As the pandemic winds down, clinical trials, product development and product commercialization are once again ramping up. That means more innovative pharmaceuticals, medical devices, software programs, biologics and other life-altering therapies will soon be more readily available to those who need them.
That positive news also carries the potential for a variety of significant risks.
It’s a fair assumption that the corporate focus throughout the past year or more has been dealing with risks posed by COVID-19. Simply trying to keep the employee population safe and functioning so that your business remains viable has likely occupied a major portion of your time and energy.
If your company has begun planning for or executing clinical trials, you should also be re-examining the accompanying risks. Even companies that don’t rely on clinical trials should be having their risk management program thoroughly reviewed post-COVID.
Four critical risk areas that impact clinical trial liability coverage
Every medical products company will generate unique liability exposures depending on the product, markets, sales method and more—and there are multiple moving parts to any clinical trial where risk occurs, including all phases of the trial. However, there are four main areas of risk that absolutely require attention and management as well as coverage.
Product and Clinical Trial liability
Product Liability coverage is essential to meet the contractual requirements with medical facilities where you’re performing trials; satisfy statutory or country requirements; and protect the company against litigation and suits for alleged damages.
Product liability can include devices that were manufactured incorrectly or have an inherent design flaw; devices that were fitted or inserted improperly or even a company’s failure to adequately warn the users of any consequences of using the product. Product software that failed or devices that were marketed in a way that promoted its use for a purpose it was not intended for can result in liability claims.
Even end-user training—to other clinicians or direct to patients—that is inadequate or erroneous can open your company up to significant liability. Errors in human diagnostic testing can be open to mistakes from hired clinicians or laboratories that result in malpractice allegations.
These situations can lead to lawsuits that often result in significant financial consequences.
For clinical trials performed exclusively in the United States, your company will be covered by your product liability policy. If the company is also doing trials overseas, some countries accept U.S. coverage, but other countries will require “admitted coverage” as well. If the company is only performing overseas trials, U.S. coverage may not be necessary.
Errors & Omissions (Professional liability)
If, for any reason, the company—or any participating third-party organization—exhibits negligence or fails to correctly perform any aspect of the trial, they can be held liable for consequential damages. One example would be delays getting a product to market due to an issue in the clinical trial. E&O handles the risk and liability associated with the potential delivery of faulty work, often referred to as “other financial loss.”
Medical professional liability
Medical professional liability insurance, sometimes known as medical malpractice insurance, is one type of professional liability insurance that protects physicians and other licensed healthcare professionals (e.g., dentists, nurses) from liability associated with wrongful practices that result in bodily injury, personal injury such as mental anguish, medical expenses and property damage as well as the cost of defending lawsuits related to such claims. That’s why it is critical for all healthcare entities and professionals that participate in a trial to carry this insurance.
Cyber liability
Cyber criminals could see clinical trials as an opportunity to disrupt the process and steal valuable company and patient information. Good data privacy protocols are essential to protect the company and the participants, and a cyber liability policy should be a part of any risk mitigation strategy.
Cybercrime is well-positioned to take advantage of the increasing need for connectivity that exponentially increases the targets for cyber criminals. It is no surprise that competition in medical products is intense and companies therefore adopt advanced technologies to stay ahead. These include mobile applications and internet-connected sensors which transmit sensitive data. This is not only a significant financial and legal risk for the companies but a potential health risk for patients.
Find the right broker to help you navigate the challenges of risk associated with product liability and clinical trials
Most companies know the basics of what is needed to secure clinical trial coverage, including:
- Established and vetted clinical trial protocols
- Informed consent from all participating patients
- IRB approval
But do you know how to acquire risk management coverage to make sure the company is protected for not only immediate needs but for the future as well? Which policies do you need? What liability limits should you choose? If there is a lawsuit, are defense costs inside or outside the liability limits?
Making certain you have the right risk management partner to help you through every stage of company development and growth is critically important. Finding the right coverage—and the right amount—for a life sciences company can be highly complex. A “standard” policy might work for a less complicated industry, but it could be completely inadequate for a medical products company.
Look for a broker with significant clinical trial and product liability experience that will go beyond simply offering an insurance policy. It’s critical to develop a partnership with a broker that can analyze current needs as well as risks and provide strategies to help mitigate and alleviate that risk.
Even if your life sciences company doesn’t participate in clinical trials, the company faces a myriad of unique risks that can cause significant issues and possibly also result in costly claims and lawsuits.
That’s why choosing a broker who understands your business and overall risks is imperative for continued success as you grow your business and product portfolio.
About Marsh & McLennan Agency
Marsh & McLennan Agency (MMA) is a wholly owned subsidiary of Marsh, serving the risk prevention and insurance needs of middle market companies in the United States. MMA has access to broad resources and solutions and, although we are not integrating the businesses with Marsh, we are able to leverage the value of our respective capabilities and intellectual.
MMA successfully bridges the gap between what the “big firms” offer and the advice, solutions, and programs that smaller businesses require. We provide public and private companies with risk management, employee benefit support and best-in-class service to help them flourish and to meet their growing needs.
MMA is currently the 9th largest insurance broker in the United States with annualized revenues of approximately $2 billion.
