Do Businesses Need Insurance if They’re Protected by a PREP Act Declaration?
Because immunity from the PREP Act isn’t permanent, it’s important that companies have the right type of large business insurance
. The COVID-19 declaration is set to end in October 2024. Unless it’s extended, this means businesses are at risk of liability claims.
“The PREP Act declaration and its immunity will expire. So, what happens next?” said Marcos Perez, a Life Sciences portfolio manager for The Hartford’s International business. “Those businesses won’t have any immunity anymore. And if they get sued or there’s a claim, they’ll want to have the right insurance coverage to help them.”
Perez emphasized that companies can also face risks outside of the U.S., highlighting the need for insurance coverage.
“The PREP Act only exists in the U.S., and although other countries are facing pressure to enact something similar, companies doing business outside of the U.S. where the country’s laws don’t have an effect need coverage,” Perez explained.
What Types of Insurance Do Businesses Need?
According to Perez, a few types of coverage that businesses may want to get include:
- Human clinical trial liability coverage
- Product liability coverage
- Errors and omissions (E&O) insurance
- Public liability insurance
- Employer’s liability insurance
Tips To Reduce Your Product Liability Risks
If a business decides to make, sell or donate safety materials, or participate in other countermeasures outlined in the PREP Act declaration, there are steps they can take to reduce product liability risks. Perez recommended taking these steps instead of solely relying on immunity granted from the PREP Act.
1. Establish a COVID-19 Task Force
Create a task force dedicated to the pandemic to ensure business operations follow best practices as outlined by the:
- Centros para el Control y la Prevención de Enfermedades
- Occupational Safety and Health Administration
- State and local guidance where applicable
2. Always Consult With Legal Counsel
Have an experienced legal team to help:
- Determine if there is immunity from the PREP Act
- Make sure there’s appropriate contractually risk transfer
- Better understand how to protect the business
3. Seek Advice From an Insurance Agent or Broker
Businesses should contact their local agent or broker to review current policies and identify any risk exposures.
4. Clearly Document Countermeasures
It’s essential that businesses follow FDA regulations and any EUAs. Document everything related to countermeasures, such as:
- Having a list of suppliers the business will work with for COVID-19 countermeasures
- Checking if suppliers have a quality management system
- Having a record of EUAs that business’ products comply with
5. Seek a Partner With Expertise
An inexperienced business can partner with another company to provide advice on how to convert operations and what to be aware of when making the temporary change to provide countermeasures.
Companies can also work through an agent or broker to partner with an experienced insurer that specializes in complex risks. For example, The Hartford offers specialized products. And with over 50 life science specialists in the world, the company can analyze complex risks and develop tailored solutions.
Internationally, The Hartford has access to Lloyd’s of London Syndicate 1221, which offers specialized solutions for hard-to-place risks for companies around the world.
“There’s a science behind good insurance,” Perez noted. “We have a team dedicated to the life science space. They truly understand the risks that these companies face on a daily basis and in unique situations, like the PREP Act.”
6. Follow Product Safety Management Plan
A product safety management plan helps keep a business and its employees safe while making countermeasures. It’s important for companies to review this plan and notify employees of any changes.
Companies creating medical devices should have a post-market surveillance system in place. This provides a way to monitor medical devices that are created for public use.
7. Review Supply Chain and Revise Contracts
The ongoing pandemic and political unrest in the world have had significant, lasting supply chain impacts
. Look at existing contracts with vendors and supplies to make sure business risks are appropriately transferred.
If a company needs to work with a new vendor or supplier, it’s essential to fully vet their business and consult with a legal team before signing a contract.
8. Examine Promotional Claims
The FDA and Federal Trade Commission (FTC) are targeting companies for making product claims that are:4
9. Report Serious Incidents to the FDA and CPSC
The U.S. Consumer Product Safety Commission (CPSC) emphasizes that companies still have to follow the rules outlined in Section 15(b) of the Consumer Product Safety Act. This means businesses must file a report within 24 hours of learning information about product safety or a defect that could create substantial risk of injury or death.
10. Notify an Agent or Broker About Claims
Businesses that learn of an incident that can lead to a claim, or if one was already filed, should immediately notify their agent or broker. They can help with the claims process and what information is needed to file.
1,2 U.S. Department of Health & Human Services, “Public Readiness and Emergency Preparedness (PREP) Act”
3 Federal Register, “Tenth Amendment to Declaration Under the Public Readiness and Emergency Preparedness Act for Medical Countermeasures Against COVID-19”
International Life Science coverage is underwritten by The Hartford Syndicate 1221 or Navigators Insurance Company UK Branch. Syndicate 1221 is managed by Navigators Underwriting Agency Limited. Registered office of these companies: Floors 7-8, 6 Bevis Marks, Bury Court, London EC3A 7BA. Navigators International Insurance Company is rated “A” and Navigators Insurance Company UK Branch is rated “A+” (Excellent) by A.M. Best and both are rated “A” (Strong) by Standard & Poor’s. Lloyd’s is rated ‘A’ (Excellent) by A.M. Best and ‘A+’ (Strong) by Standard & Poor’s. Underwriting coverage is subject to the language of the policy as issued. Products may not be available in all countries or localities and policy features may vary by country or locality. Please consult your insurance broker and review the policy for coverage limitations, restrictions, exclusions, terms and conditions.
La información proporcionada en estos materiales brinda información general y de asesoría. It shall not be considered legal advice. The Hartford does not warrant that the implementation of any view or recommendation contained herein will: (i) result in the elimination of any unsafe conditions at your business locations or with respect to your business operations; or (ii) will be an appropriate legal or business practice. The Hartford assumes no responsibility for the control or correction of hazards or legal compliance with respect to your business practices, and the views and recommendations contained herein shall not constitute our undertaking, on your behalf or for the benefit of others, to determine or warrant that your business premises, locations or operations are safe or healthful, or are in compliance with any law, rule or regulation. Readers seeking to resolve specific safety, legal or business issues or concerns related to the information provided in these materials should consult their safety consultant, attorney or business advisors. All information and representations herein are as of October 2022.