A few big losses won't cause a spike in overall premiums

Mann estimates that for every 100 customers an insurance provider in the medical equipment industry can expect to have a claim in excess of $20,000 one or two times a year minimum, and there is a good chance that every five years or so they will be hit by a shock loss, or "limits loss." Chances are there will be a lawsuit involved with exorbitant legal fees and possibly awards.


With an inland-marine policy, a $1,000,000 MRI unit traveling on the highway might get engulfed in flames after "a tire cap pops, gets caught in the wheel well and friction causes the whole unit to burn up." This actually happened, says Glass. The manufacturer or dealer is only out the $4,000 premium and whatever deductible the policy entails, but the carrier is out $1 million in replacement costs and possibly another in business interruption loss. Glass also mentions a recent $27,000 claim from an infection that occurred as a result of a power MRI contrast injection device. This can be an issue, he says.

"Some attorneys are even setting up websites to drum up class action lawsuits, primarily from Gadolinium injections," warns Glass.

Earlier this year The Schneider Group settled a $1 million dollar claim paid for a wrongful death suit and the insured was a distributor of the medical device - a hospital bed. An elderly patient in critical condition after a car accident had gotten tangled in the bed's mechanism and suffocated. The hospital, OEM and distributor were all taken to court.

"This was not the original manufacturer and he didn't repair it. He was a distrubutor, but because he was involved in putting the product into the marketplace we ended up with a major loss," says Schneider. Sometimes it provides more protection and loss control for distributors and dealers to take out their own policies instead of being insured with the manufacturer.

A single loss may cause some rate increase for the insured, but nothing dramatic. Situations where you may run into non-renewals, cancellations and significant rate increases are when there are frequent claims amounting to significant losses. At that point, the underwriter or insurer can no longer trust in that particular insured's ability to manage their risk.

The Medical Device Safety Act of 2009

The Riegel v. Medtronic case highlighted "failure-to-warn" and "design-defect" liability law involving FDA premarket approved medical devices. These are very sophisticated, often implanted devices, such as cardiac resynchronization therapy systems, coronary catheter and stent systems, defibrillators or pacemakers and associated pulse generators, but these devices also include some angioscopes, full field digital mammography units and laser systems used in ophthalmology. FDA premarket approved products account for less that 2 percent of the products approved each year.

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