Sufficient financial coverage (MDR Art.10(16)/IVDR Art.10(15))
The MDR and IVDR introduce the requirement for medical device manufacturers to provide “sufficient financial coverage” to provide compensation for damage caused by a defective device. The MDR/IVDR however do not specify what may be considered “sufficient”, which can make it difficult for manufacturers to determine the level of coverage that is required to satisfy this requirement. This Tech Letter aims at clarifying the factors that should be considered when evaluating whether a financial coverage is “sufficient”.
Among the general obligations made to manufacturers, MDR Art. 10(16) and IVDR Art. 10(15) state:
“Natural or legal persons may claim compensation for damage caused by a defective device in accordance with applicable Union and national law.
Manufacturers shall, in a manner that is proportionate to the risk class, type of device and the size of the enterprise, have measures in place to provide sufficient financial coverage in respect of their potential liability under Directive 85/374/EEC, without prejudice to more protective measures under national law.”.
Therefore, Notified Bodies and National Competent Authorities are expected to audit whether “sufficient” coverage has been assessed and is provided by the manufacturer. In such situations, the manufacturer must be able to justify the adequacy of the liability coverage provided.
Whereas the MDR and IVDR specify that the financial coverage shall be proportionate to the risk class, type of device, and size of the entreprise, they provide little information of when a coverage can be considered as “sufficient” other than referring to the provisions of Directive 85/374/EEC on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products.
The Directive 85/374/EEC on product liability states in Art. 16(1) that member states may fix a financial ceiling for damage resulting from a death or personal injury and caused by identical items with the same defect at a minimum of 70 million “ECU”, in other words euros (The ECU, or European Currency Unit, was the former currency unit of the European Communities until its replacement by the euro in 1999, at a ratio of 1:1). The Blue Guide nonetheless indicates that many countries have not used this possibility[1].
The German Medicinal Products Act section 88 specifies for instance maximum amounts of liability for damages caused by a defective product. Nonetheless, this is applicable to pharmaceutical products only, and no such limits for liability for defective medical devices are provided in the German MPDG applicable to medical devices.
Manufacturers are in principle free to provide financial coverage either by constituting sufficient provisions or by contracting a liability insurance coverage. However, in certain countries, national laws may render mandatory to contract a liability insurance. For example, in France, the Public Health Code (Art. L1142-2) states that all stakeholders in the manufacture and distribution of health products must have insurance covering for their professional liability. On the other hand, in Germany the MPDG covering medical devices does not foresee any obligation to conclude an insurance. It will prove nonetheless very difficult to provide evidence to a Notified Body on how the “sufficient financial coverage” from MDR Art.10(16)/IVDR Art.10(15) is addressed in the absence of liability insurance coverage. Unsurprisingly therefore, in the vast majority of cases manufacturers will choose to provide for financial coverage for compensation for damage caused by a defective device by means of an adequate insurance policy.
So how can a manufacturer know whether an insurance coverage is sufficient? The bottom line is that there is no universal answer to this question.
So how can a manufacturer know whether an insurance coverage is sufficient? The bottom line is that there is no universal answer to this question.
The manufacturer, through activities such as clinical evaluation, risk management and post-market surveillance (PMS), has the best comprehension of its device and therefore of the potential damages that could be caused by a defective product. These should be carefully assessed and clearly documented by the manufacturer as to allow an estimation of the level of financial coverage necessary to cover these risks. This process is essential to enable an adequate insurance solution to be established as well as to defend the adequacy of the coverage in case of audit by a notified body or competent authority.
A thorough review of available PMS data including accessible databases like MAUDE, FSCA and FSN databases in Europe and of course the own complaints and vigilance registers are typically a primary source of information. The risk class, type of device, product turnover, size of the enterprise and countries where the device will be distributed must also be carefully considered. Furthermore, it is important for the manufacuter to assess its own vigilance system to gain insight on how many further patients could be exposed to harm before appropriate actions (e.g. product recall, FSCA FSN) can be effectively implemented to prevent any further use of a device on the market once it is made aware of a defective product that led to patient harm.
In all cases, there needs to be a documented sound rationale and substantiation of what the manufacturer determines to constitute sufficient financial coverage. This process should involve all relevant functions in the organization, for instance from engineering, finance, top management, clinical, regulatory, marketing, etc.
For manufacturers based in third countries, it is important to note that MDR Art. 11(5) states that the authorized representative shall be legally liable for defective devices on the same basis as, and jointly and severally with, the manufacturer. Insurance companies typically do not provide coverage for authorized representatives. The common solution to this issue is to include the authorized representative into the insurance policy of the manufacturer as an additionally covered or co-insured company. In consequence, authorized representatives will usually examine in detail the determination of the coverage, ensure it is sufficient, and that they are indeed included in the liability coverage. In addition, authorized representatives will insist on obtaining that liability coverage is provided by an insurance company having a registered place of business / underwriter in the EU or an EEA member or otherwise associated by MRA country.
Medidee is a consulting company specialized in Quality, Regulatory and Clinical affairs in the field of medical devices and IVD. Medidee provides support services to manufacturers, public organizations and health professionals focused on the compliance with legal requirements. We may assist you with activities such as risk management, clinical evaluation, and audit preparation. Moreover, Medidee, through its European (German) and Swiss subsidiaries is your preferred partner for EC-Rep and Swiss-Rep authorized representative services. Contact us at www.medidee.com/contacts/.
[1] Blue Guide Art. 1.4