Many early- and growth-stage biotech companies have adopted a “virtual” model where they outsource various responsibilities to other companies. When negotiating contracts with these entities, risk transfer techniques are sometimes overlooked. By utilizing a few simple tips, your company may be able to effectively limit its liability and save on insurance premiums.

The three main ways to insulate your company from responsibility from another party’s negligence are Certificates of Insurance, Waivers of Subrogation, and Hold Harmless Agreements. Adding these techniques to your company’s procedures will act as a “belt and suspenders” to reduce exposure and losses, which should, in turn, reduce premiums.

Certificates of Insurance should be requested of all suppliers, vendors and subcontractors performing work on behalf of your organization. This will attest to the existence and limits of their coverage and should be checked for General/Products Liability as well as Workers Compensation. You should be certain that the limits are equal to those carried by you and that the insurer is reputable and solvent.

A Waiver of Subrogation is an endorsement to the other party’s insurance policy, which limits their insurer’s ability to subrogate or “come back” to you if they believe your company shared the blame for an accident. This endorsement should be added to your subcontractor’s policy and should not contain any limitations as to type of work or location. It is necessary to have this in place prior to any loss.

The final risk transfer technique involves adding a Hold Harmless clause to your contracts. This protects you by requiring the other party to hold you harmless for any liability arising out of their work, whether or not covered by insurance. This may apply even in situations where you are solely negligent.

Blog published in the Biotech Bulletin Fall 2014
by Wayne Crowther, Esquire, Captive Practice Group, Odell Studner