Category: Latest Thinking

BY NATHALIE SMYTH, DANIEL BRETTLER, MICHELE FIELDS, ELIZABETH J. STREELMAN, AND ANITA GORNEY

Last year, the World Health Organization called on all countries to ramp up their testing programs with a view to slowing the advance of the COVID-19 pandemic. Pharmaceutical and diagnostic companies rushed to develop diagnostic tests, some of which are alleged to be inaccurate and unreliable.

In this article, Kennedys Law and Conner Strong & Buckelew examine the liability and insurance risks of putting ‘fast-tracked’ diagnostic products on the market and how companies may be able to limit their related exposures.

CLAIMS THAT MAY ARISE FROM INACCURATE DIAGNOSTIC TESTS

Product liability claims

Claims arising from the sale, distribution and end-consumer use of inefficacious diagnostic kits in the US could arise in a number of ways against multiple players in the distribution chain:

• Strict liability of the producer for defects in the design or manufacture of a test, or for failure to warn a patient of potential inaccuracies in the result;
• Negligence of the manufacturer or supplier for breach of their duty of care to provide the recipient with an accurate test; and/or
• Breach of implied or express warranty by the producer, particularly where tests are marketed as 100% accurate.

While it is more common to see claims for false negative tests, claims may also arise from false positive results, which could cause emotional distress and financial hardship both to the end consumer and to people with whom they have had contact. Indeed, attorneys in Canada have been retained to bring a class action on behalf of nursing home residents, who received eight false positive COVID-19 test results. The plaintiffs (which also comprise nursing home staff, their close friends and family) allege that the false positive results caused them emotional harm and loss of earnings.[1]

Shareholder Litigation

Actions may also be brought by shareholders of pharmaceutical companies arising out of false and misleading statements made about the accuracy of diagnostics tests[2]

Indeed, in June 2020, an action was issued by shareholders of one of the first diagnostics companies to receive approval for the manufacture and distribution of COVID-19 diagnostic tests in the US and EU.[3]

According to the shareholder’s lawsuit, the COVID-19 test was stated publicly to be “100% effective” in detecting the virus. When the FDA later announced that no diagnostic test was 100% accurate, the company’s stock price fell, resulting in huge shareholder losses. Proceedings were issued on the basis that the company had violated federal securities laws[4] pertaining to, among other things, deceptive practices in securities trading. While the parties await the outcome of the lawsuit, it is unlikely that the liability immunity afforded by recent public health crisis legislation (discussed in further detail below) will be available to companies, which are alleged to have violated such laws.

POTENTIAL DEFENSES

There are a number of grounds on which manufacturers and players in the chain of distribution of Covid-19 and other diagnostic tests may be able to protect or defend themselves insofar as possible against the risks of such litigation.

Immunity

In 2005, in preparation for the possibility of a massive public health crisis, the U.S. government crafted the Public Readiness and Emergency Preparedness (PREP) Act, which authorizes the Department of Health and Human Services (HHS) to issue a PREP Act Declaration that:

• provides immunity from liability for, among other things, any loss caused by the administration or use of ‘countermeasures’ (including treatment and diagnosis products) to diseases constituting a risk of a future public health emergency;
• suspends multi-year testing requirements; and
• approves emergency use of desperately needed novel drugs, including vaccines.

Liability immunity under PREP extends to manufacturers, distributors, program planners[5]  and qualified persons[6] for claims arising from personal injury, business disruption, or property damage.

In March 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act extended the protections provided in the PREP Act to manufacturers of any drug, biological product, medical device or vaccine used to treat, diagnose, cure, prevent or mitigate COVID-19 or a virus mutating therefrom.

The protection is, however, not absolute as the FDA can revoke emergency use authorization when appropriate, particularly if it has concerns about the accuracy or efficacy of any such products or devices.

State of the Art

In product liability litigation, a ‘state of the art’ defense is available to a manufacturer who can prove that a product incorporates the best technology and scientific knowledge available at the time the product was manufactured. Evidence of the level of technology and lack of other advanced technology on the market at that time are key to this defense.

Given that there is still so much unknown about the novel coronavirus and its various mutations, this defense could be particularly useful to defendant manufacturers in COVID-19 litigation who can show that their testing products were developed with the best technology and scientific knowledge available at the time, against the background of urgency with which such products were required.

Accuracy in advertising

In an effort to avoid a potential claim from being brought, producers of diagnostic tests should, at the outset, take great care with the preparation of their statements as to the efficacy and accuracy of the product, not only in order to avoid the potential for shareholder actions and other claims based on reliance of such statements, but also to maintain the integrity of the product and the company.

COMPARISON WITH LAWSUITS ARISING FROM THE HIV EPIDEMIC IN THE 1980s

Comparisons can be drawn from the emergency response to the COVID-19 pandemic and the HIV epidemic in the 1980s where HIV blood screening tests were developed expediently in the face of the national health crisis.

At the time, several blood-screening tests failed to detect HIV in blood supplies later used for transfusions. As a result, patients infected with the virus filed litigation. While the consequences of these failures were tragic, the New Jersey Supreme Court found in favor of the test manufacturer on the grounds that the claim was pre-empted by the FDA’s unique regulation of the HIV screening tests, and that the tests had been developed expediently in the face of a national crisis.[7] In reaching its decision, the court took into account that the FDA had:

• actively directed the manufacturer concerning the design format of the tests;
• determined the appropriate cut-off[8];
• dictated the exact wording of the test package inserts;
• directed the manufacturer not to instruct blood banks to retest samples below the cut-off; and
• actively monitored both the ‘first generation’ tests’ field performance, and the development of the ‘second generation’ tests.

Should any similar claims be brought against manufacturers of Covid-19 tests, for example  where a patient did not seek early medical intervention and consequently died or suffered severe illness as a result of a false negative Covid test, it will be necessary to carefully consider whether and to what extent this case law, the PREP and CARES Acts, and any intervention by the FDA and similar authorities, may be relevant in the defense of such claims.

INSURANCE CONSIDERATIONS

It is important that diagnostics companies and manufacturers have in place sufficient insurance coverage for the risks described above. While these will most likely fall within the scope of a product liability policy, coverage under E&O or D&O policies may also be relevant.  For instance, companies should take great care when preparing and making representations to their shareholders and to the public to avoid any potential claims under their D&O policy.

Companies should also be mindful of the strict notification requirements contained in such policies, in order to preserve the company’s rights and to protect against a disclaimer. Policies typically provide that the company must report a claim or potential claim within a certain timeframe. If timely claim notification is not provided, the company is at risk of the insurance carrier disclaiming coverage.  Therefore, it is important to ‘loop in’ the insurer sooner rather than later once notice of a claim or a potential claim is received.

To facilitate the defense of a potential claim, companies should also have protocols in place to preserve evidence that might be pertinent to the development of their diagnostic products. For example, companies should ensure they preserve all electronic data, including proof of trials, testing and scientific research.

Given that each potential claim will bring its own unique issues and challenges, diagnostics companies and manufacturers should carefully consider the provisions and adequacy of their policies to ensure that they provide sufficient cover in the event of any and all risks, which may arise as a result of putting their diagnostic tests onto the market.

CONCLUSION

Many lessons can be learned from past litigation involving failed diagnostic equipment but, most importantly for manufacturers and their insurance brokers, it is critical to identify the policy that is triggered by a failed diagnostic claim and to notify the insurer(s) as soon as possible.

As we have seen, courts have historically been relatively lenient on companies who have expedited the development of their testing product in times of national emergency, particularly at the request of the government or its agencies.  It is therefore hoped that, in the event that similar litigation arises, the courts will afford them the same leniency, particularly in light of the protections provided by the PREP and CARES Acts.

[1] https://www.biospace.com/article/releases/miskin-law-bringing-class-action-over-false-positive-covid-19-test-results/

[2] In violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934

[3] Gelt Trading, Ltd. v. Co-Diagnostics, Inc., No. 20-cv-00368 (District of Utah)

[4] Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.

[5] Individuals and entities involved in planning, administering, or supervising programs for distribution.

[6] Persons authorized to prescribe, administer, or dispense covered countermeasures.

[7] R.F. v. Abbott Laboratories, 162 N.J. 596, 745 A.2d. 1174 (2000).

[8] The cut-off value, defined by the FDA in the test’s instructional pamphlet, was used by blood bank technicians to measure whether the HIV antibody was present in a donated blood sample.

BY TIM GOSNEAR, CPCU, & ROGER LADDA, ARM

Organizations across industries are facing one of the most challenging insurance markets in decades. This hardening market is a result of rising claims costs driven by social inflation and catastrophic claims, combined with historically low interest rates and other financial factors. It’s created stress across lines of coverage, but the challenges have been the most pronounced in property & casualty and excess liability. As a result, organizations in a variety of industries are facing high premiums – if they can secure coverage at all.

In light of these challenges, many organizations are considering alternative risk transfer solutions outside traditional insurance products. Alternative risk market tools like insurance pools, parametric insurance and integrated risk programs can be meaningful solutions in a hardening market. For many companies, one alternative risk structure worth special consideration is a captive insurance program.

Captive Insurance Defined

Captive insurance is a form of self-insurance in which an insurance entity is created by an individual company (single parent captive) or a group of companies that joins together to form their own insurance company (group captive).

Rather than transferring all insurance risk to third-party traditional commercial carriers, a captive (single parent, group and/or hybrid captive structure) assumes a level of calculated risk that is priced (quantified) by a third party actuary. The banding together of affiliated companies (single parent captive) and/or unaffiliated organizations (group captive) provides risk distribution, risk diversification and ample spread of risk to operate a viable insurance company. Captive participants can contribute to a shared pool of resources rather than paying 100% of premiums to a commercial carrier. Through sound claims management and loss control, organizations can lower the costs of claims, and therefore reap financial benefits through the captive facility.

With this structure a captive insurance program offers several benefits:

• Consistency – While traditional insurance premiums are surging and coverage is increasingly hard to secure in the current hard market, captives offer more predictable and stable pricing.
• Control – Captives remove many market factors from pricing. Cost is not based on what insurance companies think they can charge, but rather what organizations predict their losses will be.
• Customization – Captives allow an organization to build more specific coverage for certain lines at certain premiums, rather than being forced into off-the-shelf policies from insurance companies. They allow for a more comprehensive approach to risk and long-term strategic thinking.

In many cases, utilizing a captive insurance program helps organizations take a more comprehensive and strategic approach to risk. They have more options in how they finance and control various risks and exposures and can take a long-term view. It lets organizations make one five-year decision rather than five one-year decisions.

What’s more, it creates added incentive for organizations to pursue additional risk management solutions such as loss control, enhanced safety processes and more. Organizations in a captive have an opportunity to share best practices, resources and more in pursuit of reducing claims and lowering costs.

Finding the Right Captive Insurance Partner

As organizations consider the switch to a captive insurance structure, it’s important to approach the process in the right way. In most cases, a broker can be a vital partner in navigating the transition to a captive insurance program. Yet not all brokers offer the same set of services and expertise, especially when it comes to captives and alternative risk transfer. Here are three traits to look for in a true partner in determining if a captive is the right move for your organization.

1. An Objective Perspective

Many brokers have a vested interest in pushing clients toward or away from captive insurance structures. Smaller brokers typically don’t have the capabilities to handle captive services in-house and will have to find an outside consultant to oversee the process. Larger brokers may have the capacity to tackle structuring a captive, but most charge a premium for the service. In either case, the client ends up picking up additional costs. Large regional brokers like Conner Strong & Buckelew take a more consultative approach. Captive insurance is one of a host of risk management solutions, and it’s presented as an option because it could benefit the client’s business, not the broker’s.

2. A Collaborative Approach

If the captive approach makes sense for the business, the right partner can help move through the process of establishing or joining the captive. It can be a complex process that typically requires a combination of execution and education in helping clients make the right decisions. That approach necessitates a deeper understanding of a client’s business goals and priorities with an eye toward key industry considerations.

3. A Track Record of Success

Building a successful captive insurance program requires partnership. That partnership extends beyond the organization and the broker to include captive managers and administrators, actuaries, tax experts, auditors and more. These partnerships must also be objective and collaborative to deliver the best outcomes. The right partner should have a vetted network of support in these areas and a proven track record of helping similar organizations make the transition to a captive structure.

Making the Switch in a Hard Market

Today’s hardening market has prompted organizations of all shapes and sizes to rethink their approach to risk. In situations where traditional insurance has become untenable, captives are an option worth exploring. Many organizations that have already made the switch are now finding increased control and savings as tough market conditions persist. The right broker partner can help your organization find creative solutions in a challenging market.

To learn more about captive solutions in a hardening insurance market:

Please contact a Conner Strong & Buckelew representative.

BY TAYLER LINDEMAN, ARM, & MICHELE FIELDS, ESQ.

International insurance is inherently complex. Organizations must secure coverage that addresses the specific risks involved in their international operations while meeting the legal, regulatory and tax requirements of multiple countries. It typically requires placing an overarching controlled master program as well as local policies for specific countries.

Effectively meeting these demands depends on striking the right balance between scale and service. A broker must be able to handle diverse needs on a global scale while providing the right coverage and the right support for navigating claims and legal issues. A global brokerage that has the scale to offer coverages across the world may fall short of providing the high-touch service required in dealing with claims across continents and time zones.

Often, successfully balancing scale and service is best achieved with a customized approach to addressing all of the variables of international insurance coverage. Here are three key considerations when selecting the right international insurance broker.

1. Prioritize Deeper Relationships
A strategic partnership between client and broker is critical in building and maintaining effective international insurance coverage. When brokers have a more robust understanding of the client’s business and operations, including potential exposures and coverage structures, they can view international coverage in a broader context and more effectively advise the client. Building a deeper understanding also allows brokers to develop and place more customized international insurance policies specific to the organization’s risk, such as focusing on trips traveled versus covering locations around the globe. That deeper partnership promotes greater accountability and better performance that improves over the length of the broker / client relationship.

Large regional brokers typically have the size and scale to maintain strong relationships with partners and local brokers in other countries. These partnerships are often vital to ensuring the right level of coverage as well as navigating cultural barriers and language differences.

2. Identify Cost Efficiency Opportunities
The partnerships fostered by large regional brokers can drive significant cost efficiencies. Compared to a global broker with set networks and rigid pricing structures, a more agile regional broker has the ability to use other partners to create a customized network that better fits the service needs of the client. For example, it is not always necessary to involve a local broker in a foreign country. Regardless of the particular requirements, a global brokerage likely has local broker services in most areas and passes the costs of those partnerships on to clients. A regional broker, on the other hand, involves partners because it benefits the client, not the broker’s bottom line.

3. Focus on Claims and Legal Advocacy Abroad
There is no guarantee that an international claim will happen during domestic business hours. Consequently, deeper relationships, on the claims side, translate into better service when needed – at all times of the day. The Conner Strong & Buckelew claims team, for example, partners with a global law firm, based out of London, which can efficiently provide referrals to local legal resources in several countries. The result is fast action without sacrificing service. Thus, clients remain connected with the claims professionals, whom they know and trust, and these professionals are at the forefront of helping their clients navigate through a country’s legal process, as well as any language or cultural barriers. Such effective claims service provides clients with the necessary resources and peace of mind, knowing that they have the right partners in place no matter where the incident occurs

Realizing the Benefits of the Right Broker
In the end, when it comes to international insurance, large regional brokers provide the right balance of global scale, product flexibility and customization. Finding the right broker can also offer significant cost savings when securing coverage across international borders.

Case Study – Coordinating an International Claim in Under 12 Hours
An Eastern European subsidiary of a U.S.-domiciled company reported the death of a local employee on the subsidiary’s premises. The local police authorities, as well as the country’s OSHA equivalent, commenced simultaneous investigations. The organization’s first call was to its insurance broker, Conner Strong & Buckelew. Within five hours, the broker had a referral for local counsel in the relevant country. Approximately eight hours after notification, the broker and local counsel were on the phone discussing key information about the incident, the specific legal process and the investigations. Within twelve hours, the client received detailed information about that country’s legal process, the next steps and contact information for a local legal expert. As a result, the client was provided with expert guidance in real time and they were able to focus on proactively managing the tragic incident.

BY NATHALIE SMYTH, DANIEL BRETTLER, MICHELE FIELDS, AND CAMILLE HEPSWORTH

The landscape of clinical trials is evolving at an unprecedented pace, being both propelled and incentivized by the global race to advance the COVID-19 vaccines. Advancements in artificial intelligence (AI) and machine learning (ML) for data collection and interpretation, and a move towards virtual and adaptive trials and use of Real World Data (RWD), have paved the way for the development of novel data collection techniques and analysis.
Alongside such advancements is the ever-present threat of cyber-attacks and malicious hacking of private medical data as well as new potential liability risks associated with novel trial techniques and reliance on AI for decision-making. Increased flexibility and diversity of trial designs also come with the need for clarity of protocol and patient consent wording in addition to a good understanding of local coverage and liability issues in developing countries. Last, but not least, the expected roll-out of a worldwide vaccine at an unprecedented rate will necessitate careful consideration of policy wording encompassing all risks pertaining to the entire life cycle of medical products, including their development, manufacture, storage, transportation and beyond.

In this article, Conner Strong & Buckelew and Kennedys Law LLP explore current and potential future trends and liabilities in clinical trials alongside insurance considerations for key players in the life sciences market, including:

• AI and ML for Data Collection and Interpretation
• Novel Trial Designs
• Fast Tracking and Supply of Vaccines
• A Move Towards Diversity in Clinical Trials
• Looking forward

AI and ML for Data Collection and Interpretation
AI and ML tools are already being used to review thousands of study protocols and trial results and to provide automated advice during development of trial protocols, with the ultimate goal being the first machine-drafted protocol.

While there is currently limited use of the decision-making capabilities of AI to interpret clinical data, real advancements are being made in the use of AI and ML-based platforms and apps to assist with various clinical trial procedures. These include enrollment of trial subjects, confirmation of medication ingestion, facilitation of electronic clinical outcome assessment (eCOA) technology towards a more patient-centered approach to trial design and administration, and integration of data into a centralized platform to expedite analysis.

As the use of this technology develops, it is imperative that trial sponsors have adequate insurance in place to cover the potential new exposures they may bring. This includes consideration of whether and to what extent additional coverage is required in respect of potential cyber-attacks leading to unauthorized access to patient data and other GDPR breaches. Manufacturers and trial sponsors should also ensure that existing levels of coverage for professional, general and directors and officers (D&O) liabilities remain adequate, particularly when their duties and responsibilities may be linked to reliance upon AI and ML for decision-making.

Novel Trial Designs
Numerous manufacturers and trial sponsors are already spearheading several novel trial techniques, utilizing virtual and adaptive trial design and Real World Data (RWD)1.

Virtual clinical trials

While virtual trials have been feasible for a number of years, the impact of COVID-19 has pushed trial sponsors to quickly adjust their existing practices in favor of remote monitoring and data collection through the use of apps, electronic monitoring devices and online social engagement platforms.

For instance, in March 2020, J&J launched its first fully virtual trial (the Heartline trial) which explores whether its Heart Healthy app, paired with the Apple Watch’s Irregular Rhythm Notification (IRN) and electrocardiogram (ECG) apps, can help reduce the risk of stroke. The new virtual model means that people can participate remotely throughout the study without having to travel to research sites.

Similarly to AI and ML, virtual monitoring and use of apps and monitoring devices create a new area of potential exposure related to breach of private information, malicious hacking to disrupt or steal information, and potential bodily injury exposure if the monitoring device fails. As traditional insurance for clinical trials may not cover such exposures, detailed reviews of existing liability and cyber privacy insurance wordings should be carried out.

Move towards adaptive clinical trials

Clinical trials have traditionally taken the form of Randomized Controlled Trials (RCTs)2. However, there has been a recent move towards a more bespoke or ‘adaptive’ trial structure, which allows for prospective modifications to trial design based on accumulated trial data. For example, if one treatment is seen to perform better than others, the adaptive design would allow patients to be allocated to the better performing treatment during the trial period.

A move to more bespoke trial designs can provide huge benefits for both the patient and the manufacturer in terms of efficiency, ethicality, cost and time savings, improvement of patient outcomes and potentially the use of fewer participants.

There is also significant potential for a reduced timescale to obtain regulatory approval. This is demonstrated by the emergence of Real Time Oncology Review (RTOR) in 2018, which allows regulators to review data prior to the full application for regulatory approval with a view to reducing approval time from 6-10 months to under 6 months without compromising the safety and efficacy of the treatment. While this pilot program only considers applications for cancer drugs, if successful, it could extend to real-time review of drug applications for other disease groups.

As adaptive trials become more prominent, insurers and trial sponsors should also be aware of the potential exposure created by the more flexible design and the corresponding protocol and informed consent language. In particular, the underwriting of clinical liability insurance places a significant emphasis on the patients’ ability to understand the protocol. Therefore, wording must be clear and comprehensive, yet sufficiently simplified, for a non-health care professional or scientist to understand.

A growing reliance on Real World Data (RWD)

RWD is used at each stage of the drug development process to analyze the potential benefits or risks of a product or treatment, which, in turn, enables pharmaceutical companies to minimize risk and invest in only the most promising treatments.

While RWD is not a replacement for RCTs, it can supplement and augment analysis of data on the safety and efficacy of treatments over a longer period of time for a larger section of the patient population with a particular disease. Indeed, only last year, the FDA approved Pfizer’s Ibrance, which was the first drug where analysis was largely based on RWD from clinical registries.

The use of RWD (and emergence of technologies to capture it) could readily be the answer to the rising risks and costs of clinical trials, particularly in the study of rare diseases, or where there are difficulties with recruitment or funding of a full-scale RCT.

However, the implementation of new design methods based on RWD, especially those adopted mid-trial, may bring with it new additional focus on shareholder disclosure and potential litigation from a D&O’s liability perspective. For instance, if the sponsor company’s shares experience a drop in price due to negative clinical trial results, shareholders and their counsel will closely scrutinize all public statements made by the company before, during and after the clinical trial in order to assess their validity and accuracy, particularly regarding the reasons for any design changes made during the trial period. It is therefore important for insureds to ensure their coverage adapts sufficiently.

Fast Tracking and Supply of Vaccines
AI and ML will undoubtedly play an important role in the fast-tracking of future vaccines and other treatments through the regulatory process and onto the market. Indeed, AI-powered tools have already been utilized to expedite the search for potential COVID-19 treatments and vaccines by combing through thousands of studies for relevant information. The results allow researchers and policymakers to readily identify the most promising studies and to make faster and better decisions about prioritizing time and funding.

In particular, AI and ML could play an important role in Phase Three testing, which typically involves the evaluation of the risks and benefits of a medication over a large number of participants. Specifically, apps can be utilized by trial subjects to report side effects, with the data being analyzed by a centralized data system.

Again, it is important to properly insure against the risks of privacy and cyber breaches associated with the use of apps and e-technology to collect and share sensitive information, in addition to closely examining the possible implications of over-reliance on AI data for decision making.

Further, and in anticipation of the large-scale roll-out of regulatory-approved COVID-19 vaccines, manufacturers need to carefully consider whether and to what extent they bear the risk of loss of vaccines that have been stockpiled into the supply chain and the valuation of such risk. This is an exposure, which is often overlooked, although supply chain insurance for property perils and potential spoilage arising out of a change in controlled environment or condemnation is available.

A Move Towards Diversity in Clinical Trials
There has been a recent trend towards the relocation of clinical trials to less developed countries. While this has obvious benefits to manufacturers, sponsors and their insurers in terms of lower litigation risk, the importance of conducting trials in less developed countries should not be underestimated.

Africa’s virtual absence from the clinical trials map (impeded by limited infrastructure, low visibility of existing sites and unpredictable regulatory timelines) is problematic. Many potential trial subjects have had no previous exposure to pharmaceutical drugs and a number of diseases (particularly tropical) are endemic to the continent.

Africa boasts an unrivaled amount of genetic diversity, which, if not well-represented in trials, will not feed through to study findings and their generalized application to large populations. The promotion of such trials in less developed countries could therefore be the key to unlocking the potential for more diversified clinical trials going forward.

As sponsors consider studies in less developed countries, it is important to be aware that local insurance infrastructure and regulations therein are still developing. While many insurance regulations require that a local admitted insurance policy is purchased by the sponsor, these will not be as ‘well-tested’ as those in developed countries and sponsors will need to ensure that they strictly conform to local requirements and customs.

Even where local admitted coverage is not required, there may still be very strict requirements for sponsors to pay extensive damages to patients, their families and dependents, regardless of negligence. It is therefore important for brokers and insurers to have an in-depth understanding of what coverage is available in these emergent jurisdictions and under what circumstances it may be triggered, particularly as the policy may not cover certain heads of loss.

Looking forward
There is most certainly a place for new technologies in the clinical trial process, which will require detailed collaboration and an openness between manufacturers, trial sponsors and regulators to produce adequate guidance and a framework for the possibilities of AI and ML to be fully realized.

It is also hoped that the increased flexibility and diversity in trial designs and use of RWD, alongside lessons to be learned from the development of a COVID-19 vaccine, will lead to more efficient trials and development of medicinal products, with reduced risk, timescale and costs for all involved.

1 RWD is the collection of information pertaining to a patient’s health status and medical history from a variety of sources such as electronic medical records, insurance claims, disease or product registries, and mobile health apps.
2 A Randomized Controlled Trial (RCT) is a type of study in which treatment is compared in two or more randomized groups of people against a control group.

In our latest ebook, we break down the essentials of HR Communications 2.0. We detail how employers and benefits administrators can deliver essential benefits and health and wellness information for members in a post-COVID-19 world.

You will learn:
• The COVID-19 Pandemic’s Impact on Coverage Selections
• What Employees Want to Know about their Benefits Packages
• The Key Components of a Virtual Communications Toolkit
• Virtual Open Enrollment Best Practices
• Must-haves for a Virtual Benefits Portal
• Communicating Benefits Through Virtual Flip Books
• Effectively Delivering Ongoing Employee Health and Wellness Information
• Identifying the Right Virtual Employee Benefits Partner

Please fill out the form below to download the free resource about employee benefits in a virtual world.

By Terry Tracy

Even before the coronavirus pandemic, the commercial P&C marketplace was hardening. Early indications are showing the pandemic has exasperated the situation.

Already, we’re beginning to see insurance carriers increase prices, restrict coverage, cut back on capacity and exercise greater underwriting discipline. These forces are making it more difficult for businesses to purchase the coverage they need.

As the COVID-19 pandemic continues to increase losses among carriers, this hard market is likely to persist and rate increases are likely to continue. This is unfortunate for many companies that are already under financial pressure from the pandemic.

Securing adequate coverage at an affordable rate for insurance renewals will likely present challenges for many companies. Therefore, companies are wise to begin this process early by consulting with their brokers far in advance of a policy’s renewal date. Brokers with strong carrier relationships, experience navigating hard markets and knowledgeable account executives, claims consultants and risk control professionals can help companies lock down the coverage terms and conditions they need during this critical time.

Trends businesses should know prior to submitting claims

By Terry Tracy

With the initial surge of COVID-19 cases now in the rearview mirror and cases rising in many states yet again, many businesses across the U.S. are beginning to assess the damages they’ve incurred and the potential risks that remain as the pandemic rages on in many parts of the country.

When the pandemic first hit, companies experienced losses and damages on all sides. Many were forced to completely close their doors when lockdown orders went into effect. Others experienced cybersecurity events when entire workforces suddenly began working from home.

Businesses that have reopened or remained open through the pandemic are also dealing with liabilities resulting from employees getting sick. Unfortunately, mass layoffs are a reality for many companies as well, which opens up executive teams to additional scrutiny.

All in all, many businesses are wondering: does our P&C insurance policy cover coronavirus losses? The answer is complicated and dependent on your policy and the type of insurance you carry. However, the trends in claims handling related to coronavirus recovery are taking shape, offering organizations a better idea of what to expect and what steps to take.

Property coverage
When businesses shut down and lost revenue, many looked to their property coverage and business interruption coverage for economic relief. For the most part, carriers are rejecting these initial claims.

Commercial property & casualty insurance carriers argue that a shutdown imposed by the government does not constitute property damage and point to virus exclusions written into many policies. Other carriers are responding with requests for information (RFI) before denying a claim outright. Businesses are wise to respond to these RFIs and work with carriers as cooperatively as they can.

To date, there have been over 700 cases filed across the U.S., some of which include attempts to become a class action or a multi-state litigation (click here for a tracker created by UPenn law school). Similarly, insureds have sought relief in many other countries, including the U.K., South Africa and France.

To date, three courts have ruled in favor of the insurance carriers. First, the U.S. District Court in the Southern District of New York held that the insurer did not owe coverage and that there was no “property damage.” This case is currently on appeal. Second, a Circuit Court in Michigan held that there was no “property damage” and that the virus exclusion was applicable and enforceable. Third, a Washington D.C. judge ruled that the civil shutdown related to COVID-19 does not constitute “direct physical loss.” One court in Missouri has ruled in favor of the insured and permitted them to pursue a COVID-19 related property claim.

Insureds have had more success abroad than in the U.S. as it appears the language of the policy may not have the same triggering requirement. In Paris, a court ordered an insurance carrier to pay business interruption for two months to a restaurateur. The exact policy language has not been publicly distributed, but the carrier has publicly stated that only 10 percent of its clients had this unique language that granted coverage. It has vowed to pay these losses and avowed any further losses. Similarly, the high court of Cape Town in South Africa ruled in favor of a restaurant and held that coverage was triggered under the Infectious Disease Extension. Click here for a copy of the case.

The financial regulator in the U.K. is relying on the foregoing cases in arguing for coverage in an action it filed against several carriers. There have been no rulings in these proceedings but many in the industry are closely watching for the outcome.

General liability coverage
When a customer alleges that a place of business led to their exposure to the coronavirus, companies are hoping their general liability insurance will cover the legal expenses associated with mounting a defense or paying potential settlements. So far, the market has not seen many claims of this nature. But as businesses continue to reopen, it is possible more companies may find themselves in a lawsuit.

Companies who face allegations against them should notify their general liability insurance carrier. However, similar to property coverage, some carriers have written virus exclusions into their liability policies and will likely use these clauses to reject claims.

Instead of leaning on just their liability insurance, companies should consider working with their risk management and legal teams to take a more proactive approach to reducing their exposure. Some companies are having customers sign waivers that release the company from any liability and are making adjustments to their storefronts and business models to keep individuals safe. In addition, many states are enacting legal protections for businesses who follow certain established protocols and discussions around protections at the federal level have been ongoing.

For more information on what businesses can do to protect their employees, customers and business interests during the return-to-work period, click here.

Executive risk coverage (including D&O Employment Practices Liability coverage)
Unfortunately, many companies reeling financially from the effects of the pandemic are making layoffs. Business owners and executive teams making these decisions are potentially exposed to litigation from former employees, especially if these individuals were laid off for discretionary reasons. Any company making layoffs should consult its insurance brokers and examine its employment practices liability coverage to determine whether they should report facts and circumstances to their carriers to avoid loss of coverage.

The market has also experienced a rise in directors and officers (D&O) claims as a result of the pandemic. Some involve exposure to COVID-19, some involve misrepresentations about a company’s ability to gain from the pandemic and some involve companies that have experienced financial issues or operation disruptions. Each of these losses should be reported to the D&O policy and, depending on the provisions, may trigger coverage.

Companies may also seek financial relief from their D&O policy if they are audited by a regulatory agency over their use of government bailout funds, like the payment protection program. Typically, a D&O policy will not respond to an “audit,” but may respond to a formal investigation depending on the policy provisions.

Cybersecurity coverage
When entire companies quickly pivoted to remote work, many for the first time, it exposed businesses to various levels of cybersecurity liabilities. The FBI even warned about hackers using pandemic-related phishing scams and malware in an attempt to extract sensitive information from employees.

While carriers are not yet seeing a meaningful uptick in cybersecurity claims, now is a good time for companies to revisit their cybersecurity procedures and protocols to protect their businesses. Company-wide policies, like migrating to dual authentication on all devices, are critical to limiting liability as more employees work remotely.

Workers’ compensation
Workers’ compensation has been an area of a great deal of discussion at the state level. At the outset of the pandemic, claims adjusters were evaluating under applicable state law on whether the injury was compensable. In general, this required a nexus to the workplace that was unique to the work being performed. For example, if an employee works in an emergency room at a hospital and came in contact with a patient with COVID-19, the claim would most likely be compensable. However, if the employee works in an office, it is unlikely the claim will be compensable.

Some states changed the legal standard and created presumptions of compensability based on the type of employee. Due to some of the uncertainty and the ever-changing landscape as employers continue to reopen, if an employee alleges that they contracted COVID-19 at the workplace, it is best to report it and allow an experienced adjuster to determine compensability.

Experienced claims handlers
Now more than ever, businesses should revisit their insurance and risk management policies and work with a broker that has close relationships with carriers and extensive claims handling and risk control experience. At Conner Strong & Buckelew, nearly a quarter of our staff are claims handlers and risk control professionals with decades of experience working with clients to produce positive outcomes. Given the complexity of the pandemic, these claims are complex, and it is important for any business filing a claim to bring these professionals into the process early on to help fight for the best result.

This piece originally ran in the Insurance Journal.

The COVID-19 pandemic has created challenges for many businesses across the globe, including the insurance industry. But so far, the insurance broker merger and acquisition (M&A) market has remained active even as the pandemic continues to unfold.

Before the pandemic, both property and casualty and employee benefits insurance brokerages and agencies emerged as prime acquisition targets for a multitude of different buyers. These insurance agencies have experienced steady growth over the past several years. Rising demand for insurance coverage in a hardening market has resulted in growing insurance premiums. Considering most brokerages make their revenue from commissions, these rising premiums have positively impacted brokers’ bottom lines.

These dynamics caught the attention of both strategic and financial buyers looking to acquire businesses with strong cash flows and solid fundamentals. Because of this, competition for deals intensified over the last two to three years and agency valuations have also increased significantly. However, the pandemic has introduced some uncertainty into the market. Some brokers’ clients may have business continuity issues and may not survive the pandemic, which could hurt the broker’s valuation and attractiveness to a buyer. Because of this, valuations and multiples may flatten or drop slightly in the near term.

While it is still early to tell exactly how the pandemic will affect long-term demand for insurance broker and agency merger and acquisitions, the market for deals remains relatively active. As we move forward, there are several trends likely to affect merger & acquisition opportunities throughout 2020 and beyond. Here are a few dynamics to look out for in the months ahead:

1. High volume of transactions

The number of transactions taking place in the brokerage sector is charting an upward trajectory. In fact, the total number of deals in the insurance brokerage space hit an all-time high in 2019 with 649 total transactions, up from 643 in 2018, according to Optis Partners LLC. This trend is likely to continue in the face of the novel coronavirus. It is even possible that the number of transactions will accelerate selling agencies’ plans to pursue a deal given the need for diversification and scale as macroeconomic conditions begin to change.

2. Emergence of Private Equity Buyers

One major driver of broker and agency M&A activity in recent years has been the emergence of private equity buyers in the market. According to the Optis Partners report, brokers owned by private equity firms or with some form of significant outside capital support were by far the most active buyers of insurance brokerages in 2019. These companies represented roughly 66% of all buyers last year. Looking ahead, the COVID-19 outbreak may decelerate the number of discussions taking place in the market in the near term.

However, private equity firms are still expected to be active buyers of insurance brokers in 2020. With that in mind, sellers must take note: private equity firms may have the capital needed to fund a transaction. But they may not be able to provide the structure, resources, technology, industry relationships and expertise that a broker with decades of experience in the industry can.

3. Growth of Overall M&A Activity

The merger and acquisition trend is not limited to the insurance brokerage industry. According to Deloitte, more than $10 trillion in transactions have been announced across all industries in the U.S. since 2013. Even amid a pandemic, many expect total deal volume to continue rising across the United States in 2020. This trend can present challenges for the insurance brokerage industry. Brokers can lose customers when those customers merge with another company that does business with a different broker.

Insurance brokers are also facing pressure in the fight for talent. As companies grow and can offer employees more resources, it makes it difficult for smaller, middle market brokers to retain the talent they’ve spent years training and developing. For these reasons, many insurance brokers will continue considering a sale of their business in order to receive the benefits of scale needed to stay competitive.

Building a Plan for the Future

As the amount of M&A activity continues to increase, brokers of all sizes must begin to think about formalizing their strategy. The economic uncertainty caused by the pandemic may begin to apply pressure to a broker’s valuation, and many business owners considering a sale should begin to think about their options. Larger, well-established brokers that can offer technology, expertise, and benefits of scale are the buyers behind many transactions. Now is a good time for smaller brokers to sell and reap these benefits.

Before doing so, brokers should first focus on finding the right cultural fit. For two businesses to integrate smoothly, a business owner must be sure their processes, procedures, and way of doing business align with the buyer’s.

Brokers should also consider hiring an advisor. These individuals are well-versed in the insurance M&A marketplace and can guide business owners through the process. From start to finish, it may take a broker two to three years to find a buyer and finalize a transaction. A lot can change in that time, and advisors can help shorten and streamline this process.

Ultimately, brokers should partner with a company that will be able to provide them with the resources and support that enable them to grow and thrive in an evolving insurance landscape. Right now, these buyers are in ample supply and have the capital required to make a deal. It all starts with a conversation.

The Food and Drug Administration (FDA) recently overhauled the rules and regulations surrounding the production of safe food and ingredients. Now, food processors are facing more operational and regulatory risk than ever before.

For food processors, staying compliant with food safety regulations is crucial.

In this e-book, you will learn about:

• Key components of FDA food regulations
• The impact of regulatory enforcement
• The food business insurance landscape
• What insurance food processors must have
• The benefits of a food liability insurance program
• How knowledgeable insurance brokers can help

Please fill out the form below to download the free resource about the regulation of food processors.