Guide to Business Insurance for Medical Device Companies
Summary
This article is an overview of coverage considerations in insurance for medical device companies, based on the lifecycle phase of the company.
Medical device manufacturers are exposed to dynamically changing risks throughout the lifecycle of their company, and manufacturers may not be aware of their exposures. All levels of staff at medical device manufacturers should understand their unique risks, and implement plans to mitigate and manage them.
There is an array of insurance protection available from insurers with a life sciences specialization to mitigate these risks and partner with life science companies with risk management, risk transfer, and loss prevention planning.
If you have any questions or concerns about coverage for your medical device company, please contact us. There is no cost or obligation for a consultation.
- Business Insurance for Medical Device Companies
- Business Insurance for Medical Device Companies in Commercialization
- Other Insurance Coverage Considerations for Medical Device Companies
- For More Information
Business Insurance for Medical Device Companies
For early-stage medical device startups in initial R&D phases, a Business Owners Policy (BOP) designed for Life Sciences Companies is usually the initial consideration. This policy provides a convenient package of General Liability and Property coverage along with other essential coverage.
Liability Insurance for Medical Device Companies
The BOP policy above includes General Liability for the premises and operations in the event the company causes harm to other persons or property. This can include product defamation, libel, slander, and product disparagement from advertising, a visitor’s injuries sustained while on the premises, and contractual liability assumed by the company. Crime coverage is typically included for Employee Dishonesty, Forgery, and Money and Securities at various sub-limits. General Liability is also required by the landlord in order to lease an office/R&D space.
Hired and Non-Owned Auto Liability is an important insurance option to add, which protects the company when employees use their own autos or rent autos for company business, and it pays damages to injured third parties and damage to third parties’ vehicles.
Property Insurance for Medical Device Companies
The BOP policy also includes coverage for Business Personal Property covering the physical assets of the business. These property coverages can include prototypes, computer equipment, data, media, valuable papers and research records, equipment breakdown, and more. Business Income coverage is usually added to pay continuing expenses after a covered property loss, including employee payroll, renting temporary office space, and other expenses such as loss of grants, endowments and other financial contributions, dependent property (Contingent Business Income), and missed milestones.
Workers Compensation Insurance for Medical Device Companies
Workers Compensation is required when employees are hired, and pays medical costs and wage losses stemming from employee work-related injuries, as mandated by each state. Employers Liability Insurance is included for injuries or diseases when the employer is negligent, outside of liability imposed on the business through Workers Compensation laws.
Directors and Officers Insurance for Medical Device Companies
Directors & Officers Liability is also referred to as Management Liability. This type of policy provides coverage for the management and business decisions made by officers and directors. Elements of this policy include direct coverage of the individual directors and officers, corporate reimbursement coverage for the business’s obligation to indemnify its directors and officers for suits and claims as a result of their actions in conjunction with the organization, entity securities coverage for claims made against the legal entity in conjunction with securities issued, and entity coverage affording direct coverage to the legal entity if a lawsuit names the business as a defendant.
Business Insurance for Medical Device Companies in Commercialization
As the medical device company enters the clinical trial or product launch and commercialization phase, purchasing a blended liability tailored for life sciences businesses is the ideal solution. Insurance companies that specialize in this sector can provide a comprehensive and modular policy approach, combining Products and Completed Operations Liability, Errors & Omissions Liability, Information Security Liability, as well as Media and Content Liability and Clinical Trials Liability (also available as a separate policy). Below is a summary of coverage and shortlist of features to look for, which vary by insurer:
Products Liability Insurance for Medical Device Companies
Products Liability Insurance is referred to as Products and Completed Operations in the insurance industry and represents coverage for bodily injury or property damage arising from use of the company’s products and/or services. Coverage in the life science industry generally includes the following:
- Enterprise-wide coverage for all business products and work
- Inclusive of punitive or exemplary damages where insurable by law
- Human clinical trials included in Products definition
- Limited use of exclusions
Errors and Omissions Insurance for Medical Device Companies
Errors & Omissions Liability Insurance, also referred to as Professional Liability Insurance, represents coverage for financial losses from errors, omissions, or defects in design of products or work. Specific coverage enhancements in the life science industry generally include the following:
- Coverage for breach of warranty or breach of representation of performance, quality, fitness, or durability
- Coverage for allegations of failure of product to perform intended function
Cyber Liability Insurance for Medical Device Companies
Cyber Liability, also called Information Security or Cybersecurity coverage, protects the medical device company from theft of patient or customer data.
- Coverage for failure to prevent unauthorized access to, or use of, protected personal identity and health information, and business’ product or work
- Coverage for failure to prevent code tampering or introduction of malicious code by a third party
- Coverage for inability of an authorized third party to gain access to your product due to a security breach
- Coverage for unintended transmission of malicious code to a third party
Media and Content Liability Insurance for Medical Device Companies
Media and Content Liability coverage is coverage for copyright and trademark infringement or dilution, including:
- Coverage for infringement of title, trademark, trade name, service mark or name, slogan, registered copyrights, piracy (as it relates to copyright or trademark infringement)
- Coverage for misuse of intellectual property rights in code, data, images, etc., when misuse is a listed wrongful act in the policy.
Other Insurance Coverage Considerations for Medical Device Companies
Commercial Auto
Covers liability arising from operation of vehicles owned, leased or rented by the company or employees’ business use of their own vehicles, along with physical damage to those vehicles.
Employment Practices Liability
Provides coverage for employee discrimination, harassment, wrongful termination, retaliation, and other employment-related torts, including third-party coverage in certain circumstances.
Commercial Umbrella and Excess Liability
Provides catastrophic liability coverage over other scheduled primary coverages.
International and Foreign Liability
Extends liability coverages to countries other than the United States, and can extend Property, Automobile, Foreign Workers Compensations and Employers Liability coverage. Optional coverages include Kidnap & Ransom, Accidental Death and Dismemberment, Transportation Expenses, and Medical/Travel Assistance.
Transit and Transportation
Coverage for damage and theft of products in transit from manufacturing facilities to warehouses, wholesaler and retailer customers.
For More Information
If you have any questions or concerns about coverage for your medical device company, please contact us. There is no cost or obligation for a consultation.
Please note this article is limited in scope and cannot comprehensively address all aspects of insurance for the medical device industry in detail. Each business operation is unique, and various issues and exposures are addressed, the applicability of which will accordingly differ for each business. The information contained is to be used at the discretion of the company or individual. Please consult an insurance broker experienced in the Medical Device industry to assist in insurance purchasing and risk management decisions.