(Pasadena CA)- Recently the American Herbal Products Association (AHPA), in conjunction with insurance underwriters at LifeScienceRisk, announced a new insurance product that covers the liability exposures generated by a Prop 65 action against a company, in particular, coverage for attorney’s fees, fines and civil penalties, and settlement costs.
“This is a breakthrough product,” says Greg Doherty, EVP and Managing Director of Bolton & Company’s Dietary Supplement Practice. “Prior to this, several carriers had watered down versions of Prop 65 coverage. Either the limit of insurance was not adequate to cover an average prop 65 action, or coverage was severely limited, e.g., it did not cover attorney’s fees, which statistics show are the majority of Prop 65 claim costs. Or both.”
The coverage is limited to six chemicals (heavy metals actually) that must be the causative material, in order to trigger the Prop 65 coverage. They are:
- Lead (the source of almost all Prop 65 actions against companies in the nutraceutical industry)
- PCBs and Dioxins for fish Oils
The coverage is offered with two limit options, $500,000 and $1,000,000. These figures are a maximum amount for any one claim and is also the aggregated coverage for any one policy year. As with the vast majority of product liability policies offered to the supplement and herbal industries, the Prop 65 coverage is on a “claims made” basis. Four deductible options are offered, ranging from $5000 to $50,000 for any one claim.
Doherty continues, “While having some options is generally good, this structure allows for at least eight iterations for any one quote. That amounts to eight quotes the underwriter may be asked to produce. Normally, higher deductibles do not put a significant dent in the cost of liability insurance. We’ll see how these deductible options sort out.”
Sources familiar with the new coverage have indicated that the minimum premium will be $5-6000, and most premiums will fall between $5-10,000. One of the biggest underwriting factors, not surprisingly, will be how much of a company’s products, in terms of annual gross revenue, are sold in California. However, Doherty cautions, “each and every account is different, and this product is brand new so even these broad pricing indications may not apply to your situation. If you are seriously interested in getting a quote, you should complete an application (a short one at that) and seek a firm quotation.”
Some people have mistakenly concluded that this insurance product is limited to AHPA members only. That is not correct. It is available to all companies.
Greg Doherty can be reached at 626-535-1409 or firstname.lastname@example.org.