* Parents to get payments, legal fees covered
* Thousands of complaints filed with US, Canada regulators
NEW YORK, June 13 (Reuters) - Procter & Gamble Co (PG.N), the world's largest consumer products company, has settled a lawsuit by parents who claimed its Pampers diapers with Dry Max caused their children to have severe rashes.
According to settlement papers filed with the U.S. District Court in Cincinnati, Procter & Gamble will pay $1,000 to each of the 59 parents in the case, and cover their estimated $2.73 million of attorneys' fees.
The company will also spend $400,000 to fund pediatric resident training and education programs in skin health, post new guidance on its website for how to treat diaper rash, and modify labels for its Pampers Swaddlers diapers for newborns and Pampers Cruisers diapers for toddlers.
U.S. District Judge Timothy Black granted preliminary approval of the settlement last week, calling it a "fair, reasonable and adequate compromise." A hearing to consider final approval has been scheduled for Sept. 28.
Cincinnati-based P&G launched Dry Max versions of Pampers Cruisers and Swaddlers last year, saying they were thinner, more absorbent and more comfortable than other diapers.
But thousands of parents complained to U.S. and Canadian regulators that the diapers caused severe rashes, blisters, chemical burns and other ailments. At least 12 lawsuits were filed, and were later combined before Judge Black.
Procter & Gamble has changed how it makes Cruisers, with sales to begin in August, and is removing the words Dry Max from labels for Swaddlers and Cruisers. [ID:nN04173631]
Pampers is the world's best-selling diaper and P&G's biggest brand. Its main rival is Huggies, made by Kimberly Clark Corp (KMB.N).
Procter & Gamble has dozens of familiar household brands including Charmin toilet tissue, Crest toothpaste, Gillette razors and Tide laundry detergent.
The law firm Keller Rohrback represented the parents.
Procter & Gamble shares rose 9 cents to $64.79 in morning trading on the New York Stock Exchange.
The case is In re: Dry Max Pampers Litigation, U.S. District Court, Southern District of Ohio, No. 10-00301. (Reporting by Jonathan Stempel in New York, editing by Maureen Bavdek)