AN order of nuns in Mullingar is seeking up to £9 million in damages, including aggravated and exemplary damages from the VHI.
The nuns are looking for compensation for financial loss they claim was caused when the health insurance company delisted a hospital they run in 1991.
Their case is due to open in the High Count in Dublin today. The Franciscan Missionaries of Our Lady claim that the VHI actions had brought about "a disastrous financial situation".
A spokesman for the VHI said last night that the company had no comment to make.
Mr Bryan Kelly, financial controller of the Mullingar hospital, said the VHI offered £2 million in compensation a number of weeks ago but the hospital was unhappy with that figure. Negotiations had "fizzled out" about a week ago, he said. The hospital was currently in a "dire" financial position and the size of the claim "accurately matched past losses and projected future losses".
"There is a very large gulf between the figure offered and the interpretation of the damages done to the hospital by the VHI," said Mr Kelly. The hospital which employs 110 people, including medical staff, carries out a range of surgical procedure including ENT, orthopaedic, ophthalmology, a dietary disorder unit and a psychiatric unit.
In 1994 the Supreme Court ruled that the order should receive a back payment of £294,713 from the VHI following a long running legal battle. In one of two judgments, Mr Justice Blayney said it was extremely doubtful whether the VHI had a right, which it claimed, to be entitled to impose costs on hospitals in which members were treated.
He did not suggest that the VHI had no power to enter into contracts with hospitals but he was equally satisfied it was not entitled to refuse to cover a particular hospital for the sole reason that the hospital was not prepared to enter into an agreement with the VHI on VHI's terms.
Mr Justice O'Flaherty spoke of "disagreeable" aspects of the case, where the VHI had withheld substantial sums of money from the nuns which was sorely needed. The hospital had been singled out for special treatment, he said.
In 1988, after the VHI suffered very substantial losses, a new agreement was given to private hospitals where a "cash limit" was imposed and the hospital would be paid directly by the VHI.
In the ease of the Mullingar hospital, the payments instead of being the aggregate of payments during the previous year, were the amount of that aggregate less 15 per cent.
Discussions on a new agreement broke down in September 1991 and the immediate cause was the failure by the VHI to send the nuns an £83,000 cheque.
The then superior, Sister Gregory O'Reilly, said they would revert to the old system of billing patients directly and letting them recover from the VHI. The VHI objected and advertised that it was removing the hospital from its list of fully participating hospitals.
Sister Gregory, who was also head of the controversial All Ireland Children's Hospice, is expected to give evidence in the case which may last over three weeks.
In early 1994, the ACC bank repossessed Xray equipment from the hospital. Repayments on the equipment, installed in 1991 at a cost of £250,000, stopped when the VHI cut funding.
Mr Kelly said the order had a "flexible attitude" towards the settlement and did not want to be in conflict with the VHI.
"It is not clever for a hospital to be in litigation with the VHI. We have tried to have normal working relationships with them since relisting in 1994. Many of the senior people on both sides are gone now.
"A settlement has not been ruled out," he said.