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Third party reimbursement cases

Claims from healthcare providers

 

Health care providers and organisations that pay for health care, including governments, have brought 'third party reimbursement' claims against tobacco companies through courts in the US, Canada and other countries including Nigeria, Brazil and Saudi Arabia.

Typically, these claims seek reimbursement of costs for the treatment of diseases linked to smoking. They do not involve any personal injury to the plaintiff, but are often for economic loss allegedly suffered by a third party health care provider who paid for health care costs.

For example, the plaintiff may be a union fund that pays health care benefits to its members, a foreign government seeking reimbursement of medical expenses for treating smokers in its own country, or a city claiming similar reimbursement.

We have also seen asbestos companies that have paid millions of dollars in damages to people exposed to their product seeking to recover some of these damages from the tobacco industry, on the basis that the tobacco industry shared responsibility with the asbestos defendant. The only case of this kind against the tobacco industry to go to trial ended with a 'hung' jury, which meant a new trial would be needed. The plaintiffs later decided not to pursue their claim.

Outcomes

The US courts have rejected a significant number of third party reimbursement claims on grounds of remoteness. Even if an individual might have a claim, the third party plaintiffs may not directly recover health care costs they have paid because their claim entirely derives from an individual's claim.

The individual's claim must first be proven, while the plaintiffs generally prefer to rely on rough statistical models that are inevitably flawed because statistical data is inaccurate more often than not.

Elsewhere in the world, no plaintiff has ever achieved a successful outcome in a third party reimbursement claim.

Master Settlement Agreement

In November 1998, our then-operating subsidiary Brown & Williamson joined other major US tobacco companies in signing the Master Settlement Agreement with 46 State Attorneys-General, giving these US states some $200 billion over 25 years and settling many lawsuits for reimbursement of Medicaid costs for treating sick smokers.

US Department of Justice

For information about this case please see on our US Department of Justice page.

Foreign litigants

The suits by foreign governments in the US are even more remote, involving health care systems in foreign countries with diverse foreign regulatory systems.

A significant decision was the dismissal in May 2001, by a federal court of appeals in Washington DC, of suits brought by the governments of Guatemala, Ukraine and Nicaragua. They had sought reimbursement of costs they claimed to have incurred in treating smoking-related illnesses allegedly suffered by their citizens.

The court's dismissal showed that foreign governments are too remote from the wrongful conduct they allege even to permit such cases to proceed.

The outcome sent a clear signal that foreign litigants, even government entities, cannot pursue indemnification claims under the statutes and laws used by US Attorneys-General who sought recovery of healthcare costs from US tobacco defendants in the 1990s.

Canada

Reimbursement actions are ongoing in the Canadian provinces of British Columbia, New Brunswick and Ontario. The Government of British Columbia commenced an action against tobacco industry defendants in November 1998, seeking to recover tobacco related health care costs. The claim was brought under the Tobacco Damages and Health Care Costs Recovery Act, legislation which specifically created this cause of action.

The original 1997 Act was the subject of a successful challenge to its constitutional validity by three of the defendants. It was declared to be 'ultra vires' (beyond the power) and of 'no force and effect' because it exceeded the constitutionally permissible territorial reach of the province.

However, new legislation was passed in 2000 with the same name as the original act, but excluding some of the features that were successfully challenged. This came into force on 24 January 2001 and remains in effect today, at least to the extent that it applies to domestic companies.

Nigeria

Medical health care recoupment claims have been filed by the Nigerian federal government as well as the governments of a number of Nigerian states, each seeking costs allegedly incurred in treating smoking-related illnesses. These cases are still in their preliminary stages and are being vigorously defended.

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