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Sets Up $615-Million Reserve to Cover Dalkon Claims : A. H. Robins Loses $461.6 Million

April 03, 1985|Associated Press

RICHMOND, Va. — A. H. Robins Co. said Tuesday that it lost $461.6 million in 1984 after setting up a $615-million reserve fund to cover injury claims on its Dalkon Shield intrauterine device.

"I don't think this company has ever recorded a loss before," said G. E. R. Stiles, Robins senior vice president and chief financial officer.

"We are not (bankrupt) and we are not in danger of that," Stiles said. "We are operating today just as we did yesterday and as we will be next September. It's business as usual."

The reserve fund represents the minimum amount Robins believes that it will need to pay during the next 15 years for injury claims and legal expenses stemming from the IUD. The estimate does not cover punitive damages or claims abroad.

Robins withdrew the device from the domestic market in 1974 after a growing number of complaints from users. The IUD continued to be sold abroad through April, 1975.

The problem with the Dalkon Shield centers around its tail-string, which some doctors claim transmits bacteria into the pelvis, causing infection, sterility, spontaneous abortion and sometimes death.

So far, eight verdicts against Robins included punitive damage awards of $17.2 million, which are not covered by insurance.

How Much to Pay?

Robins is asking U.S. District Judge Robert R. Merhige Jr. to certify a class-action lawsuit to determine whether and how much Robins should pay in punitive damages to people with pending claims.

Meanwhile, Stiles said, the Richmond-based company remains financially strong, even though its net worth has plunged from $370 million before the creation of the reserve fund to a deficit of $128 million.

Under state law, Robins is prohibited from paying dividends until it erases the deficit.

"That has got to have a negative impact to some extent," Stiles said. But he added that the company hopes to have the deficit wiped out by 1987.

As of last Dec. 31, about 3,800 claims were pending against the company in courts in the United States. About 900 claims have been filed so far this year.

By the end of 1984, the company had disposed of about 8,300 claims, paying out $314.6 million. Of those claims, all but 50 were out-of-court settlements. Those that were tried resulted in 27 verdicts against the company and 23 in Robins' favor.

The company sold about 2.9 million of the devices in the United States from January, 1971, to June, 1974, and 1.7 million in 80 other countries through April, 1975.

Stiles said the projected Dalkon Shield expenses offset record sales and operating earnings in 1984.

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