Did Intuitive Surgical Fool Insurers?

Two liability insurance companies have accused the surgical robots maker of withholding information about personal injury lawsuits, a claim that Intuitive denies.

Nancy Crotti

Two insurance companies have accused a surgical-robot manufacturer of failing to disclose 700 injury claims when it applied for liability coverage.

Illinois Union Insurance Co. and Navigators Specialty Insurance Co. each sued Intuitive Surgical, Inc. on that basis in 2013. Intuitive denies those claims and countersued, claiming that the insurers acted deceitfully and broke their contracts. If the insurers win, the fast-growing medtech company will have only one year's worth of self-insurance, according to a report by Bloomberg.

Last week, a federal judge in the consolidated case denied Illinois Union's motion for partial summary judgment, unconvinced that the insurer had waived its right to rescind its policy.

Together, the insurers provided Intuitive with $25 million worth of coverage against claims of product liability. The Sunnyvale, CA, company is facing approximately 86 individual product liability lawsuits by plaintiffs alleging that they or a family member were injured or died from surgery using the company's da Vinci surgical system, according to a Securities and Exchange Commission filing.

The insurers claim that when Intuitive applied for coverage, it did not disclose that patients' lawyers had agreed to suspend suspend litigation deadlines during settlement negotiations. If the insurers had known about these "tolling agreements," they would have withdrawn their offers to extend coverage, according to the Bloomberg report.

In its litigation against Intuitive, Illinois Union says the medtech company disclosed just 24 of the 758 claims it was facing when it applied for coverage in 2013. The insurer called it "a massive concealment of claims from an insurer, potentially the most egregious in history," the Bloomberg report says.

Intuitive argues that disputes over factual issues would make cancelling the 2013 policy premature, the story continued. The company also contends that Illinois Union and Navigators knew about the tolling agreements and chose to pursue the business anyway.

Intuitive maintains that the tolling agreements represent only "potential claims" rather than incidents "likely to result in a claim" whose disclosure that the policy applications require.

Intuitive's fortunes have ridden a roller coaster in the past few years, with share prices soaring and plunging on news of various sales expansions, stock buybacks, and legal challenges.  The company reported a profit of $594.5 million for the first quarter of 2016, compared with $532 million for the same quarter one year ago. Its system costs between $600,000 and $2.5 million, depending on the configuration and location of the customer, the company reported to the SEC.

Intuitive has asked Judge John S. Tigar to force Illinois Union to provide coverage for 860 claims and Navigators to cover 111 claims, Bloomberg reported.

Although gynecology accounts for most of the surgeries performed using the da Vinci system, growth in U.S. general surgical and urological procedures spurred growth during the first quarter of 2016, the company reported. Surgeons performed approximately about 176,000, procedures in the quarter that ended March 31, 2016, up about  17% over the same quarter of 2015, the company reported.

In all of 2015, da Vinci-assisted procedures totaled about 625,000, compared with  approximately 570,000 and 523,000 procedures performed in 2014 and 2013, respectively.  

Nancy Crotti is a contributor to Qmed.

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