Home > Property & Casualty > Product withdrawal opens drug companies to litigation

Product withdrawal opens drug companies to litigation

Yesterday’s New York Times describes possible harm to customers of biotechnology giant, Genzyme Corporation, arising out of the reduced availability of Genzyme’s products as a result of a plant shutdown caused by a virus contamination at Genzyme’s plant. The story relates that such a viral contamination is not uncommon in the production of biological products. The inability to supply life-saving drugs that have no easy replacement from other manufacturers, not surprisingly, may have led to adverse outcomes for Genzyme’s patients and this type of exposure to harm exists for many other drug and device manufacturers.

Lawsuits that might arise from the patients of such drug may end up in a gap between Products Liability Insurance and Directors’ & Officers’ Liability (D&O) Insurance. Product Liability policies normally cover only Bodily Injury arising out of the sale of use of the product, not its lack of availability. D&O might respond to a class action against the directors and officers alleging a poor management decision for failing to have a back-up supply and/or an alternative manufacturing location and resulted in a loss of share value. But D&O policies typically have exclusions for claims arising out of Bodily Injury. Drug and device manufacturers may be self-insured for the direct Bodily Injury claims.

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