Monthly Archives: August 2009

Intellectual Property Insurance – The Most Underrated Insurance!

Posted on by

Did you know that Intellectual Property (patent, copyright, trademark) claims are 5 times more frequent than Directors & Officer (shareholder) claims?  Yet, while most companies carry D&O insurance, very few companies will cover their intellectual property exposure.

Intellectual Property insurance reimburses the litigation expenses to enforce or defend against Intellectual Property infringement and protects against certain violations involving patent, trademark and copyright infringement.

The average patent infringement lawsuit cost $2.6MM, when the amount in controversy is between $1MM to $25MM.  The median litigation expense for an infringement suit through trial can range from $250,000 for copyright to $2,000,000 for patent.

With the economic downturn and companies’ operating revenues being less liquid or non-existent, a company’s ability to adequately defend itself in an Intellectual Property infringement lawsuit may be the key its survival.

By not having Intellectual Property Insurance you face the following risks:

  1. Abandon your accused products.
  2. Try to obtain a license from the accuser from a position of weakness.
  3. Defend yourself by using your cash reserves and available credit lines.

In my opinion, importers should be twice as cautious of getting embroiled into an infringement claim.   Since the overseas manufactures do not share in any of the risk of an infringement claims or expense, they are not as diligent or concerned about potential infringement claims.  I have seen countless instances and claims involving artwork on imported products and packaging.  For example, rug importers have to pay particularly close attention that their rug patterns are not similar or the same as their competitors and many of the foreign outsourcing manufactures have garnered bad reputations for using the same artwork on packaging for their different customers as a way to hold down development and production cost.

Health Supplements Biggest Problem – Undeclared Substances!

Posted on by

One of the biggest issues facing the health supplement industry is the frequency in which undeclared substances find there way into the products.

One commissioned study conducted by Informed-Choice indicates that approximately 25% of supplements in the market could be contaminated.

Some of the undeclared substances in supplements found could be deadly.  One example of this is when the undeclared drug, Sildenafil, an active drug ingredient for erectile dysfunction, was found in the product STEAM, made by Nutracoastal Trading, LLC.  When Sildenafil interacts with Nitrates, the result could be a lowering of blood pressure.  People with diabetes, high blood pressure, high cholesterol or heart to disease often take nitrates and if combined with STEAM, could have faced life threatening consequences. 

In other cases, there could be financial impact to those that take supplements that have undeclared substances. It seems that almost every week there are athletes in the news claiming that the supplements they were taking had undeclared substances that caused them to fail a drug test. Sometimes the athletes are right. A good example is in 2004 Triathlete, Rebeka Keat, tested positive for norandrostendione and was suspended for two years for failing the drug test.  With the help and support from her sister, her name was finally cleared when the WADA laboratory  tested the supplements  she was taking and found that they were contaminated with norandrostenedione.

Since my job is product liability insurance, what I find most interesting is the question of whether or not product liability insurance would cover both of the supplement manufacturers/distributors in the above mentioned cases.

In my opinion, the first case Nutracoastal Trading, LLC is a slam dunk and should be covered by product liability insurance; however, the second case, involving Rebeka Keat, is not so clear and the manufacture/distributor may not be fully covered by their product liability policy.

In the first case, since the trigger for product liability coverage is bodily injury or property damage, the manufacture/distributor of STEAM should be covered by their product liability insurance policy, since the lawsuit would likely be a result of an interaction of Sildenfil with Nitrates and likely lead to bodily injury or death.

In the second case, it is not as clear whether or not there was any bodily injury.  The attorney for Rebeka Keat could claim emotional distress and trigger the bodily injury coverage of the product liability policy and possibly receive judgment or settlement compensation. However, much of the damage to Rebeka could have been more economic in nature such as the loss of current and future sponsors.   While the product liability insurance carrier may have a duty to defend the manufacture/distributor of the supplement that caused Rebeka to get banned from competition, any attempt to recover economic losses would likely not be covered by the product liability insurance policy, since there was no bodily injury or property damage to trigger coverage.