According to its recent Form 10-Q SEC filing, Merck’s insurance coverage will not suffice to fully cover the November 2007 settlement reached in connection with the federal Vioxx class action litigation, reported to be for an “aggregate amount of $4.85 billion” for qualifying domestic claims (a figure that does not include legal defense costs). Moreover, the company reports an ongoing dispute with its insurers over the availability of insurance proceeds to cover Vioxx-related claims.
Merck's report states that the company has product liability insurance for claims concerning Vioxx with stated upper limits of approximately $630 million after deductibles and co-insurance, which also provides coverage for legal defense costs. With respect to the shareholder derivative lawsuits filed against Merck in connection with the Vioxx claims, the company states that it has directors and officers liability insurance coverage with stated upper limits of approximately $190 million, and fiduciary and other insurance for ERISA lawsuits arising from the Vioxx claims with stated upper limits of approximately $275 million.
The company reports that it has received $590 million in insurance proceeds through an arbitration proceeding and negotiated settlements with its insurers, plus approximately $45 million in fees and interest payments. However, Merck reports that the company “has no additional insurance for the Vioxx Product Liability Lawsuits. The Company’s insurance coverage with respect to the Vioxx Lawsuits will not be adequate to cover its defense costs and losses.” Merck noted, however, that “[a]s a result of the arbitration proceeding referenced above, additional insurance coverage for these claims should also be available, if needed, under upper-level excess policies that provide coverage for a variety of risks.” Moreover, “[t]here are disputes with the insurers about the availability of some or all of the Company’s insurance coverage for these claims and there are likely to be additional disputes. The amounts actually recovered under the policies discussed in this paragraph may be less than the stated upper limits.” As of September 30, 2008, Merck had a reserve of approximately $4.649 billion related to the Vioxx litigation, including legal defense costs.
For a copy of Merck's SEC filing, please click here.