If there were any true silver linings to the COVID-19 pandemic, perhaps it’s that the life sciences industry has been thrust into the spotlight as the world faces its greatest public health crisis in a century.
Investors and governments worldwide have poured hundreds of billions of dollars into the industry as it works to develop vaccines and treatments for the coronavirus.
The leading life sciences clusters continue to be Boston-Cambridge, the San Francisco Bay Area and San Diego. But Phoenix, Minneapolis and even Detroit are now viewed as emerging clusters.
The Phoenix life sciences story is especially noteworthy, with an expanding ecosystem supported by new lab space and growing medical schools.
The promise and potential are, in fact, mind-boggling.
Yet as we know all too well, life sciences businesses on the leading edge of innovation also face a broad range of risks from clinical trial failures, to lawsuits, to breaches of personal data.
Every business needs the basics when it comes to insurance: Property, General Liability, Workers’ Compensation, Commercial Auto and Employment Practices Liability. But life sciences companies will want to consider at least three additional lines of coverage:
- Clinical Trials insurance;
- Product Liability, and
- Directors and Officers.
Covering the Researchers and Volunteers
Like a lot about insurance, choosing the right policy is easier said than done.
The right Clinical Trials insurance policy not only protects a company from liability exposure, but also provides an increased level of comfort for investors by demonstrating good financial management.
Clinical Trials coverage offers financial protection to both the researchers conducting the trial and the volunteers who are taking part in the trial.
That includes coverage for damages and legal costs awarded to the participant in case there’s an act of negligence by the company or Contract Research Organization involved in the trial.
A Clinical Trials policy also includes coverage when participants suffer non-negligent harm (side-effects and symptoms).
When Defects Happen
Product Liability insurance, meanwhile, covers you in case a lawsuit is filed against your company alleging defects in your product caused someone personal injury or damage.
The defects covered typically include those in design and manufacturing. Marketing “defects” also are covered, for claims alleging your product failed to carry adequate warnings about potential risks and harm your product may cause.
A Product Liability policy pays the costs of defending your company against these claims, as well as the cost to hire appraisers and fraud investigators who can help mount your defense.
Protecting Your Assets
Privately held companies, regardless of size, are threatened by many of the same liability exposures facing public companies. That’s where Directors and Officers insurance comes in.
We like to think of D&O coverage as venture capital insurance.
D&O protects companies, their directors and officers, and outside advisors from lawsuits arising from their actions or decisions while acting in their official capacity.
Among other things, D&O covers lawsuits arising from consumer protection violations, breach of fiduciary duty, and securities fraud in connection with private placements.
Also, because individuals can be held personally liable for their acts on behalf of a corporation, a D&O policy can help protect your personal assets, your spouse’s and your estate’s.
The work of a life sciences company can involve substantial risk, with the potential for litigation and loss around every corner. Companies that take the time to secure the right line-up of insurance policies will find it well worth the effort. Failure to do so exposes the company to needless risk and can quickly undo a lot of good.
The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the nation. As an employee-owned organization, we’ve been protecting what’s yours since 1915. Contact us at firstname.lastname@example.org or 480-730-4920.