TA MEETING TUESDAY AFTERMON, OFFICIALS OF THIS DEPARTMENT
ROPOSED TO CERTAIN MEMBERS OF THE INSURANCE INDUSTRY THAT THEY
ONSIDER AN ARRANGEMENT FOR PROVIDING INSURANCE TO MANUFACTURERS
T THE SHINE FLU VACCINE. IT WAS RECUESTED THAT ALL MEMBERS OF
TE INDUSTRY REVIEW THE PROPOSAL AND DECIDE WHETHER THEY WOULD
ARTICIPATE IN IT AND TO WHAT EXTENT. I AM WRITING TO UNDERSCORE
TE IMPORTANCE AND URGENCY OF THIS REQUEST. IT IS ESSENTIAL, IF
DE FLI' IMMUNIZATION PROGRAM IS TO BE UNDERTAKEN AT ALL, NOT ONLY
TAT INSURANCE BE AVAILABLE FOR THE MANUFACTURERS BUT THAT THIS
ACT BE DEFINITELY KNOWN AT THE EARLIEST POSSIBLE DATE.
E YOU FY, THERE WILL BE 1 MEETING ON FRIDAY, MORNING, JULY 30,
T 9:3PAN, IN ROOM 5251 OF THE DYEW NORTH BUILDING, 332
IDEFENDENCE AVENUE, S.W., WASHINGTON, D.C. TO WPICE YOU OR YOUR
REPRESENTATIVE IS INVITED, AT WHICH TIME I LOOK FORWARD TO HEARING
TE DECISIONS OF THE INDIVIDUAL COMPANIES CONCERNING THIS PROPOSAL.
EFORMATION ABOUT THE DETAILS OF THE FROPOSAL IS AVAILABLE FROM
ACE NATIONAL INSURANCE ASSOCIATION, FROM THE MANUFACTURERS, AND
RO THE DEPARTMENT.

$ CHAIRMAN ROGERS AND OTHER MEMBERS OF THE COMMITTEE MADE FLAIN AT
EARINGS ON THIS SUBJECT HELD LAST WEEY, THE FEDERAL COVER NYENT
YFECTS THE INDUSTRY ILL BE ABLE TO PARTICIPATE IN PROVIDING
IS!RANCE FOR THIS PROGRAM. WHILE THE COMMITTEE, OF COURSE, HAS NOT
ND AN OPPORTUNITY TO REVIE!! THE SPECIFIC PROPOSAL MADE TO YOU,
IYOW THAT THE CHAIRMAN AGREES WITH ME THAT YOUR IMMEDIATE RESPONSE
D IT IS ESSENTIAL

DAVID MATHE'S SECRETARY DEPARTMENT OF HEALTH EDUCATION &
WELFARE

The following modifications to the standard ISO policy will be made: 1. The definition of occurrence will be changed to provide that occurrence means an innoculation of swine flu vaccine (as defined) manufactured by a named insured.

2. A definition of swine flu vaccine will be provided.

These two changes when read in the light of the insuring agreement will restrict the policy to innoculation of swine flu vaccine.

3. The named insureds shall be the four (4) manufacturers and the
policy will be endorsed to provide coverage for the employees
of the four (4) manufacturers.

.

4. The definitions of bodily injury and property damage will be
modified to delete the words "during the policy period."
These changes are necessary because the policy is intended
to provide coverage for bodily injury whenever occurring
arising from an innoculation during the policy period.

5. A separate provision will be added to restrict the policy to
occurrences (innoculations) within the policy period.

6. The limits of liability provisions will be deleted and the fol-
lowing substituted therefor: Regardless of the number of (1)
insureds under this policy, (2) persons or organizations who
sustain bodily injury or property damage, or (3) claims made
or suits brought on account of bodily injury or property dam-
age, the Company's liability is limited to loss in the amount
of fifty million dollars ($50,000,000) in the aggregate. Loss
shall include all sums paid as damages and all sums paid as
cost charges and expenses of defense, including both allocated
expenses and unallocated expenses.

7. The premium provision will be as follows;

8.

The premium for this policy shall be the deposit premium plus
an amount equal to one hundred and twenty percent (120%) of
that portion of loss which includes sums paid as damages and
as allocated claim expense and one hundred percent (100%) of
sums paid as unallocated claim expense. However, in no event
shall such premium exceed $40,000,000. The deposit premium
is $2,000.000. The minimum premium is $2,000,000.

Additional premiums based on this formula shall be paid to the
insurers by the 20th of the month following the loss and claim
expense payments.

In the event premiums are not paid when due, this policy may
be cancelled by the insurers by giving 30 days cancellation
notice to the Insureds.

SWINE FLU VACCINE PROGRAM

We are enclosing a proposal for Insurance to provide coverage for the four manufacturers. This proposal differs as you will note from any previous forms, and it has been drafted to provide the underwriters with a profit potential for exposing their limits of liability. The policy will be on a quota share subscription form with each underwriter signing for their percentage of participation. It is contemplated using the standard ISO policy form with the attached modifications.

It is anticipated that many claims will be subject to subrogation against the government, relying upon the contract between HEW and the manufacturers delineating the responsibilities of each.

The rating formula is as follows:

$50,000,000 AGGREGATE LIMIT FOR THE PROGRAM
$2,000,000 DEPOSIT. PREMIUM

The premium for the policy is the deposit premium ($2,000,000.) plus an amcunt equal to 120% of that portion of loss which includes sums paid as damages and as allocated claim expenses and 100% of sums paid as unallocated claim expenses.

The premium so determined is subject to a minimum of $2,000,000. and up to a

SWINE FLU EXCESS

Each manufacturer will also require a policy in the amount of $50,000,000 aggregate limit, including losses and loss expenses, in excess of the primary $50,000,000 aggregate policy issued to the four manufacturers jointly.

This excess policy will apply only for liability which may remain with the manufacturer under the attached contract which each manufacturer has with HEW. The specifications for manufacturing and distribution of the product are established by the government and the government's action against any manufacturer can only be for reimbursement of losses which the government has paid to third parties arising out of a manufacturer's failure to comply with such specifications.

The premium for each of these individual policies will be a flat charge of $375,000. The policy will be on a quota share subscription form with each underwriter signing for their percentage of participation. We expect each underwriter will participate in these excess contracts as well as the primary program.

Draft of 7/28/76 (Revised)

ARTICLE 1.

DELINEATION OF RESPONSIBILITIES OF THE GOVERNMENT

AND THE CONTRACTOR

A. The parties recognize that the Government has initiated, planned, and is arranging for the implementation of the influenza immunization program. Because of the need to have the vaccine tested, manufactured, and delivered within a relatively short period of time in order that the population may be inoculated in an attempt to prevent an influenza epidemic, the Government has assumed certain responsibilities as specified herein which would ordinarily devolve upon the Contractor. It is the intention of the parties that the Contractor will be responsible solely for the performance of its obligations under Paragraph C herein. It is the purpose of this Article to delineate the separate responsibilities of the Government and the Contractor. In the light of the circumstances described in Paragraph A hercof,

B.

the Government shall be responsible for:

(1) The adequacy of the standards and specifications for the vaccine required to be delivered under this contract, including their compliance with all applicable requirements of law and regulation.

(2) The safety and suitability of materials provided to the Contractor

by the Government under or in connection with this contract.

(3) The investigation and determination of the safe and effective

dosages and adequate directions for the use of the vaccine.

(4) The investigation and determination of the risks and benefits

of inoculation with the vaccine.