Kemper Seeks to Rescind Excess Products Policy

By Gary Mogel

NU Online News Service, August 18, 10:30 a.m. EDT-- Kemper Indemnity Insurance Company is suing to rescind an excess products liability policy because the policyholder allegedly withheld information about product dangers during the renewal process.

The policyholder, Chattanooga, Tenn.-based consumer products manufacturer Chattem Inc., was the maker of DEXATRIM, a formerly popular diet drug containing phenylpropanolamine (PPA). A Yale University study had determined that PPA causes an increased risk of hemorrhagic stroke in women.

Kemper, based in Long Grove, Ill., contends in its pleadings that at the time of the renewal of a $50 million excess products liability policy, Chattem knew about but failed to disclose the results of the Yale study to Kemper underwriters. Had Kemper known of the study, the pleadings state, it would not have issued the renewal.

In addition, Kemper is seeking to at least escape liability for PPA-related claims where there has been no physical injury, in the event that the court turns down its rescission request.

"The suit is in response to Chattem's attempts to recover payments that Kemper does not believe are owed," noted Kemper spokesperson Linda Kingman.

There have been about 200 suits filed against Chattem alleging bodily injury caused by DEXATRIM, according to Kemper's pleadings, and Chattem has sought insurance coverage for those claims under its insurance policies.

In a statement, Chattem responded that it "believes that the claims made by Kemper are without merit," and promised to aggressively defend and vigorously pursue its rights and remedies. Chattem also noted in the statement that it may counterclaim against Kemper for bad faith in filing this lawsuit.

In addition to the $50 million Kemper excess policy, Chattem has $1 million in primary products coverage under an Admiral Insurance Company general liability policy and a $25 million umbrella policy with General Star Indemnity Company. The Kemper policy is excess of the General Star policy.

A Chattem spokesperson noted that Admiral and General Star have not made any complaints or allegations as to withholding of material information.

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Kemper Seeks to Rescind Excess Products Policy

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