Life sciences companies, including biotechnology, medical technology and pharmaceuticals, operate in a complex and highly regulated environment. For managing directors up to special positions such as the Qualified Person or Competent Person (PRRC), unlimited personal liability applies in the event of breaches of duty arising from board activities. D&O insurance is also important to protect your advisory board members, such as investors or a (Clinical Advisory Board), in order to cover their personal liability risks as well. and graduated plan officers - D&O insurance is important to cover personal liability risks. We would therefore like to explain the most important aspects of our insurance solution below.
In the highly regulated life sciences industry, managers bear a great deal of responsibility, not only towards test subjects/patients, but also towards investors as a capital-intensive industry. As a result, managers are personally exposed to a variety of liability scenarios. It is also typical of the industry that many managing directors often only realize the extent of their unlimited personal liability when the first liability cases arise; there is often a misconception that the GmbH (limited liability company) actually has a limiting effect on liability - however, this only applies to the shareholders, not to the managing directors.
D&O insurance is therefore part of the employer's duty of care, even if you as the founder hold shares in the company yourself. However, this applies in particular to managing directors and active managers as soon as funds from third parties (venture capital, business angels, etc.) are invested or special project risks are entered into through initial clinical studies. This is the core promise of D&O insurance:
a) Examination of the question of liability
b) Assumption of the costs of defending against unjustified claims (e.g. lawyer's fees and court costs)
c) Assumption of indemnification for justified claims (e.g. compensation or settlement payment)
Unlike traditional D&O insurance policies, our insurance cover for life sciences companies includes extended cover for people in critical key positions, such as
This extended cover is essential, as liability claims in life sciences companies are regularly based on specific legislation in relation to industry-specific persons and roles. We also cover special industry representatives in accordance with foreign legal standards.
In addition to the choice of a suitable sum insured, the quality of the terms and conditions should be at the forefront of advice, as this determines whether insurance cover is provided or not. Here, our clients are protected by our own D&O Life Sciences conditions "D&O Prime Protect 2024 - Life Sciences", which are market-leading!
Florian Eckstein - Managing Partner Atrialis GmbH
Life sciences companies are subject to complex requirements of national and international special legislation that must be constantly reviewed and adapted. In addition to general compliance requirements, unforeseen incidents or manufacturing errors can expose management to liability. These incidents can range from product recalls and reputational damage to health and injury claims and can result in high financial costs. Although property damage and financial losses can often be covered by business and product liability insurance, managers are also personally liable in the event of organizational negligence or a lack of supervision. A lack of insurance cover at company level is also a clear case of organizational fault in German case law in the absence of referral (tip: pay attention to documentation on this topic!) and opens up unlimited private liability for such damage.
Clinical studies are highly unpredictable. Damage to the health of trial subjects due to unexpected side effects can trigger serious claims against the company and its managers. Even if trial subject insurance has been taken out to cover the consequences of damage to health, management can be held liable for breaches of duty due to a lack of care or a lack of supervision of safety regulations.
Collecting, sharing and analyzing proprietary (research) data while managing the security challenges associated with personal information and intellectual property such as patents, trade secrets and proprietary processes is inherent to any life sciences company. In the field of research and development, protecting sensitive data is of paramount importance, and the consequences of a data or confidentiality breach can be extremely damaging, both financially and reputationally. Even if your company (hopefully already) has cyber insurance in place, an executive can be held liable for a data breach for failing to ensure adequate cyber security measures are in place, so you may be held personally liable along with your data protection officer.
Due to the risks and the special liability environment, the premiums for D&O insurance in the life sciences sector are higher than in other sectors. On average, the annual premiums for biotech and medtech start-ups with a sum insured of EUR 1 million range from EUR 1,100 to EUR 1,800 net (plus 19% insurance tax). The market for specialized D&O policies for young companies or those with negative business results is significantly smaller and requires precise advice to ensure that essential components and gaps are closed. By using our special concepts as well as the framework contracts of our parent company Risk Partners, we can both keep additional costs within limits and offer market-leading insurance cover with specific terms and conditions.
D&O insurance is essential protection for managers and directors in the life sciences industry. The requirements for due diligence and liability risk are particularly high in this highly regulated environment, so a tailor-made D&O insurance policy helps your managers to carry out their work and make decisions with confidence and self-assurance in the demanding environment of the life sciences. Thanks to our collaboration with Risk Partners GmbH since the beginning of 2024, we can offer further added value here - including expert support for a US IPO for our biotech clients. This is unique added value for a life sciences specialist insurance broker.