Insurance Provisions in Clinical Research Contracts: How to Set Your Policy Limits

This article is for educational purposes only and does not constitute legal advice, because it does not analyze your specific organizational risks or other unique requirements. Your attorney will provide legal advice. For best results, obtain additional input from your risk manager and insurance broker. 

It will likely come as no surprise to you if we open with this statement: insurance terms and provisions for research contracts are complicated. While a previous post established a basic definition of common clinical trial insurance terms and policy types, this article will identify a few helpful tips to determine the appropriate policy limits for your organization by exploring how your institution might assess risk for each study. Let’s get started!

Assessing Risk and Liability

You must first assess the risk involved in the study and the liability you are being asked to assume under the contract.

You can assess risks by determining:

·        The party agreeing to pay for claims

·        Whether the study is testing a drug, device, or is simply a data collection study

·        The phase of the study—Phase I studies are inherently riskier than post-market studies

A best practice is to create “buckets” of risk levels and set insurance level requirements for each. For example, you may decide that Phase II studies must always be insured with limits of $5 million per-occurrence and $10 million annual aggregate, but only $2 million per-occurrence and $4 million aggregate for post-market studies. If you check the protocol, identify which risk bucket it falls into, you only have to plug those numbers into the contract rather than reinventing the wheel.

It’s also important to know your own insurance limits and identify your level of risk aversity, which can be unique for each business depending on size, number of studies being conducted, location, patient population, or study type. Consult your risk management and legal teams to identify how much risk you are able to absorb. 

When negotiating on behalf of a client, we typically request that sponsors have clinical trials liability and general commercial liability insurance policies for any device or drug studies. These policies should be broad form and cover contractual liabilities as well, although the sponsor (not the research organization) is responsible for any out-of-pocket coverage should they fail to include these coverage terms in their policy.

Negotiation Tactics

Sponsors are often willing to accept a site’s insurance terms—if they make the terms mutual.  A small, research-only site likely does not have the buying power for a policy with the high dollar limits of a large pharmaceutical company.  So, to approach these negotiations, look at the assumed risk. Evaluate who—between the sponsor, the drug manufacturer, or the entity that stands to commercially benefit from the research—will assume indemnification and subject injury obligations under the contract.

If the manufacturer of the drug is the entity that stands to commercially benefit from the research, don’t agree to let the sponsor come down in insurance limits to match the limits of the research organization.  In this case, it’s fair to request that the sponsor impose limits that match the risk it’s assuming and benefit it stands to gain.

When it comes to making sure a liability policy will cover all entities the contract assumes liability for, the term “agents” can create a gray area in contracting, based on the interpretation of the term. If an agent isn’t specifically an officer or employee of the party, there’s a chance the insurance coverage won’t include them in a claim.  If a party is agreeing to indemnify another party’s agents, they want to know exactly which agents those are so that they can have them endorsed onto the policy as an “additional insured.”

Sponsors that require “approved” agents aren’t necessarily trying to police who a site uses. They want to make sure they are covered under the insurance policy for the trial – the best way to do that is by adding each individual to the policy so there is no gray area. Some sponsors don’t have room for a gray area due to their size or financial power.

 

Risks Depend of Sponsor Size

Risks change depending on size of sponsor. With a large sponsor, trials are ongoing and they may have more funds available to cover more comprehensive coverage premiums. Also, a large sponsor is likely to have a large asset pool if coverage is insufficient and their established business practices or products indicate longevity. If your study sponsor is small, there is a higher likelihood that this might be their first or only trial. Coverage may be limited to the premium your sponsor can afford, and the smaller size and likely young age means that few to no assets exist in the event that coverage would show to be insufficient. Unsuccessful trials or claims can extend past coverage limits, and liability could become a general ledger expense, leading the sponsor to fold.

Adding language asking to be a named insured-- and ensuring they have good termination rights—should leave your organization in a good position. To some extent, working with small sponsors is a risk regardless of the language here—if they fold, there isn’t an entity to hold responsible. If this happens, at least you know you will not have to assume their liability, and you won’t have to continue a study if payments aren’t being made. 

Do your research! Look up the sponsor’s business information to properly assess the risk.

 

Duration of coverage –

What claims can arise after a study ends?

The duration of coverage depends on the type of study being run. There are several reasons you might want to consider coverage post-study, such as injuries or side-effects from experimental treatments that take a while to manifest, data breaches that affect stored patient records, or other claims that might take a while to materialize such as the misuse of results well after a study is terminated.

Another factor that will affect whether your trial coverage should run post-study is if your policy is claims-made or occurrence based. Duration and post-study obligations aren’t as important for sites who either don’t have study-specific coverage or have coverage that applies to any future studies.  As long as site remains in business of conducting research, this coverage will be in place anyway; however, if a sponsor has study-specific coverage and claims may not arise until far after study closes, making post-study coverage important.

 

Conclusion

When carrying out clinical trials, mitigation of the risks to your organization must be carefully considered. Study type, phase and sponsor size should all factor into your assessment of the level of risk your research organization must cover in each individual trial, and a thorough understanding of the insurance provisions of your research contracts can help you better protect your institution and your patients.