The biotechnology industry in the United States consists of firms engaged in conducting research and experiments that result in new processes, prototypes or products for use in various industries. Biotechnology companies study microorganisms and cellular biomolecular processes to develop or alter living or nonliving materials.
These are examples of activities biotech companies may perform:
- DNA research
- Cloning research
- Protein engineering research
Biotechnology companies may work in the life sciences field; veterinary testing services; physical, chemical or other testing services; pharmaceutical and vaccine manufacturing; and medical device manufacturing.
Firms in the biotech industry face numerous and complex risks, many of which are out of their control.
- Strict regulation
- Supply chain interruption
- Patient injury or harm during clinical trials
- Bodily injury to third parties
- Product or sample loss, recall or spoilage
Complex Businesses Require Complex Coverage
Biotechnology companies vary significantly. Some are small start-ups, and others are multinational corporations. Regardless of your size, you need a comprehensive business insurance program behind you to protect you from the risks that are always looming.
Biotechnology companies work with delicate, expensive equipment as well as fragile and sometimes even hazardous cells or other materials. Your equipment, as well as the cells or compounds that you are working with, can be easily damaged. While your business is carrying out potentially life-altering experiments, you are responsible for protecting your employees and other members of the public while in the presence of biological materials.
You may also face spoilage risks, supply shortages, equipment breakdowns and product recalls, as well as more typical property and liability risks faced by all businesses. Every biotechnology company needs insurance policies that are tailored to their unique needs and their exposures.
In general, biotechnology companies may need to consider the following types of business insurance to protect property, customers, employees, vehicles and more from lawsuits, workplace injuries and other hazards that can be devastating.
Commercial property insurance protects your lab facilities and contents — from office equipment to expensive, delicate machinery — in the event of fire, weather events, theft, vandalism and other covered perils. In addition, you may need various other types of property coverage:
- Commercial property insurance policies usually include business interruption coverage, or business income coverage, which protects your earnings if your business is unable to operate because of damage caused by some type of covered disruption (fire, hail, wind, equipment breakdown). This coverage is invaluable if you are forced to close your doors or relocate for a some time in order to make repairs. It pays for rent, employee salaries, lost income, relocation fees and more.
- You can expand your business income policy to include coverage for breakdowns in utility services (water, electrical) that force you to temporarily close your doors.
- Boiler and machinery, or equipment breakdown coverage, helps you repair or replace damaged machinery that is essential to keeping your facility up and running, if the machinery suffers a mechanical breakdown.
- Spoilage coverage offers financial protection for the cost of cells or other biological materials that spoil on-site due to a utility interruption.
- Additional flood, windstorm or earthquake coverage may be necessary to protect your business property, depending upon your location.
Commercial general liability (CGL) insurance provides broad liability protection for bodily injury and property damage to third parties caused by your negligence. You should also consider the following types of additional liability coverage:
- Product liability insurance, including completed products coverage, helps you pay for losses or injuries to a user, buyer or bystander caused by a defect or malfunction of any product that you manufacture. Some product liability coverage is usually included in standard commercial general liability (CGL) policies, but this coverage may not be sufficient. You need an experienced agent to help you determine how much product liability exposure you have, and how much and what type of coverage you need.
- Environmental practices or pollution liability coverage protects companies from the costs associated with liability claims stemming from damage caused by hazardous waste materials.
- Employment practices liability insurance provides coverage for violations of antidiscrimination regulations. It protects a business owner if a current or former employee sues based on discriminatory employment practices.
- Commercial auto coverage is necessary if your business owns and operates any vehicles. It covers your vehicle fleet and drivers in the event of an accident or other vehicle damage that occurs as you transport your product from place to place using owned vehicles. It provides coverage for property damage and bodily injury liability claims, vehicle damage and medical bills, as well as any costs related to lawsuits due to auto accidents involving your vehicle fleet.
- Directors and officers (D&O) liability insurance provides protection for directors and officers of companies against legal judgments and costs arising from unlawful acts, erroneous investment decisions, failure to maintain property, release of confidential information, hiring and firing decisions, conflicts of interest, gross negligence, and errors of many other types. It is recommended for directors and officers who are accountable to investors, shareholders, creditors, employees and customers.
- Excess liability coverage, or commercial umbrella coverage, provides liability protection above and beyond the liability coverage included in a commercial general liability and business auto policy. A commercial umbrella policy pays when your other liability coverage has been exhausted.
Some of these can be purchased as endorsements to your CGL policy, while others might require a separate policy. All of these types of liability coverage can be tailored to the unique needs of your biotechnology company.
Biotech companies also need workers’ compensation insurance to protect employees from the costs associated with workplace injuries and illnesses. Your employees are exposed to dangerous substances and biological materials and can be injured or become ill even if you have the most stringent safeguards in place. Your independent insurance agent can help you purchase the workers’ compensation insurance required by your state.
Do You Need Product Recall Insurance?
If you are a biotechnology firm that manufactures medical devices or pharmaceuticals, you may have product recall exposure. Product recalls can be financially devastating, even for large firms. Costs can include the following:
- Product removal costs (pulling the product from the marketplace)
- Product disposal costs
- Product replacement costs
- Communications costs, including detailing the recall to the public and government agencies, as well as continued public relations costs
- Legal fees, settlements and judgments
Product recall insurance helps you with many of these costs and perhaps can even keep you from declaring bankruptcy or closing your doors. It reimburses you for recall costs whether or not you were negligent.
How to Find Insurance for Your Biotechnology Company
Biotech insurance is no less complicated than the biotech industry itself. You need the help of an experienced, trusted partner who knows how to work with companies like yours. An independent insurance agent can work with insurance companies that specialize in the biotech industry. Your agent can help ensure that you are not getting cookie-cutter coverage designed for a far less complicated business.
Contact an agent for tailored biotech insurance advice and solutions.