Product Fundamentals: Medical Technology Insurance

In recent years,  the medical technology (medtech) sector continues to experience exponential growth. The exposures related to this sector are complex and require an in depth understanding of risk from all levels. Today, medical technology insurance is a bespoke solution requiring several sections that specifically provide coverage to mitigate common risks in healthcare and technology, which are closely intertwined.

For more information on insurance trends in medical technology companies, including the range of risks faced, see our article here.

Medical technology policies should be structured with respect to the individual risk profile of the business concerned. As such it is essential that your risk advisor possesses an in-depth understanding of the exact nature of your business and the full range of products and services offered and how these are delivered.

Generally, medical technology insurance consists of the following sections of cover:

Provides coverage for companies from allegations made against them arising out of bodily injury in the provision of healthcare services and technology activities as a result of negligence, errors or omissions, cyber events, system outage and breaches.

Provides coverage for companies from allegations made against them arising out of technology activities for negligent act, error, omission, misstatement, misrepresentation, breaches etc.;

or actual or suspected product or service defect or deficiency, or contract performance failure, which creates financial and reputational risks for medical device manufacturers.

Cyber liability insurance provides cover for first party losses and third party claims as a result of a number of cyber-related incidents such as: ransomware, cryptoware, denial of service (DoS) attack, malware/malicious code, computer virus, trojans, worms and social engineering fraud.

See our product fundamentals article on cyber liability insurance here.

Covering costs which you are legally obligated to pay by reason of liability of another third-party person or organisation that you assume in a contract indemnity for bodily injury or property damage occurring during the policy period, except when it is caused directly by healthcare services or technology activities.

See our product fundamentals article on public and products liability insurance here.

Provides cover for bodily injury/property damage caused by products/services (as declared) that is caused by an occurrence (to which this coverage applies) and which results from activities during a clinical trial that is sponsored by you or on your behalf (payment is made in accordance with Medicines Australia or other applicable guidelines).

Provides coverage for companies from allegations made against them arising out of bodily injury in the provision of healthcare services and technology activities resultant of infringement of intellectual property rights, breach of any intellectual property rights, piracy or plagiarism or any misappropriation of content, misappropriation of a trade secret, invasion, infringement or interference with rights of privacy or publicity and defamation.

Any company that provides medical technology services or products is exposed to the risk of legal actions. An appropriate medical technology policy can help to transfer this risk. Legal action of this nature is evolving as technology develops and contractual obligations increase.

A medical imaging company created a mobile application which is used by teleradiologists. In this event – which eventually led to death – a patient experienced trauma due to slow treatment caused by the delay in image availability via the app. Although both parties were sued, it was alleged by the reporting facility that the death of the patient was due to a slow transfer of images from modalities connected to the radiology picture, archiving and communications system.[1]

A patient was registered with an online health platform and regularly used it to book appointments with physicians. The platform had recently introduced an AI chatbot function which allowed patients to be quickly and efficiently treated. On one occasion the patient used the AI chatbot function and was misdiagnosed, which lead to a costly and lengthy follow up process for both the patient and the online health platform. The output of AI is only as good as its human input and often when AI programmers do not have a medical background or training, there is an increased likelihood for false positive and false negative errors to occur.

A Contract Research Organisation (CRO) was responsible for recruiting 500 subjects for a late-stage clinical trial. After most of the participants were recruited, the CRO’s voice-response system experienced a problem that resulted in the invalidation of much of the trial data. The recruitment process had to be repeated, and the sponsor led a breach of contract allegation against the CRO.

[1] All claims scenarios provided by CFC Underwriting.

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