Chattem Sued By Kemper Over $50 Million Policy Chattem Earnings Lower Than Expected
posted August 13, 2003
A lawsuit has been filed in Federal Court in Chattanooga against Chattem, Inc. seeking to rescind the excess product liability insurance policy issued to the Company by Kemper.
The Kemper Policy provides the Company with $50 million of excess coverage for product liability claims, including those asserted in the lawsuits currently pending and anticipated to be filed against the Company relating to the existence of phenylpropanolamine ("PPA") in DEXATRIM.
Coverage under the Kemper Policy is in excess of $23.5 million of
product liability insurance coverage that is available to the Company
from two other insurance companies. In addition, the Company has $25
million of insurance coverage from another insurance company that is
in excess of the Kemper Policy, officials of the Chattanooga-based firm said.
In the lawsuit, Kemper is seeking to rescind the Kemper Policy based on allegations that the Company failed to disclose the preliminary results of the Yale Study during the submission process to renew the Kemper Policy for coverage for the December 21, 1999 to May 31, 2001 policy period. In the alternative, Kemper is seeking a declaratory judgment on certain policy interpretation issues that if
granted would bar or limit coverage for PPA-related claims under the
Kemper Policy.
Chattem officials said, "The Company believes that the claims made by Kemper in its lawsuit are without merit. The Company will aggressively defend this lawsuit and will vigorously pursue its rights under the Kemper Policy and its available remedies at law against Kemper which may include, among other things, a counterclaim of bad faith against Kemper."
Meanwhile, Chattem announced that it now expects total revenues for the fiscal third quarter to be in the range of $59-61 million, as opposed to the previously announced estimate of $62-64 million. The Company further estimates its earnings per share for the fiscal third quarter will be at the lower end of the previously announced estimate of $.33-.35. The Company's lowered expectations are the result of
weaker than expected sales, particularly from DEXATRIM, its topical analgesic brands and its international division, offset in part by continued high margins, balance sheet management and effective cost controls.
Officials said the revised estimates for the fiscal third quarter will have a corresponding impact on the Company's previous estimates for the entire 2003 fiscal year. The Company has not made any revisions to its
earlier estimates for the fourth quarter of fiscal 2003. The Company
anticipates that revisions, if any, for the fourth quarter of fiscal
2003 would be announced in the fiscal third quarter earnings release
to be issued on or about September 19, 2003. |
