Mind the Gap – Getting the Insurance Placement Right 24 th April 2008 Christopher Bryce Industry Practice Leader Chemicals & Life Science - EMEA

1 Marsh Mind the Gap Agenda  Why do we have so many different liability covers?  Avoiding the Gaps  Case Studies  What should be disclosed to your broker?  Risk Strategies – Identification of Exposures

2 Marsh Liability Covers Why are there so many liability covers? Employers’ Liability Employment Practices Liability Public Liability Financial Loss Product Liability Professional Liability Clinical Trials Liability Medical Malpractice Directors & Officers Legal Expenses

3 Marsh Different Liability Covers Directors & Officers Liability Professional Indemnity or Errors & Omissions Employment Practices Liability Public Liability Mismanagement or wrongful acts in operating an organisation Negligent advice or servicesEmployment disputes and personal grievances Damage to the person or property of others caused by an organisation’s negligent act or omission Products LiabilityEmployers LiabilityMedical MalpracticeClinical Trials When products produced or sold by an organisation cause damage or loss to third parties. Injuries sustained to employees out of and in the course of their employment. Improper or negligent treatment of a person under a medical professional's care, which results in injury or death. Bodily injury attributable to participation in a Clinical Trial

4 Marsh Avoiding Gaps in Liability Policy  Material Facts – duty to disclose ‘Every circumstance is material which would influence the judgement of a prudent insurer in fixing the premium or determining whether he or she will take the Risk’. The legal definition of a material fact is contained in the Marine Insurance Act 1906:  Structure of Insurance Contracts – Operative Clause – Definitions – Exclusions – General Conditions  Supporting documents – Use of Confidentiality Agreements  Presentation – Three way partnership should be the objective – Transparency – The facts presented reflect the risk now not the past

5 Marsh Avoiding Gaps between Liability Policies  Construction project to build an extension to an existing building all occupied by the Principal  A number of policies would apply – Public Liability – Employers Liability – Construction Liability (i.e., removal or weakening of support)  Key areas of focus: – Contract conditions – Understanding of responsibilities – Definitions; use of consistent policy language – Protection of the Principals position – Understand relevance of exclusions and their applicability

6 Marsh Avoiding Gaps between Liability Policies  Clinical Trial involving new drug  A number of policies would apply – Public Liability – Employers Liability – Professional Indemnity/Errors & Omissions – Medical Malpractice – Clinical Trials  Clinical Trials are potentially high-risk particularly if they go wrong  The insurance protection put in place needs to be carefully studied to ensure that it is aligned to the different exposures and liabilities that exist as there are a number of parties to the trial all of whom have different interests Avoiding Gaps in Clinical Trials Liability Insurance, G.Carlson, 1999,

7 Marsh Case Study TeGenero  The parties – Contract Research Organisation – Sponsor – Manufacturer (of the compound) – GLP Studies ( a laboratory) – Eight participants in the trial  Phase 1 study – “first in man study”  Of the eight six experienced a serious adverse reaction MHRA Investigation into Serious Adverse Event during trial of TGN 1412

8 Marsh Case Study TeGenero Parexel – TGN 1421  Mr Wilson and five others who took part in the TGN 1421 trial look to receive 6 figure payouts.  It is reported that Parexel, the U.S clinical trial group who conducted the trials are willing to meet a shortfall between the £2million insurance policy and the claims (around £4million)  Ryan Wilson, 21, had to have all his toes amputated and the tips of several fingers removed.  Of the six men who took part, Mr Wilson was the worst injured: his body swelled to three times its usual size and he was in a coma for two-and-a-half weeks.

9 Marsh Case Study TeGenero  Parexel did not ensure that there was insurance coverage to protect the participants; they had a duty to review Sponsor’s insurance policy – The insurance policy did not contain exclusions that would impact on the payment to the volunteers  The policy was a no-fault compensation policy - compensation should be paid regardless of whether the subject is able to prove that the company has been negligent (ABPI)  Failure in procedure? – No evidence to suggest that appropriate care was not given – A 24hr on-call rota in place for medics and telephone system that would divert out-of hours – However, there was no formal written procedure for the process and the process had never been tested * MHRA Response to Questions, foi/documents/foidisclosure/con pdf foi/documents/foidisclosure/con pdf

10 Marsh Case Study Clinical Trial of a supplement  The parties – University – Sponsor – Manufacturer (of the compound) – GLP Studies ( a laboratory)  In excess of 100 participants in the trial  Mothers & children under 5 years of age

11 Marsh Case Study Clinical Trial of a supplement  Insurance Cover – Clinical Trials – No fault (ABPI Guidelines) – Claims Made wording; run-off cover? – Extended Discovery Period – Limit of Liability in relation to number of participants – Medical Malpractice excluded – Costs in addition  Title of the Insured – Aggregate limit  Territorial Limits

12 Marsh Case Study Clinical Trial of a supplement  Supporting documentation – Evidence of hold harmless & indemnification from other commercial partners – Copies of Informed Consent outstanding; seen by Insurers – Indemnification provisions  Has the University sought information on the extent of insurance held by other participants to trial?  Who is participating in the trial and what is their expectation of jurisdiction (Does Informed Consent deal with this)  Serial trialists

13 Marsh Risk Strategy & Identification of Exposures Cost drivers What are the good controls? How robust are they? How would they respond to a major event? Prioritise your risk issues and solutions and improve your resiliency to current and future risks High Impact Low Research Subject Safety Regulatory Non-Compliance Low Exposure High Impact and exposure to loss (for example) Conflict of interest Care Custody & Control Breach of Contract Breach of Confidentiality Consent Improper Management of Research Subjects Improper inducements to ‘volunteers’ Absence of Clinical Trials Safety Plan

14 Marsh The Process Exposures NEGLIGENCE RECOMMENDATIONS OF ETHICS COMMITTEE – Public Liability OVERSIGHT – Public Liability REPORTING ADVERSE EVENTS NON-COMPLIANCE SCIENTIFIC MISCONDUCT Errors & Omissions/Public Liability/Medical Malpractice SELECTION UNDUE INFLUENCE DISCRIMINATION Employment Practices/Employers Liability COMPLIANCE PRIVACY CONFLICT OF INTEREST BILLING Public Liability

15 Marsh The Controls Exposures CARE, CUSTODY & CONTROL OTHERS PROPERTY DAMAGE OR HARM Public Liability/Financial Loss CONTRACT & CONFIDENTIALITY INFRINGEMENT OF IP BREACH OF CONTRACT INAPROPRIATE DISCLOSURE First & Third Party IP/Public Liability/Errors & Omissions SAFETY PROCEDURES COMMUNICATION EXISTENCE OF PARTICIPANTS Employers Liability/Public Liability/Clinical Trials COMPLIANCE ASSESSMENT OF PROCESS DOCUMENTATION Public Liability

16 Marsh Evolution of Risk Management Driving a Good Deal Influence Cost of Programme Marsh Resource Cost to Client Reduce costs outside of insurance transaction Total cost of Risk Reduces