For at least a decade, A. H. Robins Co. has taken the heat for the Dalkon Shield disaster. Meanwhile, Aetna Casualty & Surety Co., which insured Robins against possible lawsuits brought by users of the intrauterine contraceptive device, kept a low profile.
But recent developments are pushing Aetna toward the spotlight, and may affect the size of the pool of money that the U.S. bankruptcy court in Richmond will authorize for payouts to Robins' creditors -- mainly the large numbers of women who say the Shield harmed them. Robins has been in voluntary bankruptcy since last Aug. 21.
Five weeks ago, for example, Aetna filed a "proof of claim" for $57.4 million that converted the nation's largest casualty insurer -- which had 1985 sales of $3.5 billion -- into a powerful competitor for money from the Robins estate.
Aetna said in the document that it sought to recoup mainly what it called "overpayments" for liquidation of Shield lawsuits and claims. Aetna contends that it paid more than its rightful share of the bills of Shield claimants and their lawyers, expecting -- before the bankruptcy intervened -- to be reimbursed.
Other recent developments include:
*A lawsuit in which Anna Piccinin, a Shield user who suffered a major pelvic infection and inability to bear children, accused Robins and Aetna of reaching agreements that changed their relationship "from insured and insurer to a joint enterprise" in several respects.
*A class action that names Aetna as the sole defendant.
*A probe by the court-appointed Dalkon Shield claimants committee to determine whether Aetna and other carriers, particularly reinsurers, owe money to the Robins estate.
Piccinin's lawyer, Edward H. Kellogg Jr., said in a statement that "insurance companies are pressuring Congress to limit innocent peoples' rights to collect damages for death or injury caused by dangerous products like the Dalkon Shield. The administration and the Congress have a moral obligation to find out what role insurance companies play in affairs such as this before they heed the insurance industry's plea for 'tort reform.' "
Robins' Chapter 11 filing put an automatic freeze on the pending lawsuits in which more than 5,100 U.S. women allege that the Shield was a defective product and seek billions of dollars in product-liability awards to compensate for injuries and to punish the company for wrongful conduct.
Since then, nearly 310,000 others from around the globe, plus about 40,000 so-called trade creditors -- including Aetna -- have filed notices of possible claims under a court-ordered notification plan. As of a few days ago, another 22,000 women had filed potential claims after the April 30 deadline.
Robins distributed 4.57 million Shields worldwide starting in January 1971. Aetna provided annually renewable product-liability policies requiring Robins to pick up increasingly large deductibles: $250,000 in 1971-1972, $750,000 in 1973-1974 and $4 million in 1975.
In June 1974, after Shield users turned out to have extraordinary rates of sometimes fatal pelvic infection, the company halted sales in the United States, where an estimated 2.2 million women received the IUDs. Shield sales continued in many foreign countries for up to nine months or longer.
Saying that continued Shield use was exposing hundreds of thousands of users to avoidable pelvic infections, a Shield plaintiffs' lawyer urged a recall in February 1977, as did Miles W. Lord, then the chief U.S. district judge for Minnesota, in February 1984. Robins spurned the pleas and denounced Lord. But in October 1984, after several juries had made large awards to compensate for injuries and to punish Robins for wrongful conduct, the company launched a recall.
Aetna became disturbed by the soaring volume of lawsuits in the mid-1970s, particularly in 1975, when a Kansas jury returned the first award for punitive damages -- and when Aetna increased Robins' deductible to $4 million. Court records show that, in the aftermath, Aetna hired university experts to make secret studies of the string on the Dalkon Shield, which was suspected in the infections.
A high-stakes financial dispute between Aetna and Robins followed. The issue in the dispute was the point at which Aetna became liable. If liability began with use of a Shield, as Robins contended, the insurer would have to pay all successful claims. But if Aetna became liable only when a Shield-induced pelvic infection became manifest, its liability would be limited to claims made before Feb. 28, 1978, the expiration date of the last renewable insurance policy Aetna issued.
The dispute persisted until March 1977, when Robins and Aetna signed an interim cost-sharing pact pending a court resolution of a Robins lawsuit for a declaratory judgment. Under the pact, which Minnesota trial lawyers put into court records, Robins agreed to pay all punitive awards, while Aetna agreed to all compensatory awards -- including those "based upon expected or intended bodily injuries" or upon "failure to disclose important relevant information and the supplying of false and misleading information."
Minneapolis plaintiffs' lawyer Dale E. Larson charged in a 1984 court paper that the pact "dramatically reveals that Aetna has evidence that A. H. Robins was intentionally causing injury." Robins termed the charge "untrue."
In Hartford, Conn., Aetna, saying it had made "a thorough investigation of each claim," said: "We are prevented by law from publicly discussing any information provided to us in confidence by our clients. . . . Confidentiality is not only paramount to an insurer's relationships with its clients; it is also our business and legal principle, without which it might not be possible for insurance companies to provide product liability insurance in any form."
Aetna and Robins settled the lawsuit in October 1984, on the eve of trial. Under the settlement, Aetna agreed to make a phased payment of $70 million to Robins in return for a limit on its own liability. As of last August, when Robins filed for reorganization, it and Aetna together had paid out about $520 million to dispose of approximately 10,000 U.S. Shield cases.
Piccinin, 39, the British wife of a Rome physician and the mother of one child, sued Robins and Aetna in U.S. District Court in Montgomery, Ala., a few weeks before the Chapter 11 filing. She alleged that they "willfully and fraudulently concealed their knowledge of the dangers" of the Shield, and "engaged in an on-going conspiracy . . . continuing to the present date."
By mid-March 1972, the companies "had actual knowledge" that each Dalkon Shield string "was defective and constituted a health hazard" and also knew that Shields "would reach consumers in an experimental and clinically untested condition," Piccinin contended. Yet, the recall did not occur for 12 1/2 years, she said.
She also alleged that the companies intentionally stored records and documents in outside attorneys' or insurance claims offices. If the documents had been given to Robins' medical or claims departments "where full and accurate adverse reactions could be compiled and documented," reports to the Food and Drug Administration would have been required, leading "to public notice and recall of the Dalkon Shield," she asserted.
Aetna public relations director Matthew M. Sheridan made this statement about the Piccinin case and about the class action, which is similar in many respects: "We feel that the suits are without merit, and we intend to defend against them and any other suits of like nature."
After the Chapter 11 filing, U.S. District Judge Robert R. Merhige Jr. transferred the approximately 5,100 Shield product-liability cases, including Piccinin's, to Richmond. Her lawyer appealed to the 4th U.S. Circuit of Appeals, saying he was willing to seek damages from Aetna alone and that a victory over the insurer would have no effect on the Robins estate.
In April, however, the appeals court upheld Merhige, and Kellogg said he would ask the Supreme Court to review the ruling.
The class action naming Aetna as the single defendant, filed in April in U.S. District Court in St. Paul by lawyer John A. Cochrane, also was transferred to Richmond.
Cochrane alleged that Aetna and coconspirators, including four named persons, violated the Racketeer Influenced and Corrupt Organizations Act through a pattern of racketeering activity consisting of acts "of mail fraud . . . wire fraud . . . and obstruction of justice."