Contingencies

9 Months Ended

Sep. 30, 2011

Contingencies [Abstract]

Contingencies

Contingencies – In the ordinary course of its business, the Company is a defendant in a number of lawsuits, primarily product liability actions in which various plaintiffs seek damages for injuries allegedly caused by defective products. All of the product liability lawsuits have been referred to the company's captive insurance company and/or excess insurance carriers and generally are contested vigorously. The coverage territory of the Company's insurance is worldwide with the exception of those countries with respect to which, at the time the product is sold for use or at the time a claim is made, the U.S. government has suspended or prohibited diplomatic or trade relations. The amount recorded for identified contingent liabilities is based on estimates. Amounts recorded are reviewed periodically and adjusted to reflect additional technical and legal information that becomes available. Actual costs to be incurred in future periods may vary from the estimates, given the inherent uncertainties in evaluating certain exposures. Subject to the imprecision in estimating future contingent liability costs, the company does not expect that any sum it may have to pay in connection with these matters in excess of the amounts recorded will have a materially adverse effect on its financial position, results of operations or liquidity.

As a medical device manufacturer, the Company is subject to extensive government regulation, including numerous laws directed at preventing fraud and abuse and laws regulating reimbursement under various government programs. The marketing, invoicing, documentation and other practices of health care suppliers and manufacturers are all subject to government scrutiny. Violations of law, regulations, licensing or registration requirements can result in administrative, civil and criminal penalties and sanctions, including disqualification from the licensing or certification required for the sale of products or for the reimbursement therefore, in the U.S., Canada, Australia, New Zealand, relevant European countries and China, which could have a material adverse effect on the Company's business. In the United States, the Food & Drug Administration (FDA) regulates virtually all aspects of a medical device's development, testing, manufacturing, labeling, promotion, distribution and marketing in the U.S. Any failure by the Company to comply with the regulatory requirements of the FDA or other applicable regulatory requirements may subject the Company to administrative or judicially imposed sanctions. These sanctions include warning letters, civil penalties, criminal penalties, injunctions, consent decrees, product seizures or detention, and total or partial suspensions of production.

As previously disclosed, Invacare received a warning letter from the FDA following its inspection in the fall of 2010 of the Company's Sanford, Florida bed plant. The Company also has received inspectional observations (known as form FDA-483s) in connection with inspections in 2010 and 2011 of its corporate facility and a manufacturing facility in Elyria, Ohio, as well as the Sanford, Florida facility (collectively, the "Sites"). Over the past year, the Company has been actively making systemic improvements in its reporting processes and enhancing its documentation and tools for capturing, investigating and assessing product complaints and quality data. The Company also has engaged outside experts with proven quality systems and regulatory experience in the medical device industry in order to accelerate these improvements. The Company is working with the FDA to resolve the inspectional observations identified in the warning letter and in the FDA-483s for the Sites. If the FDA determines that the Company has not adequately addressed the inspectional observations or has not remained in compliance with the quality systems regulations, the FDA could pursue a range of enforcement actions, including issuing a corporate warning letter, seeking a consent decree, bringing an action for injunction or seizing or detaining the Company's products.

Any of the above contingencies could have an adverse impact on the company's financial condition or results of operations.