July 20, 2019

Practice Tip #4: Watch for Coverage Issues on Product Claims!

Added to the fun and challenge of handling product liability claims is the fact that they are not exempt from posing coverage issues for the claims person to be aware of and to act on.
At least six types of coverage issues here include:

Ins Coverage

#1. Date of loss/occurrence (especially in claims against implants or long-term exposure to a drug); with the date of loss that they the implant was inserted, the patent symptoms arose or the date that the patient became aware of the link between the symptoms and the implant?

#2. Late notice; perhaps the insured didn’t feel that the claim was going to amount to anything and therefore neglected to reported promptly to the insurance company. Later, it morphed into a lawsuit. Probably time to send the claim to the insurance company and let the adjuster

#3. Evidence spoliation; The insured took possession of the ventilator, for example, but then lost or discarded it. If the insured’s spoliation compromises the insurer’s ability to defend the claim, a coverage question may exist.

#4. Coverage (or non-coverage) for punitive damages;

#5. Policyholder “do-it-yourself” claims-handling. DIY is great for Home Depot. It’s not so great for life science companies sometimes trying to “self-handle” their own product liability claims. XYZ Medical made a well-intentioned but ill-advised offer to pay an injured patient. The patient declined it and now, thinking that the corporation has conceded liability, runs to the office of a personal injury attorney. Now this is YOUR problem.

#6. Coverage for recall expense, etc.

Moral: Be attuned to emerging coverage issues. Keep your antenna tuned. Do not fall asleep at the wheel in spotting potential coverage issues and defenses.

If and when they arise, quickly reserve rights.

Communicate with the insured the existence of a coverage issue and explain the nature of that issue.

SPLIT the claim file. Have a separate adjuster handle coverage with a separate file and erect a proverbial “Chinese wall.“

Product liability claims have sufficient exposure on the liability side, particularly when you’re dealing with products in the medical device and pharmaceutical realm. When things go bad here, they tend to go bad in a big way. When a product does not work or function as intended, you can have death or permanent injury, birth defects or paralysis. There is little margin for error.

Do not complicate or compound the challenges by overlooking potential coverage issues that from time to time service on such claims and to react appropriately in space of those issues. It’s not just a matter of issue-spotting, it’s a matter of issue spotting and responding an appropriate way.

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