[MANDATORY] LIABILITY INSURANCE

5th Annual European Device and Diagnostic Regulation Conference23 May 2016

Erik Vollebregtwww.axonadvocaten.nl

Between dream and reality stand laws and practical considerations• Ardent “nevermore” political wish in

response to PIP fraud to

• make patient recourse for damage suffered from defective devices easier

• provide deterrent to fraud / negligence in quality of devices

• Drafting of manufacturer and AR liability clauses sloppy and without consideration to relation with existing EU and national law on product liability for medical devices

• No added value over existing product liability regime

• Result of current MDR/IVDR language will be ‘Confusion Everywhere’

Council position on manufacturer liabilityArticle 8 (13) MDR / 8 (11) IVDR

• “compensation” – what exactly? Product Liability Directive is clear on damage covered

• “caused by” – burden of proof? PLD puts burden of proof on claimant• “in accordance with applicable Union and national law” – ergo in

accordance with PLD? What national laws?• “shall consider” – so not mandatory? Need to document considerations?

Can this cause non-conformity?• “appropriate insurance / guarantee ” – what is appropriate?• “damage caused by” / “cost associated with” – different concepts; what is

covered: replacement/explantation, other (consequential) damage?• “defective” – by what legal standard?

Manufacturer liability

• Relation to PLD completely unclear

• MDR and IVDR lex specialis or not? • Does it amend PLD for medical devices only?)

although “in accordance with applicable Union and national law” – so, in accordance PLD and national additional liability

• PLD excludes negligence test, national law may allow it• Article 9 PLD: only (a) damage caused by death or by personal injuries;

and (b) damage to, or destruction of, any item of property other than the defective product itself

• MDR / IVDR uses “damage caused by” / “cost associated with” inconsistently and imprecisely

Council position on AR liability

Article 9 (4a)

• “Manufacturer has not complied with article 8 [General manufacturer obligations]” – that is quite a list

• “legally liable” – what does that mean?• “defective devices” – by what legal standard? Must defect be caused

by Article 8 non-compliance? • “[liable] in accordance with Article 8 (13)” – does that mean the AR

shall “consider appropriate insurance”?

AR liability• Unique in Goods Alignment Package – no other EU statute has AR

liability (not even toys and civil explosives)• Does not fit in AR role as defined in Blue Guide• Article 9 (4) excludes a number of Article 8 obligations from delegation to

AR• e.g. Article 8 (1): ensuring that the devices ‘are designed and

manufactured in accordance with the requirements of this Regulation’ – so AR responsibility for design and manufacturing related defects excluded? PLD definition of defect basically only covers those

Does not fit in PLD logic, which excludes liability for ‘producer’ (Art 7 (a) and (c) if:

• he did not put the product into circulation; or• the product was neither manufactured by him for sale or any form

of distribution for economic purpose nor manufactured or distributed by him in the course of his business

AR liability

• Overlap ‘importer/producer’ PLD liability and AR MDR/IVDR liability will cause parties to point to each other to detriment of patient

• ARs will become very triggerhappy for termination given that MDR/IVDR make it mandatory to include in the mandate that AR terminates the mandate if the manufacturer acts contrary to his obligations under this Regulation (article 9 (3) (e) MDR)

Interface with Product Liability Directive• EU Court in Centre hospitalier universitaire de Besançon v Thomas

Dutrueux and Caisse primaire d’assurance maladie du Jura (C-495/10)

• national legislation and EU legislation in the field of liability for defective products may be established but only on condition that it does not adversely affect the producer’s liability as it is established by the PLD

• Overlap between MDR/IVDR and PLD will cause gaming the system by parties held liable, to detriment of patient (like in O’Byrne case (C-127/04) re PLD statute of limitation)

Product batch liability for all devices• EU Court Joined Cases C‑503/13 and C‑504/13 Guidant: all devices in a

recalled batch are ‘defective’ under PLD, provided that

• they have a risk profile like pacemakers and ICDs (“abnormal potential for damage” with patients in “particularly vulnerable situation”)

• damage includes costs that patients incur to have devices replaced in accordance with manufacturer FSCA (“all that is necessary to eliminate harmful consequences and to restore the level of safety which a person is entitled to expect”)

• MDR /IVDR “the costs associated with” proposal will likely extend product batch liability to all devices, regardless of risk profile

• Manufacturers and ARs will think twice before issuing a recall because application of precautionary principle in recall renders device defect under PLD

Other EU developments in product liability• Ongoing discussions to harmonise collective redress one way or the

other

• Commission Recommendation 2013/396/EU on Common Principles for Collective Redress Mechanisms aimed at ensuring that collective redress mechanisms are available to assist in the resolution of large numbers of similar claims

• To be implemented by Member States in 2015• Commission to evaluate in 2017

• Potential notified body liability for defective products if placed on the market as result of notified body negligence in relation to design and surveillance?

• C-219/15 Elisabeth Schmitt v TÜV Rheinland LGA Products GmbH (in early stage of EU Court preliminary reference procedure)

Consequences

• Small companies run disproportionate risks

• Small manufacturers have additional product liability risks• Small ARs will cease business• ARs will terminate agreements at first suspicion of non-

compliance• Interruptions of supply to market as a result of AR-manufacturer

conflicts / contract terminations

• Costs of liability (insurance) will be passed on and end up with patients and healthcare systems

• Everyone will spend more time and money litigating as manufacturers, ARs, patients, notified bodies and insurance companies fight about who is liable

www.axonlawyers.com

THANKS FOR YOUR ATTENTIONErik VollebregtAxon LawyersPiet Heinkade 1831019 HC AmsterdamT +31 88 650 6500M +31 6 47 180 683

E erik.vollebregt@axonlawyers.com @meddevlegalB http://medicaldeviceslegal.com

READ MY BLOG:http://medicaldeviceslegal.com