2018 Power Broker

Pharmaceuticals

Tackling Tough Risks

Grant Bell
Senior Vice President
Marsh, Atlanta

A client of Marsh’s Grant Bell, a relatively new privately held biotech company, has multiple subsidiaries and is acquiring assets but hasn’t yet introduced any products. With such rapid expansion, risk management issues can crop up unexpectedly.

For example, a state recently sought evidence of workers’ compensation coverage at a new subsidiary located outside the client’s state of domicile. Bell “quickly and effectively guided our human resources team in the process,” the client said.

Bell also helped the client implement a system to ensure that it could “remain proactive in procuring specific workers’ compensation solutions or placements” as the company grows and enters new jurisdictions.

The client’s portfolio of coverages includes both public and private company D&O liability programs.

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“Grant and his team delivered significant savings with our most recent D&O public company renewal, achieving more than $200,000 in savings while maintaining both the retention and the total purchased limit,” the client said.

Another client praised Bell for his assistance in defending against a D&O claim.

“We faced a frivolous lawsuit that threatened many aspects of our business,” the client noted. “Grant was quick to organize the team, even connecting us with his firm’s experts on handling D&O carriers in this type of situation.”

The client added: “We have the best broker who can help us navigate any threat to our business from a risk management view.”

Armed with Knowledge

Matthew Grove, CIC, ARM, AIS
Business Insurance Consultant
BB&T Insurance Service, Frederick, Md.

No matter which direction their risks are heading, clients count on Matthew Grove to help manage them.

When Aziyo Biologics was purchasing the assets of CorMatrix last year, its greatest risk management concern was “the generation of certificates of insurance for more than 50 hospitals,” noted Jeff Hamet, VP, finance. Without the COIs, Aziyo’s new salespeople could not have entered the facilities, he explained.

Hamet said that Aziyo’s expectations were exceeded with the “simultaneous close of the deal, binding of coverage and generation of the necessary COI documents.”

Grove’s efforts “ensured a seamless transition with no loss of sales to Aziyo — which would have occurred had we been shut out from the hospitals even for a short period.”

Ed Cordell, former CFO of KeraLink International, praised Grove’s efforts when he came on board as the company was beginning to downsize in 2015.

“Matt inherited our line from a retiring broker at BB&T. He impressed me at our first meeting by being fully briefed on our business and coverages. However, he wanted to learn more” about KeraLink’s industry, competitors and business environment.

A year later, Grove used that knowledge to successfully market the renewal of the downsized KeraLink “as an opportunity in the corneal transplant market and sold the carrier on creating a package that could be marketed to the approximately 50-plus eye banks around the country,” Cordell said.

Leveraging Renewal Opportunities

Natalie Marquess, ARM, CIC, CRM
Senior Broker
Aon, San Francisco

After joining VIVUS Inc. as CFO in 2015, Mark Oki soon realized that the company’s renewals had been treated as a last-minute “perfunctory event.”

That changed after Oki turned to Aon’s Natalie Marquess for the 2016 and 2017 renewals. The renewal process, which began at least three months ahead of the renewal date both years, yielded many coverage enhancements while cutting premiums 41 percent in 2016 and 10 percent more in 2017, Oki said.

Marquess converted the company’s $10 million product liability deductible to a $5 million self-insured retention, giving VIVUS much more control of claims handling with no program cost increase.

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She also secured punitive damages coverage and negotiated a $25,000 deductible within the product liability program for clinical trial exposures — a fraction of the $5 million SIR that losses from clinical trials previously were subject to.

Oki also noted that Marquess understands VIVUS’s potential growth and planned for it by recommending adding a carrier to the company’s tower of insurers.

“It sets us up to have an existing relationship with the new insurer to absorb future growth” of risk.

An official for another client also praised Marquess for her efforts during that organization’s 2016 and 2017 renewals.

The Right Solutions at the Right Time

Lars Sorensen
Director EMEA Life Science & Pharma
Aon, Chicago

When product liability crises arise, Lars Sorensen has the resources to help his clients avert disaster.

Sorensen assisted one multinational client facing a material coverage reduction due to an exchange rate issue. For years, the client had €700 million of limits — or $1 billion of indemnity in the United States — where it generates significant revenue.

But in 2017, greater parity between the Euro and the dollar cut the client’s U.S. coverage by about $250 million.

Stressing that the organization could not shoulder a €200 million uninsured loss, the client noted that finding more than €100 million of additional coverage was a real challenge.

“Lars came with an Aon treaty, allowing us to benefit from an additional €200 million capacity immediately and following the conditions of our lead insurers in product liability without negotiations on wording and pricing,” the client said.

“This allows our company to continue to meet our future financial forecasts.”

For another client facing a claim, Sorenson collected documentation and developed arguments to rebut the plaintiffs’ allegations, ultimately compelling the plaintiffs to drop their claim.

Then Sorensen proactively developed “strategic risk management initiatives to improve internal controls and documentation, especially regarding quality controls,” which will allow the company to more efficiently confront future claims, the client said.

Coming Through in the Clutch

Nick Tait, AU
Principal
Marsh & McLennan Agency, San Diego

A client of Nick Tait’s invested considerable time and resources in a state-of-the-art facility.

Unfortunately, a sprinkler-head malfunctioned shortly before the operation was set to open in mid-2016. The malfunction occurred in the facility’s clean room but flooded the entire plant, causing substantial damage and a significant delay in opening the facility.

The client had business interruption insurance but faced significant complications with its claim.

First, “because the facility had not opened yet, there was not a historical revenue/income number to base the claim on,” the client said, adding that Tait and his team at Barney & Barney, a Marsh & McLennan Agency company, “were invaluable working with me to properly show the forecasts and impact on our income as a result of the flood.”

Recovering the loss of approximately $860,000 was an urgent matter. “Importantly, as a company, we were struggling with cash flow, and the BI claim payment was extremely important to bridge us from point A to point B while we recovered,” the client said.

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“Without a quick and good outcome for us, the company would likely be in trouble.”

Another client praised Tait for shepherding the company through a difficult renewal of its D&O liability insurance coverage while defending itself against a class-action claim.

Tait was able to renew the coverage with an increase in limits “without a meaningful increase in premium,” the client said. “The CEO and board were pleased with the revised D&O program that met our needs and fell within budget.”

Achieving Goals with Tailored Solutions

Darlene Villoresi
Managing Director
Marsh, Morristown, N.J.

When clients need their risk-financing plans fixed, Darlene Villoresi tops their call list.

Teva Pharmaceutical Industries Ltd. began self-insuring its U.S. product liability exposure in 2014 for economic reasons, explained vice president Limor Sagiv, head of global insurance. But after a few years, company officials “were not confident this was the right path,” he said.

Teva wanted insurers, however, to address its top three concerns: wording, deductibles and premium.

Villoresi “suggested a novel concept, and we drafted together a manuscript policy, based on the Bermuda form, which was shared with some key insurers — who are our partners on other lines — for their input,” Sagiv explained.

“After a very long process — over a year — we were able to bind a policy which answered the triple target,” including cutting Teva’s previous commercial program’s deductible by more than two-thirds, Sagiv noted. The program also includes a hedging tool to protect Teva’s balance sheet from a catastrophic event.

Sagiv ascribes Villoresi’s success to her determination, ability to simplify complex matters, skill in managing her team, great relations with markets, and her aptitude for “making things look achievable and possible by creating good process.”

Another client, whose acquisitions over the years required it to maintain multiple product liability programs, turned to Villoresi for an economical risk-financing approach.

Finalist: 

Brett Pizer
Vice President
Marsh, Philadelphia

 

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]