Monthly Archives: September 2009

Nanotechnology – The Great Unknown!

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Back in December of 2008 I wrote a blog “Insuring Nanotechnology Still Up In The Air”.

 In the article, I stated that because insurance carriers viewed nanotechnology as potentially the next “asbestos” it would be difficult to insure and that nanotechnology business development would probably be forced to ‘creep at a snails pace”.

It turns out that, maybe, I was wrong. According to Lux Research, a consultant on emerging technologies, Nanotechnology business is expected to increase thirty fold.  It is expected to increase from $100 billion in 2007 to $2.6 trillion in 2014.  It is thought that, as much as 15% of all manufactured products will rely on some type of nanotechnology by 2014.

The interesting part of the from a product liability insurance point of view is how many insurance carriers are going to line up to provide product liability policies for nanotechnology businesses.  Ultimately, larger companies, such as DuPont and 3M, could either self-insure or bring enough premium to the table to attract some insurance carriers to provide product liability coverage.  However, with some claims already being filed with some sunscreen companies that use nano particles in their products, it is my opinion that most of the insurance carriers are going to wait before jumping in to provide product liability coverage for the new emerging nanotech products.  The insurance carriers are going to want a proven track record of no claims before making product liability insurance policies available to small and medium size companies.

The insurance companies’ primary concern is that since nanotech particles can be smaller than a virus and can easily penetrate or be absorbed by human tissue, they may be handling severity related claims such as cancer, similar to the thousands of past and pending asbestos claims.

One thing that is a sure thing – product liability trial lawyers are already having seminars in far away exotic locations and are preparing their strategies on how to hit a home run similar to the home run hit with asbestos.

The Electronic Discovery Trap

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In a recent blog, “Why Naming Multiple Defendents In A Lawsuit Is Common Practice”, I talked about the liberal discovery rules in the U.S. and cost to comply when named as a defendent in a product liability lawsuit.

I wanted to expand on this because so many of the businesses that contact us have never been through a lawsuit and do not have any concept of how extremely expensive it is to comply with discovery in today’s electronic and technological world.

Often overlooked in today’s modern world is the fact that plaintiff attornies have spent the last 20 years perfecting the art of electronic discovery and how to use it against the defendents as a way of making them spend money. 

Did you know that defendents are required to preserve every email? If the emails are in an old system, defendents are required to search out and discover emails in old systems that are no longer supported and make this information available to the plaintiffs in whatever format they want to read it.  Not only is it expensive to ferret out the emails, but what if the emails contain sensitive materials that are protected by HIPPA privacy laws?  The cost to comply goes up.

I think you get the picture.  Even if you have no liability in the lawsuit, our liberal discovery rules in the U.S. allow the plaintiff’s attorney to force you to spend a great deal of money to comply with discovery.  The higher the costs to you the greater the asking price by the plaintiff’s attorney to reach a settlement.

Defense Costs Inside or Outside The Limits of Liability?

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When buying a surplus lines product liability insurance policy, you are often presented with product liability quotes that indicate the defense costs are inside the limits of liability.  If you read your proposal or quotes carefully, you will often see the option of adding defense costs outside the limits of liability for an additional 10% premium charge.

Why is this important? Before I can answer this it is important that you first understand what it means to have defense costs inside or outside the limits of liability.  If your defense costs are inside the limits of liability, any lawyer fees, investigation expenses, defense expenses and appeal expenses erode your limits of liability.  In other words, if all these expenses add up to $500,000 and you have a $1,000,000 per occurrence limit on your product liability policy, you only have $500,000 left to pay a judgment or settlement.   If your defense costs are outside your limits of liability, lawyer fees, investigation expenses, defense and and appeal expenses of a claim will not reduce your liability limits.

This may not appear to be a big deal on the surface, but if you had a bad batch of defectively manufactured products, you may find yourself faced with multiple claims.   Recent data indicates the national average cost to defend a product liability claim is $876,000.   A $1,000,000 per occurrence with a $2,000,000 aggregate liability limit could be exhausted very quickly and you could find your business with no limits left to pay the judgment or settlement of additional claims very quickly.

Once the liability limits have been exhausted, your insurance carrier no longer has any obligation to pay any claim, judgment or claim expense or to defend or continue to defend your company.

So when purchasing or renewing your product liability policy, review it carefully and if your defense costs are within the limits of liability, think very carefully about spending an additional 10% to add your defense cost outside the limits of liability.  It could mean the difference between success and failure as a business.