RCO CORPORATE RESPONSE
To pursue violations of the Food, Drug and Cosmetic Act, government regulators have increased their application of the “responsible corporate officer doctrine,” which provides that responsible corporate officers may be held criminally liable under the law for their firm's wrongdoing, regardless of whether they actually knew about the wrongdoing or participated in the offensive conduct.
The RCO Corporate Response policy was developed by Marsh Inc. and underwritten by Farmington, Conn.-based Allied World Assurance Co. Inc., in response to this, and the policy is intended for companies involved in the health care and life sciences sectors, said Maureen Gorman, New York-based senior vice president in Marsh's FINPRO unit.
The policy's basic premise is that under the theory of strict liability reflected in the doctrine, corporate officers can be held accountable for their organization's actions even if they had no knowledge of it and even if when “you did everything within your power to prevent something from happening, that action still happens,” said Ms. Gorman.
The product has earned a 2013 Innovation Award from Business Insurance.
The policy, which was introduced in March 2012, “provides coverage for defense costs as part of a (Responsible Corporate Officer doctrine) investigation,” said Ms. Gorman.
Ms. Gorman said that as a result of an investigation, officials may be barred from working with federal or state health care programs, which is potentially career-ending. To address this, the Marsh policy also “provides a soft landing for an executive” by paying them lost future compensation.
In addition, the policy reimburses for “recoupment loss,” which is the value of any compensation that must be returned or repaid by an insured person as a result of a judgment, decision, or settlement of a Responsible Corporate Officer claim.
The policy provides up to $10 million in coverage, said Ms. Gorman. Retentions will be based on the policy, she said.
Potential policyholders include pharmaceutical companies, laboratories, hospitals and nursing homes.