A regulatory nightmare: Takeda and suits against its drugs.

Regulatory Nightmares

Regulatory suits and high punitive damages are a constant reality in the medical business. In early 2014, Takeda Pharmaceutical Co., Ltd., was hit with $6 billion in punitive damages when a U.S. Federal Court found the company in the wrong for concealing cancer risks associated with a diabetes drug it manufactures. Eli Lilly and Co. – Takeda’s co-defendant in the case – was ordered to pay $3 billion in damages.

It’s not just the goliaths in the medical industry who get hit. Regulatory suits and punitive damages awards can be devastating to midsized businesses and medical practices. From makers of medical instruments to the doctors who use them, defending the suits takes a huge amount of time and money, and settling them can be just as costly.

Making it through the storm

Consider the industry you’re in and the potential your company has for facing a regulatory suit. Are you prepared to battle a government agency? Do you even know a law firm that specializes in defending cases that you could be named in? And when you think of what a suit like this might cost your business – in lost time, bad PR, and dollars – do you have an idea of what kind of insurance you have to cover it? Many policies contain inadequate coverage and/or very high deductibles.

Think about how regulations may have changed since you worked with your insurer to write that policy – or how your company’s role in the industry may have evolved over the last few years, are you covered?

Is your business covered?

Take a really good look at your situation, and work with your insurance provider to see what kind of coverage you have. If you feel your company is vulnerable, consider starting a captive insurance company – a captive can help cover the deductibles if you’re ever under investigation. You can also purchase insurance that’s more in tune with your industry and the specific needs of your company. For anyone in a highly regulated field, this is a good idea.  We’re happy to talk with you about options and help you find out of a captive is right for you.


When history puts a halt to your business -

When History puts a Halt to Your Project – Business Interruption Insurance Options

The crew is digging, the last phase of your $600 million complex is ready to go, and project managers have Gantt charts timed from the moment the first shovel hits the ground to the day when the first moving truck pulls up to the curb.

And then your crew finds a Tequesta village that dates back to 500 – 600 B.C.

This was how work was halted for the developers of a project in downtown Miami in February of 2014 – read all about it in the Miami Herald. The village is well-preserved and coveted by archeologists who see an opportunity to study a culture that thrived for 2,000 years. Developers have offered to preserve a large piece of the village and put it on display. As they wait for an answer, the project is halted.

What could halt your business?

There are many outside factors that could have a negative impact on your operations and cause business interruption issues for you.  Wildlife conservancies and historical preservation foundations can file an injunction against new construction, litigation can sometimes keep key professionals like lawyers, medical professionals and real estate professionals from working while their case is under review. Unforeseen environmental regulations can halt plant production for weeks – or longer. This is why business interruption insurance was created.

The business losses may be covered by your insurance policy – but what is the cap, and what is the deductible? When you’re in the thick of battling against City Hall, it’s too late to adjust your policy.

Create a plan

Before ancient people appear from underground and halt your project, make a plan. Work with your insurer to get the right coverage in place, or develop a captive to make sure you’re covered for these eventualities. If you would like some help in finding out of a captive is the right solution for you, please contact us.

intellectual preorty rights

Whose idea was this? Intellectual Property Coverage

We recently read Ten Famous Intellectual Property Disputes on Smithsonian.com. Some of the cases are funny – the tattoo that Ed Helms’s character accidentally gets in The Hangover Part II is identical to Mike Tyson’s, so Tyson’s tattoo artist sued Warner Bros. over copyright violations. We bookmarked the article, however, to send to some of our actuary friends who may not know that Sir Isaac Newton and Gottfried Wilhelm Leibniz had duked it out in the 18th century over who really invented calculus.

While the article gave us a smile, some of the suits it mentions – Mattel’s Barbie vs. the Bratz for instance – serve as good examples of just how careful companies need to be about intellectual property, whether they’re protecting their own property or in danger of violating someone else’s.

The growing threat

The threat of intellectual property theft and hijacking presents companies with a wide set of issues. A recent study, prepared by the National Intellectual Property Rights Coordination Center outlines how the U.S. government approaches and seeks to protect threats to intellectual property. Caution: Reading the report might make you feel more susceptible to sabotage. The report finds that intellectual property threats are growing in size and scope, counterfeiters of all types are getting more sophisticated in how they steal intellectual property, and counterfeiters and their goods are moving from secondary markets into primary markets. From individuals who steal designs, to manufacturers who create, ship, and sell fake purses, to manufacturing fake goods and building stores to sell them in – who could forget when Chinese authorities found 22 fake Apple stores in a single city in China in 2011 (read the BBC News article if you missed this one.) Individuals, gangs, organized crime syndicates, and even terrorists organizations fund these operations. The problem is vast.

Add to this list the issue with patent trolls — nefarious characters who purchase patents and then launch frivolous lawsuits to enforce them — and depending on what kind of company you own, even if you hire a platoon of Harvard lawyers you could still get hit by intellectual property violations or thefts.

Fixing the problem

The National Intellectual Property Rights Coordination Center reports that the threat isn’t just to individual businesses. The problem impacts public health and safety, infrastructure and national security. The report recommends a “multi-dimensional response” on the part of the government. Perhaps your company should consider a similar tack.

Be vigilant about your security policies. Work with HR, your legal advisors, and outside consultants to develop strategies to keep your employees from undermining your intellectual property. Continually check your IT structure for safety and security. Find ways to keep an eye on your marketplace to identify and deal with potential violations or copies of your product, and/or train your staff on how to keep an eye out for fake goods making their way into your operations – particularly if you could be liable for a faulty part from a supplier.

The Pandora’s Box of intellectual property issues that could have an impact on your business should also be insured. Talk with your broker to make sure that your coverage is up to date and work with your advisers to make sure your polices could withstand the wide range of potential threats that you face.

If you find that you may want additional insurance and security through a captive insurance company, please contact us.


Something in the algorithm: Matt cutts at a conference.

Something in the Algorithm – Insuring Technology

It’s called Penguin. It doesn’t live in the artic, but it sure left more than a few companies out in the cold.

Penguin is the code name for updates that Google makes to its algorithm to keep the bad guys (mostly spammers) from scoring well on its search engine. You can read more about Penguin on Matt Cutts’ blog – he’s the engineer who oversees its development. While Google’s intent is good – Penguin is designed to give you better search results — there are some very legitimate companies that went from riches to rags almost immediately after the first Penguin release.

Technology is like that. One day it’s here and friendly, the next day it’s gone like Friendstr.

When your profits rely on an algorithm

What can you do when your profits rely heavily on the whims of a search giant like Google? Diversification isn’t exactly an option. At the end of 2013, Google owned 67.3 percent of the market share in search, according to comScore, so if Google decides it no longer wants to include you in its rankings, you’re options are suddenly very limited.

Companies hit by Penguin had to fire staff, hire consultants, re-tool, and build their businesses up again, climbing the now-steeper ladder that Google had left out for them in the name of better search results for all users.

How do you hedge that bet?

More and more companies rely on technology like Google for everyday operations. We don’t even think about what the world might be like without Google except for those few times when the WiFi goes down for a few minutes and we’re all left to look to each other for support and conversation.

But what would happen to your business if a sudden technology failure took the bottom out from under you? Are you insured for that? Can you even buy a policy that covers your specific business for something like a Penguin update emergency?

Work with your insurance broker to find out how you can get covered in the event of a tech disaster at your firm. If they don’t offer specific coverage, then ask them – or us – about starting a captive insurance company that could help you get covered for unusual technological events.

After all, you want to be around a lot longer than Friendstr.

If we can help you talk about a captive insurance strategy to help cover your company, please call us.


risk as seen in Butch Cassidy and the Sundance Kid


At the AdobeSummit  in 2014 (the Adobe that brings us PDFs and Photoshop) Robert Redford talked about risk, summing up for businesspeople everywhere one of the main tenets of commerce: “Not taking a risk is a risk.” Redford was encouraging business leaders to take risks with art and creativity.

Business owners face risk every day. And while they may sometimes take the creative leaps Redford is hoping for, more often business owners feel like Redford in that famous scene from Butch Cassidy and the Sundance Kid in which he and Paul Newman are chased to the edge of a cliff and then jump into the river below. Watch the classic clip.


How do you handle risk?

Risk can propel a business forward or put it in peril, but it will always be there. How you deal with risk is what determines whether you’re moving forward or back.

You buy insurance to cover risks you know you might encounter. You cover property, liability, and the loss of income that might result from something like a fire or tornado. You purchase insurance against the idea that your business – because of something like an error, neglect, or misconduct – may injure a third party. These are pure risks – sometimes also called static risks – and they are all insurable.

There are also remote risks. There is the very remote risk that you could be injured during the type of train robbery that the Hole in the Wall Gang performed in Butch Cassidy and the Sundance Kid.

Frequency risks are the type of risks that commonly happen. Trucks in your fleet may get in accidents, cargo containers may fall off the ship during a storm. Severity risks, on the other hand, are the larger events that occur and are very traumatic to a company – involving loss of life, severe property damage, and possibly far reaching impact to the environment.

Don’t jump off the cliff without a safety net

During the filming of Butch Cassidy and the Sundance Kid, Redford and Newman actually jumped off the cliff toward the river – onto an air mattress a few feet below. Insurance is your air mattress against risk. But even if you purchase all the insurance available on the commercial market, you may find that you’re not covered for the potential issues your business faces – or you are covered, but the deductibles set by the insurance company are prohibitive to the way you do business.

A captive insurance company is a bit like lining a safety net a few feet under and a few feed wider than the air mattress hanging off the cliff – just in case you fall a bit harder than you thought. Captives cover the risk that insurance policies might miss. You create the insurance company, fund it, and operate it as an insurance company, and then your business purchases insurance from the captive. The captive insures you for pure and static risks that occur with some frequency and severity potential, and in the event that your company needs to draw from insurance, the captive is there to keep you from crashing into the river.

The risks you take with your business should be the daring ideas that propel you forward. For all the other risks that lay out there waiting for you, get the right kind of coverage. Don’t leave it to the last minute like Butch and Sundance did. Contact us if we can help.


key person disability - Steve Jobs and Apple

Replacing the Irreplaceable – Key Person Disability Insurance

In recent history, few leaders have been as tied to a company’s persona as Apple’s Steve Jobs. His story of invention, loss, revival and death are the very stuff of Greek mythology and dramatic story arc. In 2004, Jobs and his team carefully orchestrated the messaging around his cancer announcement and in 2009, when his health was again in decline, Jobs and the company faced many decisions about the messaging around his illness in order to maintain the long-term health of the company.

Think of your key leaders and what you might lose if one – or more than one – of them were suddenly unable to work. What would you do? Who would you hire to help? What kind of loss would your company suffer in sales, potential sales, contracts?

Prepare for the worst

The temporary or permanent loss of a key employee involves a job search, hiring and training a replacement, and issues related to salary and revenue. These are all very real costs, but often, traditional policies don’t offer Key Person Disability insurance. Additionally, the potential insurance payout is probably much lower than the damages your company suffers.

If your policy doesn’t provide enough coverage, consider your alternatives. Can you “self-insure” this kind of risk? Some companies maintain strict rules about travel, so that no two key employees are on the same flight, for example. Policies like these are worth implementing. But if your business hinges on a few key people and the knowledge and relationships they bring to the table, you need to find a way to articulate the value they bring and design a policy to cover the loss if they suddenly can’t sit at the table.

Acquiring Key Person Disability Insurance

Work with your insurance provider to develop a good coverage strategy and if they can’t help you, take a look at the numbers and decide if creating a captive insurance company is a good approach. We can help you work out the numbers, feel free to contact us at your convenience.

EEOC charges, emploement practices issues - chart

Employment Practices Coverage and Discrimination Suits

If you’re wondering if you have enough employment practices coverages, visit the home page of the U.S. Equal Employment Opportunity Commission’s website where you’ll find a frightening newsfeed that lists scores of employment practices and discrimination suit settlements. If you employ people, and you ever want a good scare, take a gander at the list, which today includes an internal medicine practice that’s paying $22,500 to settle a pregnancy discrimination and retaliation suit, a company in the foodservice industry in Chicago that is settling a disability discrimination suit for $80,000, and a fast food franchise that’s spending $100,000 to settle a pay discrimination lawsuit.

An employee can bring a discrimination suit on any of a dozen categories which include age, disability, equal compensation, harassment, national origin, pregnancy, race, religion, retaliation, sex, sexual harassment and genetic information.

As an employer, you set the standard, and you trust your managers to maintain a high level of professionalism. Many suits against employers are legitimate, and some probably originate from a single bad manager, or a good manager having a really bad day. Whatever the cause, the results can be costly and damaging.

Preventing lawsuits

Of course, your best defense against an employment practices suit is preventing them from happening in the first place. Weather you have an in-house human resources manager, or outsource to a team, it’s important to develop a set of guidelines and train your managers well. Equally important is the ability of your team to listen to employees to hear what’s going on in each department. Often, employees want to be heard and want to feel that leadership is doing something about the problem, so listening and taking positive action may solve the problem and prevent the situation from escalating to the next level.

Additional resources include the Society for Human Resource Management, which devotes an entire section of its site to employment law, and the U.S. Department of Labor’s compliance page, another good resource for answers.

Dealing with lawsuits – employment practices coverage can help

Entering into litigation over an employment suit has obvious financial costs, but your company also takes some hits on reputation – employees gossip, word gets around your industry – and if things get bad enough, the whole suit can take on a life of its own on social media channels.

Your employer’s liability coverage policy may cover you for many of the costs associated with a suit, but depending on the industry you’re in and the number of employees you have, you may want additional coverage – or you may want to be able to cover the costs of your deductibles if you ever face a suit, or a series of unrelated suits, or a class action suit.

Work with your insurance provider to be sure you have plenty of coverage in place. If you’d like to explore the additional options a captive insurance company can provide, please feel free to contact us.

Managing Risk on a Global Level

If you’ve never looked at the U.S. Department of State’s U.S. Passports & International Travel Worldwide Caution report, U.S. Department of State’s U.S. Passports & International Travel Worldwide Caution you should consider giving it a read. Particularly if you are sending staff abroad any time soon, or if you have operations overseas. Warnings about groups that are targeting Westerners, and U.S. citizens in particular, for kidnapping and terrorist attacks are updated regularly.

Managing global risk requires additional planning

kidnapping chart - 1997 - 2012 - Mexico

The Citizen’s Council for Public Security and Criminal Justice (Consejo Ciudadano para la Seguridad Pública y la Justicia Penal, SJP) in Mexico reports that kidnappings there are on the rise.

Growing businesses are always looking for new vendors, manufacturing facilities, or markets and this means key salespeople and executives may be dispatched to locations around the globe. A time of growth is exciting and optimistic, but it is important to keep safety in mind before you send employees out of the country. Mexico, for instance, reports that kidnappings are on the rise.

The State Department maintains an A-Z guide for Americans Travelling Abroad. One tip: Make a photocopy of all of your identification and passports prior to leaving. Another helpful tip: Make sure you’ve notified your credit card companies that you’ll be traveling and let them know what your destination is – credit card companies have updated security measures that automatically detect out-of-the-ordinary transactions and your card could be placed on hold just as you’re handing over your AMEX for that dinner party you’re hosting in Barcelona.

Also check with your insurance company before you say bon voyage to any staff. You want to be sure that they are protected for everything from health emergencies to more serious issues like kidnapping.

If you’re making plans to open an office or facility overseas, you’ll need to do your homework. From working with the appropriate U.S. consulate to calling on your legal and operations teams, you’ll want to be sure your business is set up for success.

Think globally

Even if these trips or offices are very small, take the time to make sure you’re covered for anything. The cost of a catastrophe to your company could be huge if there is loss of property and immeasurable if one of your employees is harmed. If you feel your coverage isn’t adequate to cover everything you’re being advised to cover – or if the coverage you want isn’t offered, consider creating a captive, which could help you get the insurance you need as your business grows overseas, and can grow with you as your international operations reach the “global” level. Contact us if we can help.

Crisis Managment – Be Prepared for the Worst

It could be an outbreak of E. Coli that was overlooked on a single day in a single plant, it could be the indiscretion of a senior officer at your company, or it could be a junior staffer posting a Tweet to what she thought was her personal account that causes your first (or next) big crisis. These are the nightmare scenarios that keep corporate communications directors and CEOs awake at night.

It’s essential to develop a playbook for dealing with disasters. The Conference Board has penned a very helpful whitepaper called Handling a Corporate Crisis: The Ten Commandments of Crisis Management. Take the time to read it and share it with key leaders at your company, but the main crux of the article is: Be prepared.

Leaders should know the crisis management lawyers and PR people to call – and know where to reach them at 3 a.m. The unprepared lose valuable time trying to locate the right mix of PR and legal help when a crisis strikes. However you approach a crisis, only one thing is certain: It’s going to cost you a lot of money, no matter what the outcome.

Crisis management for companies

Your best insurance for a good outcome in any crisis is having a plan in place, and implementing it immediately. But not every company thinks about crisis in terms of cost. From the cost of managing the crisis at hand to the potential damage the crisis can have to your company, sales, and the long-term health of your brand, the price tag can add up significantly.

Insurance companies offer policies for crisis management, but often impose high deductibles. Your company may or may not qualify for crisis management insurance at all, depending on what kind of business you’re in, and your track record with previous issues.

You never know when you’re at risk for a crisis. Remember your Scout pledge and be prepared.

If we can help you look over your current strategy, please contact us.

managing risk

Managing the risks you take

Talk to a small business owner just starting out or a senior executive at a flourishing company and both will tell you that risk is the essential ingredient to success. It is the element that keeps businesses in front of their competition and the main spark for innovations that change the marketplace.

Seasoned mavericks know that the key to successful risk taking is evaluating risks and making sound business decisions on how to deal with them. That’s where risk management comes in.

Insurance helps with managing risks

Risk management is the art of looking at potential threats to your business and deciding how to deal with them. Options may range from reducing risk through prevention, limiting potential exposure to threats, or implementing controls against perceived threats. But even the most carefully planned businesses can be blindsided at times.

Traditional insurance policies help companies by providing indemnification – or compensation for loss and damages when something goes wrong. Insurance places the insured in a large pool that can reduce the impact of the loss – the Law of Large Numbers at work.

Some businesses, however, find that they need to insure risks that may not be covered in traditional insurance plans. These businesses can form a captive insurance company to formalize self-insured risks and share the potential burden with businesses who face potential issues similar to their own.

Benefits of Captives

By identifying and insuring potential hazards that could have damaging impact – think of a huge explosion that impacts a large community, or the kidnapping of a key executive – the company is protecting itself. The insured events are remote possibilities, and if the loss never occurs, the premiums paid to cover them generate higher profits over time.

Captives offer benefits like cost reduction, more control over settlements, leverage against third-party insurers, and the ability to establish better-than average claim experience. Companies also find captives are a good way to manage cash flow and protect assets.

Increasing certainty

There is no doubt that a sense of bravado and the willingness to explore new frontiers drives business forward. Being prepared for almost everything on the road ahead will help you maintain your lead.