By Anna Canty, Senior Clinical Research Contracts and Compliance Analyst PFS Clinical
With Contributions by Bailey Lyons, Senior Clinical Research Contracts and Compliance Analyst, PFS Clinical
Confused about insurance provisions for research contracts? We don’t blame you—insurance terms are complicated, even without the added complexity of figuring out how they apply to your research program. If you’ve found yourself swimming upstream through contracts full of insurance provisions you’re unsure of, let us help you out! In this article, you’ll find definitions of several common terms and policies, complete with discussions of how they interact with the services delivered by your organization during a clinical trial.
Common Clinical Research Insurance Terms
When it comes to clinical trial insurance provisions, even the most basic terms aren’t really all that basic. To help you unpack their meanings, here’s a list of some of the insurance terms most commonly encountered in research contracts:
1. Fully-Insured and Self-Insured
As the two primary types of insurance plans, these terms speak to the source of the funds available for a claim when an insurance policy is required to pay out. With a more traditional fully-insured plan, an entity (research organization) pays premiums to an insurance company based on the insurance provider’s risk pool (among other factors). The insurance company is responsible for managing the funds and assumes the risk for paying all claims-related expenses.
A self-insured plan means that the insured entity is the holder of the plan and is responsible for paying the cost the claims. Rather than paying premiums to an insurance company, the organization essentially pays premiums to itself, building its own source of funding for claims payouts. If no claims occur, the organization benefits from saving the cost of premiums that would have been paid to an insurance company under a fully-insured plan. Most self-insured plans have a saturation point indicating the amount the organization could pay for claims before risking its assets. At that point, an insurance policy would kick in. This is known as stop-loss coverage.
2. Per-Occurrence and Aggregate (or Annual Aggregate) Limits
The per-occurrence limit is the size of the pool of money available to pay a single claim, while the aggregate (or annual aggregate) limit refers to the overall amount available to pay all claims in total. As you can imagine, the per-occurrence limit is lower than the annual aggregate; if the organization has a per-occurrence limit of $1 million per claim and a $5 million-dollar annual aggregate, it can afford to cover five $1 million dollar claims in one year before no claims would be covered.
3. AM Best Rating of Financial Size Category
AM Best is a credit rating organization that focuses on insurance companies. By imposing a certain rating or financial size requirement in a contract, your organization will essentially gain some extra protections from an insurer’s financial strength and creditworthiness. A newer/smaller insurer may end up folding because it failed to underwrite premiums correctly and isn’t able to absorb the claims it has promised to pay. Requiring a larger, more experienced insurer mitigates that risk.
4. Claims-made vs. Occurrence-based
These terms reference the policy type and timeframe limitations for claims. A claims-made policy will only cover a claim that is asserted during the policy term. An occurrence-based policy will cover a claim that is asserted at any time, so long as the incident or injury actually occurred during the term the policy was in effect.
This is additional coverage that can be purchased to cover claims asserted after the policy term in a claims-made policy. It is important to think about tail coverage when considering potential side-effects of investigational drugs, which may not surface for months or even years after the study has ended. This coverage can be purchased for a limited number of time after the study (i.e. five years), or you can pay higher premiums for higher coverage. The length of the tail should correspond to the risk level of the study.
6. “Insured” or “Named Insured” and “Additional Insured”
Insured or named insured refers to the entity specifically covered by a policy, whereas additional insured is someone who is added to the policy in addition to the named insured. This is done via endorsement or through the contract/written agreement. Your broker and legal counsel can help determine if another entity should be covered under your policy and how to do this.
Specific Policies in Clinical Trials
Now that we’ve covered some basic insurance terms, let’s look at some of the insurance policies that may apply to your research program:
1. Commercial Liability
It’s beneficial for both sites and sponsors to have commercial general liability insurance, as this covers claims for injury or property damage arising from daily operations—regardless of whether these claims are related to clinical research.
2. Product Liability
This is coverage for a drug or device-specific study. Typically, this policy is held by the manufacturer of the product, but in the case of clinical trials, this policy can be held by other entities to protect from any risk assumed by administering another company’s drug or device.
3. “Clinical Trials Insurance”
This is a more generic term used when discussing contract language, and it could mean a few different things. For instance, it could refer to the medical malpractice insurance for the investigator, as many medical malpractice policies don’t specifically include research, and it could also refer to the sponsor’s liability insurance—the lines of coverage for the product and the protocol.
4. Umbrella Coverage
Coverage above and beyond a policy’s claim limits that protects against any claims of unprecedented amounts. An organization may have a $1 million per-occurrence, and a $5 million annual aggregate policy with an $8 million umbrella that kicks in if claims exceed these policy limits.
5. Professional liability, medical malpractice, and errors and omissions
In many contexts, these can be used interchangeably. For each, the objective is the same: to keep the organization in operation if a client (patient) is harmed by a major mistake made by someone offering services on behalf of your business.
6. Indemnification Insurance
This refers to contractual liability. When an entity in a contract is promising to indemnify the other party, the other party wants to be sure that the coverage in place will cover those obligations. An agreement to indemnify a party in a contract may be an exclusion on a commercial general liability policy, so the concept of the indemnification insurance could refer to a separate line of coverage for contractual liability, or an actual circumstantial change to a policy—called an endorsement—that would include these liabilities assumed under the contract.
Exclusions to liability may include liability assumed under oral or written contract because an insurance company expressly does not want to pick up the cost of defending or indemnifying another party. Some policies may state something like, “where required under contract,” though this might look different from policy to policy.
As a side note, breaches of an agreement can affect what an insurance company will cover. If a sponsor breaches an agreement and a claim is then filed against the research organization running the sponsor’s study, their insurance carrier may not agree to cover the claim—even if the sponsor accepted indemnification in the contract.
7. Cyber Liability
This generally covers your organization’s liability for a data breach involving personal information, such as health records and Social Security, credit card, or account numbers.
Even if the sponsor stores electronic case report forms (eCRFs) on a local server once received and aren't providing the cyber environment/electronic data capture (EDC) to the site - that can be hacked. The sheer cost of employing the legally-required security measures in the event of a breach puts a large number of affected businesses out of business each year. A site may want to make sure they don't have to financially shoulder the burden if the sponsor isn't insured for those legally-required measures, since it would be very likely they could fold.
Insurance terms and policies are complex, and understanding how they interact with the services provided by your research organization during clinical trials can be overwhelming. Sometimes, a list of definitions is really all you need, but if you’re looking for more—such as negotiation tips or specific language that can help you ensure you’re insured—check out our white paper or contact us with questions!
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.