New Insurance Coverage for Medical Technology and Life Science Companies – Errors and Omission Liability Coverage

By | February 18, 2014

Did you know?

Life Science and medical device companies are required to assume liability for a customer’s financial loss if the products or services they offer are deficient or do not meet the customer’s expectations.

During the past six months, several insurance carriers have unveiled a new product for manufactures, suppliers, and distributors of medical technology, medical device, and pharmaceutical companies which help cover third–party financial losses. Medical device manufactures and distributors commonly purchase product liability coverage to insure their product against bodily injury and property damage claims. Financial or economic injury losses are often left uncovered.  This creates a significant coverage gap, exposing life science companies to considerable, uninsured claims for damages based upon pure economic loss by their customers.  Errors and Omissions coverage specifically covers a third-party financial loss based upon:

  1. A failure of the insured’s product or service to function as intended or expected.
  2. An error, omission or negligent act.


In today’s marketplace, when it comes to medical and life science devices and products, many hands are touching different phases of production.  A particular product could be subcontracted through multiple vendors, manufactures, and distributors.  The probability of error somewhere along this cycle increases the likelihood of an error being made.  Here is one example of a real life claim.

Claim example: A customer alleged that a medical device manufacturer delivered improper pre-production prototype instruments, resulting in financial loss.  In addition, the customer alleged that the instruments did not meet specifications.

Claim paid: more than $250,000

Some items to consider as your analyze E&O coverage for your company:

  • First, does the coverage offer enterprise-wide protection?  Many companies manufacture or distribute different products, possibly across different industries. Many carriers can exclude certain products.
  • Second, is there worldwide coverage? Since many products are distributed or manufactured in foreign countries, it can be critical that companies obtain worldwide coverage, where permitted by law.


Josh CreerJoshua Creer

The Buckner Company

Life Science Practice Group


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