09.17.18
Recent developments surrounding California’s Proposition 65 have many companies concerned about the after effects of the expanded law, in particular, how those changes may promote an environment of increased litigation, and how companies might be able to deflect the risk using insurance. The new rules took effect August 30, 2018.
“Lawyers I have spoken with have pointed out that most Prop 65 actions in the past were about failure to provide the proper, generic warning, whereas under the new rules, we can most certainly expect lawsuits alleging inadequate warning labels,” commented Greg Doherty EVP of the Dietary Supplement Practice at Bolton & Co. Insurance Brokers.
Since the labelling requirements have become much more complicated, lawsuits over the inadequacy of complying with the new requirements will open up a grey area, something that plaintiffs’ attorneys relish. Enter Prop 65 liability insurance, introduced a couple of years ago by insurance underwriters at LifeScienceRisk of Chicago. The insurance 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 insurance is comprehensive coverage for Prop 65 claims. Several other insurers currently offer 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,” said Mr. Doherty.
The coverage has recently been broadened from covering 11 different chemicals, including:
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.
“Lawyers I have spoken with have pointed out that most Prop 65 actions in the past were about failure to provide the proper, generic warning, whereas under the new rules, we can most certainly expect lawsuits alleging inadequate warning labels,” commented Greg Doherty EVP of the Dietary Supplement Practice at Bolton & Co. Insurance Brokers.
Since the labelling requirements have become much more complicated, lawsuits over the inadequacy of complying with the new requirements will open up a grey area, something that plaintiffs’ attorneys relish. Enter Prop 65 liability insurance, introduced a couple of years ago by insurance underwriters at LifeScienceRisk of Chicago. The insurance 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 insurance is comprehensive coverage for Prop 65 claims. Several other insurers currently offer 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,” said Mr. Doherty.
The coverage has recently been broadened from covering 11 different chemicals, including:
- Lead
- Cadmium
- Mercury
- Arsenic
- Chromium
- PCBs and Dioxins for fish Oils
- Pulegone
- Myrcene
- Goldenseal Root Powder
- Aloe Vera, Non-Decolorized Whole Leaf Extract
- Naphthalene
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.
