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ARTICLC 4. NDEMNIFICATION OF CONTRACTOR FOR LOSSES FROM
THIRD PARTIES' CLAIMS NOT COMPENSABLE BY INSURANCE

A. Pursuant to the authority of Public law 94

within

days

after presentation of a claim the Government will indemnify thc Contractor

for losses sustained by the Contractor on account of claims or actions by

third partics against the Contractor for injuries from inoculation with the vaccine, provided that (1) the Contractor has given the Government timely

notice of such claims or actions and has otherwise complied with the

provisions of Paragraph B hereof, and (2) the losses of the Contractor are

not compensable by insurance described in Paragraph B of Article 3. Losses

subject to indemnification under this Article include finai moncy judgments; settlements and payments of claims approved in advance by the Government;

and reasonable costs of investigating and settling claims and defending

lawsuits, including reasonable attorneys' sees. The Contractor shall reimburse

the Government for any portion of the amount paid by way of indemnification

which the Government thereafter establishes to have resulted from the

Contractor's failure to carry out its obligation under Paragraph C of

Article 1. Such reimbursement shall be made with interest at the rate of

six per cent per annum from the date of the indemnification payment by

the Government to the Contractor.

B.

The Contractor shall give immediate wriitcn notice to the

Contracting o:ficer of any claim or action filed against the Contractor

which might result in losses subject to indemnification under this

Article. Except as otherwise directed by the Contracting Officer, the

Contractor shall promptly furnish to the Contracting Officer copies of all

pertinent documents served upon or received by the Contractor in connection

with such claim or action. The Government may, at its election, direct,

control, or assist in the defense of such claim or action. If the settlement

or defense of such claim or action is undertaken by the Government, the

Contractor shall furnish all reasonable assistance to the Government.

Irrespective of whether the Governinent participates in the defense of a

claim or action, no payment by the Contractor in settlement of a claim will

be indemnificd under this Article unless the Contracting Officer has approved

such payment in advance. If any claim or action includes an allegation

that the Contractor failed to c.xercise due care in the manufacture or handling

of the vaccine in accordano · vith the contract specifications, the Contractor

reserves the right to direct and control the defense or settlement of the

claim or action with respect to such allegation.

C.

The provisions of this Article shall not be subject to Article

of this contract entitled "Disputes."

D.

The rights and obligations of the partics under this Article shall

survive thc termination or expiration of this contract.

November 10, 1976

10:

Each Subscribing Insurer - Special Liability Insurance and
Special Excess Liability Insurance for Vaccine Manufacturers
National Swine Flu Immunization Program of 1976
Claims Administration Procedures
Proposed Implementation

RE:

As you may know, four of the subscribing insurers (or affiliates thereof) are now providing primary coverage and/or certain primary loss adjustment services for the four vaccine manufacturers in connection with their non-Swine Flu general liability or pharmaceutical products liability insurance or selt insurance programs. Almost from the outset of the difficulity in placing suitable insurance coverage for the Swine Flu Immunization Program, there was a fairly general request from the subscribing insurers to those four companies to provide loss adjustment services for the Swine Flu Program. Those four companies have agreed to perform such loss adjustment services, each for its own manufacturer, and additionally agreed to form a committee with membership open to others of the subscribing insurers, to provide initial oversight of matters which might involve the vaccine manufacturers' insured liabilities and to plan for the defense and adjustment of any insured claims which might ensue.

Representatives of each of the four companies referred to have met and now outline here the elements of their proposal to accomplish those purposes, as well as to provide for liaison with the government offices, the subscribing insurers, and others involved.

Those companies (also sometimes called "servicing carriers") and the manufacturers they respectively serve are: Aetna Casualty & Surety Co. - Richardson-Merrell Continental Insurance Company - Warner Lambert - Parke Davis ESIS Inc. (affiliated with INA) - American Home Products - Wyeth Federal Insurance Company (Chubb) Merck, Sharp & Dohme 1. National Swine Flu Program Insured Claims Administration Committee

This Committee will be composed of (1) a claims officer (and designated alternate) of each of the four companies referred to, and (2) a representative of any other subscribing insurer whose pro rata share of either layer of coverage is at least 58 and which wisnes to

participate in the Committee's work. It will be responsible for establishing a central office which will collect information from the Government Claims Office, from the manufacturers, from the subscribing insurers or others. which may be necessary, or desirable, in carrying out the Committee's responsibilities for oversight of matters involving potential claims. It has certain responsibilities under the Servicing Carrier Agreements referred to below. 2. The Committee's Administrative and Accounting office

The Committee expects to establish and staff an office which will among other matters serve as focal point for liaison with the Government Claims office, prepare regular reports to each of the subscribing insurers of the activities of the office, of occurrences which may involve insured liabilities, and the like - all under the supervision of the Committee. The office will also maintain accounts in connection with the functions of the servicing carriers under the agreements referred to below, and bili, collect and disburse funds therefor. 3. Initial Funding of the Committee's Administrative Expenses

The Committee proposes to have the amount of $100,000. withheld from the total premiums (net of commission) for the first layer of coverage which would otherwise be paid to the subscribing companies and to have that sum of money paid over to the Committee for deposit in a special account out of which the Committee would pay the expenses it incurs for the office and for other expenses (such as travel, etc.) which are incurred in connection with its functions.“

In addition, the subscribing insurers which have incurred expenses on behalf of all participants, particularly in connection with policy form preparation, would be reimbursed for their actual expenses in that regard out of the same funds..

These expenses (and 'the $100,000. initial funding thereof) will be allocated to each of the subscribing insurers for the first layer coverage in direct proportion to dollars of premium payable to each such participant.

The Committee through its office will account to each of such insurers for the funds initially set aside for the expenses referred to. Unexpended funds will be returned to them. 4. Expenses Relating to Self-Insured Retention (For the Manufacturer's Account)

To the extent that any or all of the four companies also provide administrative or supervisory services of an allocable nature in connection

with claims matters which are requested by the manufacturer in connection with its potential liabilities falling within the particular manufacturers' selt-insured retention of $2,500,000.; those expenses will be for the account of that particular manufacturer in accordance with the understanding between that manufacturer and the insurer providing the services referred to.

Other "non-allocable" expenses incurred by any or all of the four companies at the instigation of such company (ies) or the Administrative Committee will be charged to the subscribing insurers in the appropriate layer as set forth in Section 4.5 of the Servicing Carrier Agreements. 5. Claims Services and Expenses for the Subscribing Insurers

The Committee also believes that the efficient and economical investigation, adjustment and defense of claims or potential claims arising against each manufacturer would be promoted, 1such claims handling is conducted by the Servicing Carrier for such manufacturer on behalt of all. The understanding among the subscribing companies, or some of them, about the conduct of such claims servicing on their behalf has, of course, not been spelled out in any detail.

The Committee therefore proposes and now asks that each of the subscribing insurers execute an agreement with each of the four Servicing Carriers.

Copies of such servicing carrier agreements are enclosed herewith. We request each such subscribing insurer to review the agreement, have it executed by a duly authorized officer, and return it as indicated below.

It should be noted, however, that the Committee does not now plan to pay out of its funds, or otherwise on behalf of the subscribing insurers, any amounts for indemnity or for allocated loss adjustment expenses, i.e., payments which wili involve "loss' as the special liability policies define that term. When any such "loss" is payable by the subscribing insurers in either layer of coverage, each such insurer would be billed for its appropriate and proportionate share thereof, or otherwise pay in accordance with the enclosed agreements.

As set forth in the enclosed agreements, the subscribing insurers will be charged for the services of a servicing carrier and at the rate of $35. per hour of professional employee's time. This "unallocated loss adjustment expense" will be billed as incurred to the appropriate layer of coverage.

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