Setting the Record Straight
Given the risks, FDA warnings and lawsuits surrounding transvaginal mesh implants, it’s no wonder product liability insurance premiums for their manufacturers skyrocketed.
The problem implants, though, are made of synthetic mesh, not the biologic mesh manufactured by Sarah Goodman’s client Acelity.
The distinction was lost on carriers, who also conflated the industry’s litigation with Acelity’s litigation on a separate matter, said Joanne Belisle, senior director of risk management.
In preparation for a May renewal, Goodman mounted a multi-pronged education program in January, putting Belisle and her boss in front of underwriters to explain the difference in products.
She approached “every single market out there” to tell the story, Belisle said, coming in with enhanced coverages and better terms and conditions than Acelity had budgeted for. “She left no stone unturned.”
Michael Burgess, vice president of finance for Direct Flow Medical, realized he had yawning insurance gaps when a series of brokers fumbled product liability and clinical trial coverages. He needed a broker who specialized in medical devices and pharmaceuticals.
“Sarah looked at contracts that addressed indemnification and insurance ramification. She worked with our attorneys on language. She knew what coverage we needed for clinical studies in Germany and the rest of Europe,” Burgess said. He once called her from Europe, forgetting the time zone difference. “It was 4:00 a.m. and she took the call.”
Booting in a Long Shot
When Tecomet acquired two companies in 2014, its risk profile expanded along with its head count, annual revenues and international footprint.
All three companies were in the same broad industry — manufacturing components and assemblies for the medical implant, aerospace/defense and specialty commercial/industrial markets — but their insurance profiles were different and needed blending, with a strong emphasis on removing redundant coverage in its global program.
“It wasn’t a standard renewal,” said John Connolly, the CFO of Tecomet.
The logical time to consolidate insurance was at the acquisition, Connolly said, and the logical broker to do it was the incumbent who managed the biggest portion of business and understood Tecomet the best.
That wasn’t Ty Howe, who brokered only the company’s relatively small directors and officers program, not the big liability and product insurance lines. “Marsh was a long shot,” Connolly said.
But Howe impressed him, the acquired companies and the private equity firm that owns Tecomet.
“Ty’s strong life sciences background allowed him to jump right in. He formed a very customer-oriented team at Marsh, and they learned the business quickly.” Howe and his team produced a merged program with far fewer policies, and premium savings of more than 37 percent.
“He blended the small-company customer approach with Marsh’s big-company scope. We got the benefits of both.”
Impressing With Preparation
Joel Keller, controller, Peregrine Semiconductor, doesn’t have to be an insurance expert, because HUB’s Dan Kabban is.
When Peregrine went public, Kabban walked into the first meeting having already read its 300-page SEC filing and carrying a three-inch binder of policies tabbed where he found gaps and opportunities.
And when Kabban reads about a new Peregrine location, Keller counts on a call from him. “Dan might call to say ‘Congratulations on your acquisition. You’ll need statutory insurance.’ He knows the company as well as our staff.”
Kabban made a good first — and second and third — impression on Raffy Lorentzian, controller, Youngevity International. His supplements company was growing fast.
“Dan came in with a comprehensive insurance plan that identified gaps in our cargo and inventory insurance,” Lorentzian said.
Drawing on his deep knowledge of life sciences and the FDA, Kabban came through with “nice” product liability coverage. Later, he introduced a program to control workers’ compensation claims. “He’s our best advocate.”
Kabban focused his critical eye for detail on Pulse Electronics’ business processes, said CFO Mike Bond.
For example, he looked at its flow of goods, from China to Hong Kong and back to contract manufacturers in China, to find insurance efficiencies. And he looked at “how we reported our asset pools — not strictly an insurance issue — and found we weren’t as accurate as we thought. He saved us a lot on asset-based insurance policies.”
Customers’ ‘Quiet Hero’
Ashford Inc. consists of three public companies. The traditional directors and officers insurance structure was on three separate policies, but that structure was fraught with coverage and pricing issues, said Philip Flanary, senior vice president, risk management.
Ashford looked to combine the programs while providing the same or higher limits to each organization.
To meet the goal, Patrick Roth modeled a program that insures the companies together for the initial policy, then secured excess liability for each individual company — saving 20 percent in premiums and providing 10 percent incremental limits of liability that Ashford hadn’t even budgeted for.
“Pat’s program emphasized market penetration and minimizes cost differential. That makes a difference in the risk world,” Flanary said.
Chris Heck, risk manager, Gilead Sciences, recalls meeting Roth when the large pharmaceuticals company was considering restructuring its D&O program. The program was “a big deal” to its board of directors. “It was a very serious conversation.”
Rather than ducking from attention or elbowing his way onto center stage, as new service team members tend to do, Roth immediately provided a positive impact, but he did it quietly, without pushing any agenda other than Gilead’s best interests.
Over the next months, he “spent a lot of time getting his hands dirty to make sure we had no gaps” and that the policy wording was optimal for Gilead. Heck took that work to outside counsel for review. “No issues, flaws or gaps,” he said. “Pat is our quiet hero.”
Winning Over Underwriters
Amy Sinclair has “the personal touch” with her clients, said Darlene Deptula, CFO, Pieris Pharmaceuticals. Even when it was too late last year to send D&O business Sinclair’s way, Deptula said Sinclair dropped everything to review the contract another broker wrote.
She advised about questions to ask, policy language and missing coverage. She did damage control, and when the policy came up for renewal, “Who did I call?” Deptula said. “Amy.”
Her personal connections with underwriters are key, said Lou Arcudi, CFO of Idera Pharmaceuticals. Idera’s D&O coverage and rates haven’t budged for years from their now-unheard-of low, thanks to Sinclair’s constant, behind-the-scenes advocacy with a longtime carrier.
Her understanding of all the phases of clinical development “goes a long way,” he said. “Amy asks the right questions. She’s seen everything that can happen to a biotech company, and carriers respect that.”
When AMAG Pharmaceuticals doubled in size twice, its product profiles and property exposures transformed. Carriers declined to quote. One involved product liability exposure for an injection hormone to avoid preterm births.
By providing a complete package of information and meetings with the carrier’s medical affairs people, one carrier who declined was persuaded to quote. “It turned into a competitive bid,” said Scott Townsend, senior vice president of legal affairs. How did she do it? “She has good relations with underwriters and the life sciences experience to educate underwriters about our risk.”
Tackling Coverage on a Global Scale
AHT’s management liability practice leader Mike Tomasulo makes the complex simple, said Andy Drechsler, CFO of Insmed.
With his company’s international expansion, the biotech industry’s regulatory requirements and risk factors associated with Phase 3 trials, Drechsler confronts a broad variety of risk.
For example, regulations vary from country to country. As Insmed added European locations, stateside managers struggled to understand local policies. “Mike explained complexities country by country. He put together a global policy rather than policies for each country.”
Since Drechsler isn’t a lawyer and doesn’t spend more than 10 percent of his time on risk management, his broker’s legal background and experience working with other small companies going through expansion was “a godsend.”
Along with its clinical trial insurance, Soligenix’s D&O insurance is “near and dear” to its board of directors’ hearts, said Joe Warusz, vice president of finance.
When its previous broker presented a D&O renewal package as a done deal without sending out RFPs to other carriers, Tomasulo stepped in. Within a month, he bound a new, superior package that cost 30-40 percent less.
“Mike’s more of a business partner than a broker,” Warusz said, partly because he advocates for Soligenix even when he stands to gain nothing from it. For example, he’s in continuous contact about other lines of insurance but has made no attempt to broker them.
“He says our other brokers are doing fine. He doesn’t pressure me to change.”