2015 Power Broker

Pharma

He ‘Knows His Stuff’

Jack Bodden, ARM, CPCU Managing Director Marsh, Philadelphia

Jack Bodden, ARM, CPCU
Managing Director
Marsh, Philadelphia

Typical risk issues at global pharmaceutical companies include product liability and professional liability.

These two exposures tend to surround the placement of significant amounts of coverage — which is made difficult because there are relatively few carriers that write that much coverage and it may be challenging to get the needed limits.

For an East Coast client, Jack Bodden introduced an advanced analytics program that helped management make better decisions especially with risk transfer options for products liability exposure in building the layers of coverage.

However, although it is less visible, pharma companies also have large property liabilities for their facilities around the world.

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Bodden’s client had a multimillion-dollar loss when one of its facilities in Australia was destroyed. There was a quick advance payment for a significant portion of the claim less than four months after the accident, but the balance was subject to extensive investigation by forensic accountants and the carrier’s claims team.

Bodden, with the client, devised a strategy to expedite payment.

It hinged on his client receiving payment within their fiscal year — which was a significant challenge for this large a claim.

“He brought in all the right people including those needed to document a significant business interruption loss,” the risk manager said.

Sealing the Deal

Erica Craner Senior Vice President Marsh, Morristown, N.J.

Erica Craner
Senior Vice President
Marsh, Morristown, N.J.

Talk with a trucking company or cargo insurer and they will tell you that pharmaceutical shipments can be the most difficult cargo to insure.

Just think about how much a truckload of Viagra is worth on the market today if it were stolen. Millions.

A client of Erica Craner’s called one afternoon (on a day when U.S. offices were scheduled to close early) about a pharmaceutical shipment coming into the United States from outside the country.

The firm needed cargo and liability insurance immediately. And the Marsh team needed time to make the arrangements.

Craner arranged for a West Coast underwriter of the carrier to handle the proposed transaction, giving her team essential additional time for negotiations. Although cost was not as much of an issue, comprehensive coverage of the exposure was critical. The requirements were reached and the coverage secured in time for the shipment.

Insuring pharmaceutical clinical trial risk is also a challenge. One of Craner’s clients has significant clinical trial activity in foreign countries, making capacity difficult to come by.

To create a solution, Craner and her team reviewed each individual trial for each country involved. She was able to arrange additional capacity to give the master global program the strength it needed to account for any differences in limits and differences in conditions.

Throughout her career, Craner has learned that it’s one thing to create a successful result in a renewal, but quite another to retain clients unless the customer service is beyond reproach.

Focusing on Strategic Goals

Mark Miller Managing Director Marsh, Chicago

Mark Miller
Managing Director
Marsh, Chicago

“Be prepared” is Mark Miller’s motto.

“He always makes sure that we have a strategic vision of what we’re going to do if something goes wrong,” one risk manager said of him.

For example, products liability coverage can be difficult. “He asked, ‘What do we do if we lose a carrier?’ He helped us develop a very effective strategy — looking at other markets, like Bermuda, or examining our retentions.”

She added that Miller has been good at connecting her with underwriters who may not be writing their risks now, but may be needed in the future.

“He gets my face in front of them so they know me and who we are.”

For another client, Miller created a risk management manual and a process manual.

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The basic manual is detailed, almost outlining what to complete on a day-to-day basis. But it’s also written in a way that gives the senior management a good understanding of how risk is managed within the different parts of the organization, the risk manager said.

Miller has also gained good marks for handling claims and other problems. Before Marsh held the account, one of the company’s carriers was put into runoff.

As time went on, reimbursement issues developed. Miller stepped in and got both sides of the issue together.

“We both understood each other and we resolved the problem with great results for us. We couldn’t have reached that point without Marsh,” she added.

Overcoming Challenges

Patrick Roth Vice President Aon, Denver

Patrick Roth
Vice President
Aon, Denver

Two big issues highlight the importance of professional liability coverage at pharmaceutical and life science companies. The first is huge claims and losses stemming from product liability risk. Second, but almost as important, has been the proliferation of merger and acquisition activity within the industry.

Patrick Roth heads up Aon’s executive liability practice for the life science industry.

As a client of his pointed out, there are ongoing issues concerning the supply of enough strong insurance carriers for these risks. Things are further complicated by ongoing declines in insurance capacity, increasing claims, and pricing that continues to increase.

For example, in a relatively recent transaction, a privately owned firm looked to purchase professional liability for a public company (possibly anticipating some changes). In this case, the number of available markets was limited and the budget was constricted.

The company needed to convince the underwriters that although they were privately held, their risk profile was best-in-class. Roth showed why the company was a standout, compared to its peers, especially in the area of clinical trials, which pose a significant risk.

The result: The needed insurance was acquired at a price that met the company’s budget relative to coverage and limits.

In another case, one of Roth’s clients faced bankruptcy if the company’s renewal wasn’t a success. He was able to renew the professional liability coverage, despite an increase in the underlying risk.

Satisfying Evolving Demands

Aaron Simpson Director Aon, Philadelphia

Aaron Simpson
Director
Aon, Philadelphia

A client of Aaron Simpson’s faced a dramatically changing risk profile. The client’s strategic plan called for accelerated growth during the coming two years through an expanding product portfolio.

Up to that point, the company’s risk was concentrated in a relatively narrow, homogeneous exposure. The plan would broaden that exposure by adding a diversified set of new products and new risks.

The challenge for Simpson and the company was to fashion a program that had to change significantly because of the evolving risk profile.

The company sought a multiyear relationship with its life science carriers. That relationship was needed to build upon the risk appetite of the carrier and move toward more diversified exposures.

Most carriers are not comfortable with all aspects of the risk in the life science industry, so it was a challenge to find the right carriers for the program.

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The client’s strategy included both internal growth and growth through acquisitions, which added further complications to developing a flexible program.

“This was a difficult and comprehensive process,” the client said.

Usually, especially at pharmaceutical companies, the issues flow well beyond risk management and require the oversight and active participation of the finance operations. Pharmaceuticals also have significant compliance requirements that affect risk management and risk transfer.

That’s why brokers must act as trusted advisers all year long, not just during renewals.

More from Risk & Insurance

More from Risk & Insurance

Risk Scenario

The Betrayal of Elizabeth

In this Risk Scenario, Risk & Insurance explores what might happen in the event a telemedicine or similar home health visit violates a patient's privacy. What consequences await when a young girl's tele visit goes viral?
By: | October 12, 2020
Risk Scenarios are created by Risk & Insurance editors along with leading industry partners. The hypothetical, yet realistic stories, showcase emerging risks that can result in significant losses if not properly addressed.

Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.

PART ONE: CRACKS IN THE FOUNDATION

Elizabeth Cunningham seemingly had it all. The daughter of two well-established professionals — her father was a personal injury attorney, her mother, also an attorney, had her own estate planning practice — she grew up in a house in Maryland horse country with lots of love and the financial security that can iron out at least some of life’s problems.

Tall, good-looking and talented, Elizabeth was moving through her junior year at the University of Pennsylvania in seemingly good order; check that, very good order, by all appearances.

Her pre-med grades were outstanding. Despite the heavy load of her course work, she’d even managed to place in the Penn Relays in the mile, in the spring of her sophomore season, in May of 2019.

But the winter of 2019/2020 brought challenges, challenges that festered below the surface, known only to her and a couple of close friends.

First came betrayal at the hands of her boyfriend, Tom, right around Thanksgiving. She saw a message pop up on his phone from Rebecca, a young woman she thought was their friend. As it turned out, Rebecca and Tom had been intimate together, and both seemed game to do it again.

Reeling, her holiday mood shattered and her relationship with Tom fractured, Elizabeth was beset by deep feelings of anxiety. As the winter gray became more dense and forbidding, the anxiety grew.

Fed up, she broke up with Tom just after Christmas. What looked like a promising start to 2020 now didn’t feel as joyous.

Right around the end of the year, she plucked a copy of her father’s New York Times from the table in his study. A budding physician, her eyes were drawn to a piece about an outbreak of a highly contagious virus in Wuhan, China.

“Sounds dreadful,” she said to herself.

Within three months, anxiety gnawed at Elizabeth daily as she sat cloistered in her family’s house in Bel Air, Maryland.

It didn’t help matters that her brother, Billy, a high school senior and a constant thorn in her side, was cloistered with her.

She felt like she was suffocating.

One night in early May, feeling shutdown and unable to bring herself to tell her parents about her true condition, Elizabeth reached out to her family physician for help.

Dr. Johnson had been Elizabeth’s doctor for a number of years and, being from a small town, Elizabeth had grown up and gone to school with Dr. Johnson’s son Evan. In fact, back in high school, Evan had asked Elizabeth out once. Not interested, Elizabeth had declined Evan’s advances and did not give this a second thought.

Dr. Johnson’s practice had recently been acquired by a Virginia-based hospital system, Medwell, so when Elizabeth called the office, she was first patched through to Medwell’s receptionist/scheduling service. Within 30 minutes, an online Telehealth consult had been arranged for her to speak directly with Dr. Johnson.

Due to the pandemic, Dr. Johnson called from the office in her home. The doctor was kind. She was practiced.

“So can you tell me what’s going on?” she said.

Elizabeth took a deep breath. She tried to fight what was happening. But she could not. Tears started streaming down her face.

“It’s just… It’s just…” she managed to stammer.

The doctor waited patiently. “It’s okay,” she said. “Just take your time.”

Elizabeth took a deep breath. “It’s like I can’t manage my own mind anymore. It’s nonstop. It won’t turn off…”

More tears streamed down her face.

Patiently, with compassion, the doctor walked Elizabeth through what she might be experiencing. The doctor recommended a follow-up with Medwell’s psychology department.

“Okay,” Elizabeth said, some semblance of relief passing through her.

Unbeknownst to Dr. Johnson, her office door had not been completely closed. During the telehealth call, Evan stopped by his mother’s office to ask her a question. Before knocking he overheard Elizabeth talking and decided to listen in.

PART TWO: BETRAYAL

As Elizabeth was finding the courage to open up to Dr. Johnson about her psychological condition, Evan was recording her with his smartphone through a crack in the doorway.

Spurred by who knows what — his attraction to her, his irritation at being rejected, the idleness of the COVID quarantine — it really didn’t matter. Evan posted his recording of Elizabeth to his Instagram feed.

#CantManageMyMind, #CrazyGirl, #HelpMeDoctorImBeautiful is just some of what followed.

Elizabeth and Evan were both well-liked and very well connected on social media. The posts, shares and reactions that followed Evan’s digital betrayal numbered in the hundreds. Each one of them a knife into the already troubled soul of Elizabeth Cunningham.

By noon of the following day, her well-connected father unleashed the dogs of war.

Rand Davis, the risk manager for the Medwell Health System, a 15-hospital health care company based in Alexandria, Virginia was just finishing lunch when he got a call from the company’s general counsel, Emily Vittorio.

“Yes?” Rand said. He and Emily were accustomed to being quick and blunt with each other. They didn’t have time for much else.

“I just picked up a notice of intent to sue from a personal injury attorney in Bel Air, Maryland. It seems his daughter was in a teleconference with one of our docs. She was experiencing anxiety, the daughter that is. The doctor’s son recorded the call and posted it to social media.”

“Great. Thanks, kid,” Rand said.

“His attorneys want to initiate a discovery dialogue on Monday,” Emily said.

It was Thursday. Rand’s dreams of slipping onto his fishing boat over the weekend evaporated, just like that. He closed his eyes and tilted his face up to the heavens.

Wasn’t it enough that he and the other members of the C-suite fought tooth and nail to keep thousands of people safe and treat them during the COVID-crisis?

He’d watched the explosion in the use of telemedicine with a mixture of awe and alarm. On the one hand, they were saving lives. On the other hand, they were opening themselves to exposures under the Health Insurance Portability and Accountability Act. He just knew it.

He and his colleagues tried to do the right thing. But what they were doing, overwhelmed as they were, was simply not enough.

PART THREE: FALLING DOMINOES

Within the space of two weeks, the torture suffered by Elizabeth Cunningham grew into a class action against Medwell.

In addition to the violation of her privacy, the investigation by Mr. Cunningham’s attorneys revealed the following:

Medwell’s telemedicine component, as needed and well-intended as it was, lacked a viable informed consent protocol.

The consultation with Elizabeth, and as it turned out, hundreds of additional patients in Maryland, Pennsylvania and West Virginia, violated telemedicine regulations in all three states.

Numerous practitioners in the system took part in teleconferences with patients in states in which they were not credentialed to provide that service.

Even if Evan hadn’t cracked open Dr. Johnson’s door and surreptitiously recorded her conversation with Elizabeth, the Medwell telehealth system was found to be insecure — yet another violation of HIPAA.

The amount sought in the class action was $100 million. In an era of social inflation, with jury awards that were once unthinkable becoming commonplace, Medwell was standing squarely in the crosshairs of a liability jury decision that was going to devour entire towers of its insurance program.

Adding another layer of certain pain to the equation was that the case would be heard in Baltimore, a jurisdiction where plaintiffs’ attorneys tended to dance out of courtrooms with millions in their pockets.

That fall, Rand sat with his broker on a call with a specialty insurer, talking about renewals of the group’s general liability, cyber and professional liability programs.

“Yeah, we were kind of hoping to keep the increases on all three at less than 25%,” the broker said breezily.

There was a long silence from the underwriters at the other end of the phone.

“To be honest, we’re borderline about being able to offer you any cover at all,” one of the lead underwriters said.

Rand just sat silently and waited for another shoe to drop.

“Well, what can you do?” the broker said, with hope draining from his voice.

The conversation that followed would propel Rand and his broker on the difficult, next to impossible path of trying to find coverage, with general liability underwriters in full retreat, professional liability underwriters looking for double digit increases and cyber underwriters asking very pointed questions about the health system’s risk management.

Elizabeth, a strong young woman with a good support network, would eventually recover from the damage done to her.

Medwell’s relationships with the insurance markets looked like it almost never would. &

Bar-Lessons-Learned---Partner's-Content-V1b

Risk & Insurance® partnered with Allied World to produce this scenario. Below are Allied World’s recommendations on how to prevent the losses presented in the scenario. This perspective is not an editorial opinion of Risk & Insurance.®.

The use of telehealth has exponentially accelerated with the advent of COVID-19. Few health care providers were prepared for this shift. Health care organizations should confirm that Telehealth coverage is included in their Medical Professional, General Liability and Cyber policies, and to what extent. Concerns around Telehealth focus on HIPAA compliance and the internal policies in place to meet the federal and state standards and best practices for privacy and quality care. As states open businesses and the crisis abates, will pre-COVID-19 telehealth policies and regulations once again be enforced?

Risk Management Considerations:

The same ethical and standard of care issues around caring for patients face-to-face in an office apply in telehealth settings:

  • maintain a strong patient-physician relationship;
  • protect patient privacy; and
  • seek the best possible outcome.

Telehealth can create challenges around “informed consent.” It is critical to inform patients of the potential benefits and risks of telehealth (including privacy and security), ensure the use of HIPAA compliant platforms and make sure there is a good level of understanding of the scope of telehealth. Providers must be aware of the regulatory and licensure requirements in the state where the patient is located, as well as those of the state in which they are licensed.

A professional and private environment should be maintained for patient privacy and confidentiality. Best practices must be in place and followed. Medical professionals who engage in telehealth should be fully trained in operating the technology. Patients must also be instructed in its use and provided instructions on what to do if there are technical difficulties.

This case study is for illustrative purposes only and is not intended to be a summary of, and does not in any way vary, the actual coverage available to a policyholder under any insurance policy. Actual coverage for specific claims will be determined by the actual policy language and will be based on the specific facts and circumstances of the claim. Consult your insurance advisors or legal counsel for guidance on your organization’s policies and coverage matters and other issues specific to your organization.

This information is provided as a general overview for agents and brokers. Coverage will be underwritten by an insurance subsidiary of Allied World Assurance Company Holdings, Ltd, a Fairfax company (“Allied World”). Such subsidiaries currently carry an A.M. Best rating of “A” (Excellent), a Moody’s rating of “A3” (Good) and a Standard & Poor’s rating of “A-” (Strong), as applicable. Coverage is offered only through licensed agents and brokers. Actual coverage may vary and is subject to policy language as issued. Coverage may not be available in all jurisdictions. Risk management services are provided or arranged through AWAC Services Company, a member company of Allied World. © 2020 Allied World Assurance Company Holdings, Ltd. All rights reserved.




Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]