Many vendors lack product liability insurance – includes information on VGM & Associates Inc.’s liability coverage
Many vendors lack product liability insurance
Distributors and dealers of health care products often erroneously assume that manufacturers’ product liability coverage extends to them, according to officials from Medmarc, the world’s largest insurer of medical device and diagnostic equipment manufacturers.
“Many manufacturers try to induce vendors to handle their products by saying, ‘Work with us because our insurance will cover you,’ but read the fine print because that might not be the case (due to policy exclusions),” according to Thomas Konopka, Medmarc’s marketing manager. “Claims are growing, six-figure settlements are becoming common, and juries are capricious, so make sure you are covered.”
Manufacturer product liability insurance typically includes a statement of “vendor liability exposure” that spells out which, if any, of its vendors and products are covered by the manufacturer’s policy. Vendors should make sure that they and the products they handle are included in that statement, Konopka said.
“Many policies only name certain vendors and a limited number of products,” he said. “The best policies will specify ‘all vendors’ and ‘all products,’ but even then you may not be fully covered.”
For instance, vendors could lose the product liability coverage that manufacturers extend to them by altering, repackaging or relabeling a product, or if they improperly install a product, fail to demonstrate how it works or make any unauthorized claims about a product.
The most complete protection, Konopka said, is for a vendor to get its own insurance.
Virtually all of Medmarc’s 500 members are manufacturers and the company says it has no plans to begin providing insurance to distributors and dealers on a large scale, even though many health care distributors and dealers are underprotected. This is especially true for distributors and dealers in home care. Their customers are older, sicker and more frail than ever because hospitals are sending patients home earlier and nursing home beds are harder to find.
“The most dangerous setting in health care is not the operating room or the emergency room–it’s the home,” said Deborah L. Strickland, loss prevention manager for the Fairfax, Va.-based company, during a presentation at the National Home Health Care Exposition Nov. 16 in Atlanta.
Cindy Khin, a claims administrator for Medmarc, suggested ways to avoid getting caught in a product liability fight:
* know your product, including accessories, and how to service it, * don’t make any unauthorized guarantees or warranties, * don’t remove or change a manufacturer’s label and * relay all complaints and problems with products to the manufacturer.
Khin also warned about distributing or selling products for foreign manufacturers. “If they do not have a U.S. presence, you will probably be held fully accountable, because it’s impractical or impossible to sue an overseas company,” she said.
Manufacturers step up
Most often, when a distributor or dealer is named in a product liability lawsuit, the plaintiff will not pursue it as aggressively as the manufacturer, who tends to have deeper pockets. Besides, most manufacturers prefer to assume the defense of their products, in part, because they can benefit from a consistent defense.
Nevertheless, vendors named in lawsuits often incur significant legal expenses before being released, Strickland said. Therefore, they should try to avoid being named in the first place.
Vendors should be careful whom they buy insurance from and consult guides, such as the Best Insurance Directory, to identify highly rated companies.
The Safe Medical Devices Act, signed Nov. 28 by President Bush, risks creating antagonism between manufacturers and those who distribute and sell their goods. The bill requires certain health care workers to report to the Food and Drug Administration any defects or potential defects in medical devices. If they don’t report, they could face fines up to $15,000 per violation. The law is at least one year away from being implemented. (See “Medical devices come under microscope,” p. 10.)
“It may negatively impact your relationship with manufacturers because you may become the one to blow the whistle on them,” Strickland said. “Nevertheless, try to cooperate with manufacturers rather than being adversarial.”
Medmarc is a risk retention group founded 12 years ago as a captive insurance provider. It offers claims-made coverage, and members must invest in the company to be eligible for coverage.
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