depuy ASR hip’s design was “substantially equivalent” to other hip products on the market, Depuy was able to avoid the important safety review required for premarket approval under FDA regulation, including vital clinical trials.

August 24, 2010

After hundreds of reports of failures of the Depuy ASR MoM artificial hip in patients, Depuy Orthopaedics issued a worldwide recall of the Depuy ASR on August 24, 2010.

September 3, 2010

The Judicial Panel on Multidistrict Litigation (JPML) approved a multidistrict litigation site for injury claims involving the Depuy ASR. The MDL is situated in the Northern District of Ohio with Judge David Katz. After Judge Katz’s death, Judge Jeffrey Helmick was appointed to preside over the Depuy ASR MDL. (1:10-md-2197)

November 19, 2013

The first Depuy ASR hip Settlement Agreement was reached on November 19, 2013. The first settlement agreement required that a plaintiff had revision surgery on or before August 31, 2013. In the Agreement Depuy agreed to pay $2.5 billion dollars to settle thousands of claims.

March 2, 2015

The second settlement agreement was reached on March 2, 2015, which allowed participation in the settlement if a plaintiff received a revision surgery after August 31, 2013 but no later than January 31, 2015. The material terms in the second settlement agreement were the same as those in the first settlement.

March 3, 2017

On this date an extension of the second settlement agreement was reached. Let’s call it the “Third Settlement.” The Third Settlement covered people who were implanted with the Depuy ASR hip and underwent revision surgery between January 31, 2015 and February 15, 2017.

February 16, 2017

If you had revision surgery on this date or afterward, you (technically) do not qualify for participation in the Third Settlement. However, if you had revision surgery on February 16, 2017 or later, you should still be able to recover from Depuy, either in a Fourth Settlement or outside the MDL altogether. After all, you were injured by a failed medical device and were forced to undergo revision surgery (which should not have been necessary). Give me a call to discuss your revision surgery occurring after February 15, 2017.

July 19, 2017

This is the deadline to file a claim for participation in the Third Settlement. If you had revision surgery between January 31, 2015 and February 15, 2017, you have just a few weeks longer to enroll in the Third Settlement. Do not delay!

October 27, 2017

This is the deadline to file claims in the “Part B” portion of the Third Settlement. I wrote about Part B “Extraordinary Injury Fund” here and here and here, but briefly, Part B recognized “extraordinary injury” that followed Depuy ASR hip failure and provided extra compensation to people suffering from particularly bad results, such as heart attack, stroke, foot drop, pulmonary embolism, deep vein thrombosis, dislocation, or infection, and lost earnings.

August 24, 2020

This will be the ten-year anniversary of the date Depuy recalled the Depuy ASR artificial hip. After this date, I imagine it will be difficult to bring injury claims against Depuy Orthopaedics for the failure of the Depuy ASR, though some claims should still be viable depending on the timeline.

Please check this site for all kinds of information on the Depuy ASR hip, the Depuy Pinnacle hip, the Stryker and Smith & Nephew hips, and other MoM artificial hips that have harmed thousands and thousands of people all over the world. As always, good luck.

When a device or drug maker pays money to an injured person for a defective product, several costs must be repaid from these funds. There will likely be medical liens, expenses of litigation, attorney’s fees, and health insurance liens. You can get an overview of these cost repayments in a post I wrote last year. In today’s post I want to take a closer look at health insurance liens (and the related concept of health insurance “subrogation”), mainly because health insurance companies can take a big bite out of your product liability settlement funds. Best to understand this unpleasant news upfront.

How Do Health Insurance Liens Work?

If you have health insurance, much of the cost of your medical care will be paid by your health insurance plan. Let’s say you need revision surgery to remove defective hernia mesh. The total cost of the surgery is $36,000.00, but under contracted payment rates between the hospital and your health insurance company, the cost is reduced to $24,000.00. Under your agreement with your insurance company, it pays $20,000.00 for this surgery and you pay a total of $4,000.00 in “co-pays” (that is, the amount you must pay “out of pocket” under your health insurance plan). So far so good.

A week after the surgery, while you recover from the operation (and watch afternoon commercials asking if you have been injured by defective hernia mesh), you receive a letter from your health insurance provider asking specific questions about how you were injured. The health insurance company is trying to figure out if a third-party is ultimately responsible for your injuries and thus for the costs of your revision surgery. The insurance company may want to know if you are pursuing a product liability claim against the manufacturer of the hernia mesh. It is no secret that the health insurance company is looking to be reimbursed for the payments it made for your mesh revision surgery. The moment you file a lawsuit against the product manufacturer, your health insurance company will submit a “lien” identifying its claim to some of the settlement funds. And trust me, these companies will not let this claim go lightly; they will pursue reimbursement aggressively, and you will most likely have a contractual responsibility to pay the health insurance company from your settlement funds. In fact, if possible the insurance company will expect to be repaid 100% of the costs it paid for your health care caused by the negligence of others.more

Health insurance subrogation is the closely-related concept whereby your health insurance carrier pays for your health care and then directly pursues reimbursement of those payments against the negligent third party or the third party’s insurance provider. Subrogation is the substitution of one person or entity for another with respect to an insurance claim or debt, and the entity substituted will obtain all the rights associated with the insurance claim or debt. What this means is that if your health insurance company pays money for your medical care, and it turns out your injuries were caused by a negligent third-party (such as a distracted driver or the manufacturer of hernia mesh) then the health insurance provider can step forward and demand to be repaid for the costs it incurred in your treatment. Essentially, it can pursue a lawsuit against the negligent third-party on its own, without you.

But Isn’t My Health Insurance Company Supposed to Pay for My Health Care?

In a word, yes. And these companies will pay for your health care related to injuries you sustain from a failed medical device, a problem prescription, or a car crash. At least, they will pay what they are required to pay based on the health insurance contract (and not a penny more). However, if a third party is at fault, they will want to be repaid from the third party for payments made.

This repayment can sting because it will naturally lower your overall net award from your product liability settlement. It also stings because you have paid health insurance premiums for years to provide medical care when you are injured, and the moment you receive compensation for an injury caused by someone else, your health insurance company will expect to be repaid for the medical care it paid on your behalf.

Let me put it another way, in any given year you may not receive any health care, but you paid monthly health insurance premiums every month. The insurance company does not give you that money back, and there is no mechanism for you to recover these premiums in a year when you did not need health care. What can I say? The health insurance industry has a more robust lobby in Washington D.C. than do individuals injured by defective products.

How Much Can the Health Insurance Company Take of my Product Settlement?

This can be the shocking part: in some cases the health insurance lien can be larger than the third-party is willing to pay in settlement. This means that you as the injured person may receive nothing from pursuing an injury claim against a negligent person or company. Quick example: you are hurt by the failure of a metal-on-metal artificial hip, but in the revision surgery you suffer a mild heart attack. Your health care related to your recovery from the heart attack eventually costs the health insurance company $225,000.00, but the hip manufacturer will only offer $300,000.00 to settle your case. In that situation, after other costs are paid there would be no money left over for your pain and suffering.

Some good news is that many states recognize the “Made Whole Doctrine.” This doctrine is a defense to a health insurance provider’s lien or subrogation rights. It goes like this: the insured (or injured person) must be “made whole” before an insurance company may step in and assert its rights to be repaid. But a word of caution: often the subrogation rights of insurance companies is stronger than the defense of the made whole doctrine.

If the “Made Whole Doctrine” does not protect you in your state, the other modest good news is that health insurance companies will occasionally work with a competent lawyer to lower the overall health insurance lien. For example, in the above example the health insurance company may agree to take two-thirds of the total cost for the health care “to get the deal done.” In that case, there would be money left over for you.

Finally, in many multidistrict litigation settlement agreements, the parties negotiate an arrangement for the product manufacturer to pay the health insurance liens and other liens as part of the overall settlement package. This can be one of the more attractive features of a multidistrict litigation settlement.

If you have more questions, call me: (919) 830-5602.

Note: this is not legal advice.