Orthopaedic devices group Smith & Nephew Group PLC warned that the fourth quarter will be hit by an exceptional charge of 80 mln stg, after two of its secondary insurers refused to cover their share of the liability costs arising from its macrotextured femoral knee component implant product.
S&N is currently disputing 12 mln stg which it has already spent on further surgery and the settlement of claims arising from the macrotextured knee implant -- for which its second level of insurers is now refusing to pay it back.
And the group warned that the total liability could rise to as much as 105 mln stg.
"Our primary insurers have acted very much as partners in this process and they have received exactly the same information as the excess layer insurers, but at this stage two of the excess level insurers have declined to cover us going forward," Chief executive Sir Chris O'Donnell told analysts this afternoon.
He was speaking on a conference call after the group's announcement, in which he refused to disclose the identity of the group's insurers, nor Smith & Nephew's total insurance limit.
"Our view is these guys should pay -- it is our intention to get them to pay," he added.
Smith & Nephew withdrew the macrotextured knee implant from the market in August 2003, and has been settling and revising the implants in affected patients as fast as possible since the problem -- between the bone-to-implant interface in certain patients -- was detected.
"We are managing this very actively, it is having no negative effect on our business, and it certainly is our view that we have more than adequate insurance cover to cover any likely macrotextured claims," O'Donnell said.
He added that the group has had "some skirmishes with plaintiff lawyers" in the US over these knee implants, but said that no class actions have been filed in the US.

Closed AZN and XTA for a few. Still long BPRG. ;-)