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Do Distributors Require Professional Liability Insurance?
Francis A. Stockwell  |  August 31, 2011
Q

Question:  Do distributors require professional liability insurance coverage in addition to products liability insurance coverage?

 

A

Fran StockwellAnswer:  No, at least not “professional liability” coverage as it has been understood traditionally. The actions or omissions of sales representatives when acting in the scope of their employment should all be covered as part of the medical device company’s products liability insurance coverage. Such circumstances include when sales reps: (1) provide product consultations; (2) make device technical adjustments; (3) are present in operating rooms during surgeries to answer questions deemed essential for patient care; or (4) are present during patient monitoring visits to ensure clinical trial protocol compliance by surgical staff and nurses. Products liability insurance, when written correctly, will provide the company and its sales reps with protection in the event that a sales rep is named in a malpractice action.

Because sales reps frequently enter clinical settings such as operating rooms, sales reps may become the center of attention when patients experience unexpected or undesirable outcomes. Frequently, statements made by sales reps to customers result in problems for companies and raise the issue of insurance coverage. There is a popular misconception that a sales rep’s presence in an operating room or physician’s office to observe the use of the product constitutes the performance of medical services and, therefore, creates professional liability exposure. Sales reps, however, do not provide medical services. They are not licensed medical professionals and are in fact prohibited from having direct patient contact. Consequently, the sales reps of medical device companies do not need to procure separate or supplemental professional liability insurance coverage and their activities are covered under a company’s products liability policy.

To translate this more specifically into insurance terms, a products liability policy is intended to cover persons acting under the direction, control or supervision of the named insured, be they employees or independent sales representatives (“1099 contractors”). The personal acts or omissions connected with the sale, loan, lease, or delivery of any medical device, instrument or drug sold, handled, distributed or disposed of by the named insured are not construed to be medical professional services, but fall instead within the products liability policy’s definition of the “completed operations hazard” and “your work.”

 

Francis A. Stockwell, III is the Vice President and Chief Underwriting Officer for Medmarc Insurance Group.