#NEWS

12/07/2017

How are class actions a danger to Medical Device Manufacturers?

In a recent legal case, over 800 women have launched legal action against the NHS and the manufacturer of a vaginal mesh implant used to treat pelvic organ prolapse after childbirth, alleging that the devices ruined their lives, leaving them in debilitating and lifelong pain.

 

The trial is being described as one of the country’s largest ever product liability class actions. Whilst the UK’s medical product regulator has said the current evidence showed the devices are “acceptably safe” if used “properly and as intended”, the costs of the litigation will be enormous, and the manufacturer’s defence costs are likely to be funded by their Products Liability insurers.

 

Whilst this case is still ongoing, if it were proved that the implants were defective, and the judge were to award each of the 800 claimants £20,000 each (although it could be much more than this), the manufacturer would be faced with a bill of £16 million. It is highly unlikely that they would have even close to that amount of insurance cover. This could mean the company would be forced to wind up, and could potentially lead to the Directors being sued personally.

 

This case should highlight to medical device or consumable manufacturers the importance of having adequate Products Liability insurance in place – particularly in the event of a class action – and prompt them to review their current arrangements.

 

Products Liability insurance is usually written with a limit of indemnity per occurrence but is also subject to an annual aggregate limit which caps the amount an insurer will pay in any policy year, so it would be worth looking at both aspects.

 

What steps can companies take to ensure they are properly protected?

 

  • Consider the risk associated with the product. Common sense tells you that a bandage presents far less risk to a patient than an invasive product and as such is far less likely to cause harm.

 

  • Consider the volume and geography that the products are sold in. If you sell into the UK market only, you are far less likely to be sued than if you supply into the USA and the claims will be for a higher amount in the U.S.  It also stands to reason that the more you sell, the greater the potential for a claim or class action to occur. In the above example, the product has so far been deemed safe, but the cost of proving your innocence can be high!

 

Once you have worked out the extent of your risk exposures, you will be in a position to make an informed decision about how much Products Liability cover you need to buy “per occurrence” and for the annual aggregate.

 

This decision could be the difference between your business surviving a major claim or not.