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Finding that Vanderbilt University failed to give its excess liability insurer timely notice, the 6th U.S. Circuit Court of Appeals ruled Sept. 28 that the insurer will not have to pay any part of a $9.1 million settlement the school entered into with a class of 800 women who, while pregnant, unwittingly drank a “cocktail” containing a radioactive iron isotope as part of a 1940s university study. United States Fire Ins. Co. v. Vanderbilt Univ., nos. 00-5239 and 00-5301. Based on the terms of the insurance policy, the circuit court drew a distinction between Vanderbilt’s timely notice of the 1994 filing of the suit and the school’s failure to give notice of the effects of the study, which was conducted between 1945 and 1949 as part of the Tennessee-Vanderbilt Nutrition Project. Some 20 years later, Vanderbilt conducted a follow-up study, surveying the women and their children. It found a “small, but statistically significant increase” in the incidence of cancer among the exposed children, four of whom died during the 1950s. Though participants claimed not to have known of the dangers of the experiment, Vanderbilt did not inform its primary insurers, the St. Paul insurance companies, or its excess liability carrier about the studies. The school also failed to inform the insurers of a 1985 Department of Energy request for information about the study — later used in congressional hearings. After giving notice when the suit was filed and then entering into the settlement, Vanderbilt sought the carriers’ indemnity. The St. Paul companies settled for $4.5 million, but U.S. Fire refused and sued the school for a declaratory judgment that it was not obligated to pay. A Tennessee federal district court found for U.S. Fire. Though conceding that the policy’s “as soon as practicable” notice of occurrence standard was “roomy,” the circuit court applied Tennessee’s “reasonably prudent” standard to hold that Vanderbilt should have expected claims to ensue, if not after the 1960s study then after the 1985 DOE request. The panel rejected Vanderbilt’s argument that it did not anticipate a claim because that call “divests the insurer of the opportunity to make that determination for itself.” The court also rejected the school’s claim that the carrier should have to prove it was prejudiced by the delay. Under state law, untimely notice creates a presumption of prejudice. Citing both the loss of substantial documentary evidence and the remaining witnesses’ memory problems, the court said Vanderbilt failed to rebut that presumption. Echoing the court, U.S. Fire’s local counsel, H. Buckley Cole of the Nashville firm Greenebaum Doll & McDonald, spoke of one witness who had to be deposed over several days because she could not sit for long periods. “That’s what you get when you force very elderly witnesses to try to recall what happened during the second world war,” Cole said. Gregg W. Mackuse of Miller, Alfano & Raspanti, the Philadelphia firm representing Vanderbilt, disputed the notion that relevant documents and recollections no longer remained. He also said the ruling gives rise to an unattainable occurrence notice requirement. “If this is the standard, you can never meet it.”

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