LONDON, UK, Dec. 20, 2004 (PRIMEZONE) -- Smith & Nephew - excess insurers decline coverage
20 December 2004
Smith & Nephew plc announces that two of its excess layer product liability insurers have informed it that they are declining coverage in respect of their share of the liability arising from patients who require revision surgery related to the macrotextured femoral knee component implant product. The company's primary insurer, who is also a participant in excess layers, is continuing to provide cover.
Smith & Nephew strenuously refutes the grounds cited for declining coverage, which centres around the level of initial disclosure made by the company to the insurers. The company is pursuing all avenues to enforce its coverage rights.
At 30th November 2004, of the total of 2971 macrotexture products originally implanted, 676 revisions have been carried out and settlements agreed with patients in respect of 447 of those revisions amounting to GBP37m. The insurance coverage being disputed of this amount is GBP12m.
In order to comply with the requirements of FRS12, the company is likely to record an exceptional charge in its fourth quarter results on the basis that all disputed claims and future claims are treated as irrecoverable. Whilst it is too early to be able to make a firm statistical prediction of the ultimate number of revisions, the exceptional charge may be in the region of GBP80m (pre-tax), inclusive of the GBP12m of disputed coverage referred to above.
Commenting on the announcement, Sir Christopher O'Donnell, Chief Executive, said:
"Our first priority is to treat the affected patients fairly and promptly. It is very concerning that two insurers have now declined coverage at this late stage. We will take all steps available to us to enforce this coverage and to bring this matter to a satisfactory conclusion."
A conference call for analysts to discuss today's announcement will be held at 5.00pm GMT/12.00pm EST today. This will be broadcast live on the web and will be available on demand shortly following the close of the conference call at http://www.smith-nephew.com/confcall. If interested parties are unable to connect to the web, a listen-only service is available by calling 020 7019 9504 in the UK or 718 354 1153 in the US.
Analysts should contact Julie Allen on +44 (0) 20 7401 7646 or via email at julie.allen@smith-nephew.com for conference call details.
This information is provided by RNS
The company news service from the London Stock Exchange