Arthrex, insurers spar over coverage of $16M settlement

Carly Behm -  

Orthopedic devicemaker Arthrex is asking a judge to order its insurers to cover a $16 million settlement over kickback allegations, but the insurers are pushing back.

Five things to know:

1. In November, Arthrex agreed to pay $16 million to resolve kickback allegations involving an orthopedic surgeon in Colorado. The company allegedly paid royalties to Peter Millett, MD, for his contributions to the development of the SutureBridge and SpeedBridge products. However, the money was intended to encourage his recommendation and use of Arthrex products, the Justice Department said.

2. Arthrex purchased primary and excess director and officers insurance policies from the National Union Fire Insurance Co. of Pittsburgh and Federal Insurance Co., according to a lawsuit filed April 9 in the U.S. District Court of Delaware. Arthrex is asking for the full $20 million policy limits and alleges the insurers are denying coverage for the legal fees and costs from the settlement.

3. Arthrex argues in its lawsuit that the insurers breached their contract to pay the loss. The devicemaker is asking for a jury trial.

4. The insurers filed their own lawsuit April 9 in the U.S. Middle District Court of Florida. That lawsuit alleges Arthrex did not fully inform National Union about what it was settling with the Justice Department.

5. The insurers argue they are not required to reimburse Arthrex for the defense costs or compensate for the $16 million settlement because the company did not comply with reporting requirements.

Arthrex did not immediately respond to an April 12 request for comment. The parent companies of Federal Insurance Co. did not immediately respond to an April 12 request for comment. AIG, the parent company of National Union Fire Insurance Co. of Pittsburgh, declined to comment.

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