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capacity to liabilities which could total $200 million. A number of insurers, including some who finally agreed to commit their capacity, regarded the premium as inadequate. Others had unresolved doubts about the application, interpretation and validity of P.L. 94-380.

Many United States insurers undoubtedly made commitments

which they might not have otherwise made to the program, because they were moved to demonstrate social and political commitment to an immunization program, believed to be vitally necessary to the public interest of the United States. Those seeking to complete the necessary underwriting commitments had to go not only to United States insurers, including the life insurance community as well as the property/casualty underwriters, but also to the foreign insurance market where there was naturally considerably less interest in motivations which it regarded as essentially political and peculiar to the United States. Nevertheless, it was necessary to have substantial participation by that market. Despite many rejections, a sufficient participation was obtained at virtually the last minute through the efforts

of one of the lead underwriters at Lloyd's, London. That underwriter later commented, that even though he had eventually

supported the vaccine insurance program, he thought that "the

premium was too thin for the deal".

Preparation to carry Out the Insurers' Responsibilities

Subsequently in September 1976, and almost as soon as the insurance underwriting commitments were certain, four of the principal subscribing insurers met to plan for the efficient and economical investigation, adjustment and defenses of claims or potential claims against their insureds. Each of the more than forty subscribing insurers is entitled to a voice in such matters should they arise and as they affect its interest. Consequently, it was essential to have in place in advance a common, indeed centralized, generally agreed upon procedure, so that expense and duplication of effort might be avoided in, and unified supervision provided for, claims servicing.

Those four insurers met on several occasions, discussed proposed procedures with Neil R. Petersen, Assistant Chief, Tort Section, Civil Division, Department of Justice, and during October prepared a Servicing Carrier Agreement which was distributed to the 19 insurers subscribing to the first layer of coverage. A transmittal memorandum dated November 10, 1976 outlined the claims administration procedures proposed.

A copy of that memorandum and one of the Servicing Carrier Agreements

are annexed as exhibits hereto.

Each of the 19 insurers subscribing to the first layer of coverage executed and returned the agreements to the insurers'

Claims Administration Committee. Several other insurers joined the Committee. The Committee, as then permanently organized under the Chairmanship of Aetna Casualty & Surety Company,

retained the Hogan & Hartson law firm to maintain regular

liaison on its behalf with Mr. Petersen's office at the Department of Justice and to assist the Committee in monitoring incidents which might give rise to claims against the manufac

turers under P.L. 98-340.

While the Committee has not yet had any such incident

called to its attention, close to a thousand claims, we are

informed, have been filed so far under P.L. 98-340. The Committee continues, and expects to continue indefinitely, to perform its functions of oversight and readiness to respond as required by the agreements among the participating insurers.

Mr. Chairnan, and members of the Subcoinmittee, we

appreciate the opportunity to make this report today.

Respectfully submitted,

T. Lawrence Jones

ljdw attachments

Alternative #1

1. Insurers issue fias million products liability coverage

to cach manufacturer, including all claim cxpense in the

$125 million aggregate limit.

2. Policy covers the manufacturer and anyone else other than llic

government who is legally liable for injury resulting from the vaccine and its administration. The policy is primary to all other applicable insurance.

3. The premium for the first $10 million is determined on a cost

basis and paid by the manufacturer,

4. The premium for $40 million excess of $20 million is determined

on a cost basis with a ninimum premium of $2 million and a

maximum premium of $30 million (again, paiù by the manufacturer). 5. The government "reinsures" the policy 100 percent excess of $50

million aggregate.

6. The term "aggregate" includes indemnity, allocated loss expense,

and unallocated loss expense.

Draft - July 27, 1976


1. ' Aggregate limit of $50 million shared by the four manufacturers

and protecting only the manufacturcrs from third party claims

(subject to mutually acceptablc IIEW contract dividing all


Government pays on behalf of the manufacturers

in cxccss of the $50 million aggregate limit.

2. The premium for the $50 million coverage is determined as follows:

$1.20 for cach $1.00 of indemnity or expense subject to $2 million

minimum and $40 million maximum.

3. Each manufacturer obtains its own excess insurance program prote:ting

it from a government claim for "honch crror."

The suggested amount

of coverage is $50 million for each manufacturer (incluiing defense

cost regarılloss of outcome) with a cost estimated to be $375,000

per manufacturer.


The term "aggregate" includes indemity, allocated claim expen:c,

and unallocated claim cxpense.

Draft - July 27, 1976

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