Richard M. (Dick) Griffin, formed Grifcon Enterprises, Inc. in 2000. A commercial lines insurance broker with over 46 years of experience specializing in products liability insurance, Griffin formed the national Products Liability Insurance Program for the U.S. dietary supplement and natural products industry in 1996. His website is www.GrifconEnterprises.com. 

Health E-Insights: As an insurance program manager, what is your role working with supplement companies?
 
Mr. Griffin: I established an insurance program for the American Herbal Products Association (AHPA) in 1996. The purpose for the program was to provide AHPA members with comprehensive insurance coverage with the most competitive pricing possible. Since the AHPA’s exclusive endorsement I have gained the endorsement of the following associations and organization – American Association of Homeopathic Pharmacists, American Botanical Council, Natural Products Association and the United Natural Products Alliance. My promise to the associations and members is to always hold their interest first, for the associations as a whole, and the members individually. During the first four years of my relationship with AHPA I called on the members directly and sold the insurance the members needed. This approach was fairly successful but changes that began to occur in the insurance industry in 2000 caused me to decide to focus the program on providing Products & Completed operations Liability (Products Liability) exclusively and I opened the insurance program to independent insurance agents and brokers nationally. This change has helped to make the program grow dramatically. During the last 11 years the program has provided products liability and excess liability insurance to more than 1000 member and non-member supplement companies in the United States. In 2002, I started a program for AHPA that paid overrides to AHPA based on the total premiums we sold through the program. The other association added after 2002, were also included in the override program. During the past 10 years more than two million dollars of overrides has been paid to AHPA and the other associations. This money has been used by the associations to provide training and education to members and to help raise the level of awareness about the value of supplements in the process of promoting healthy living for the public. In addition to the override program I have provided money for many annual meeting costs of the various associations and for sponsorships at meetings. Finally I have been successful in helping to gain contributions for the various association foundations in excess of $50,000.
 
Health E-Insights: Is the cost of product liability insurance a major concern for companies?
 
Mr. Griffin: The cost of product liability during the first decade of the program escalated rapidly and during this period there were a limited number of insurance companies willing to insure the supplement class of business. During this period the cost of insurance escalated for all classes of risk. Supplement premium rates climbed to rates of $11 to $15 per thousand of sales. The high cost of insurance became a hardship for both large and small companies. The minimum premium for basic liability limits of $1 million/$2 million reached $10,000 annually. One major contributing factor for this rapid escalation in supplement insurance costs were the large number of claims filed alleging injury and death as the result of taking products containing Ephedrine. The product liability claims, as the result of Ephedrine, in the group of companies insured in the association program exceeded $50 million during that same 10 year period.  Seventy % of the $50 million was paid out for defense costs. In 2006, the FDA banned the sale of products containing Ephedrine in the U.S. The absence of Ephedrine in the market has helped to reduce supplement claims to a very low level in both the number of claims and the frequency. In late 2006, the cost of liability insurance, and insurance in general began to decrease. The recession in 2008 helped speed the downward costs of insurance for all classes of risk and for supplements the decrease was more than 60% on average. Numerous factors contributed to the cost going down and this held rates low until 2011. Now rates for all types of coverage are beginning to increase. Again there are many contributing factors but the inability for the insurance companies to be profitable at such low rates, plus huge losses in both property and liability has made it necessary to increase pricing. Many insurance experts in the U.S. and internationally expect rates to increase substantially over the next three to five years. I agree with what they say but I do not believe the increase in rates for supplement companies will be at the rate of all others. I believe this is true due to the low level of claims being filed and paid. The cost of products liability insurance for supplement companies is expected to stay very affordable.
 
Health E-Insights: Has the insurance business changed since you first got into it?
 
Mr. Griffin: During my 47 year career as insurance agent, broker and excess and surplus Lines insurance broker, I have seen many things change. Many major insurers that were household words have disappeared and there many new ones taking their place. My estimate of the number of new coverage lines would be somewhere in the thousands. The changes come about as a result of the need for the coverage. When I stated my career the fax and office copy machines were the most exciting things we had to speed up the transfer of written materials. In 1965, there were still areas in the U.S. that did not have television, or even phones. Computers were large and very limited by today’s standards. The closest thing we had to an electric car was a 1912 Edison Electric which was already displayed in a museum. The electronic universe that has been created has expanded the capabilities of the insurance industry just like all other businesses and made communication with others unlimited. The ability to underwrite, rate and issue an insurance policy takes just seconds now and all the vast types of insurance coverage available are stored on line so everyone in the world that has access to an iPhone has access to knowledge about these insurance products. Insurance has become a global requirement for most industries as commerce and trade has expanded around the world. New coverage is added every day that did not exist when I started. There are exposures created by cyberspace such as internet theft, advertising and many more. Today, regardless of the risk there is some new insurance product available to insure the risk. Should coverage not exist something is created to meet the exposure. A good example is Proposition 65 for label claims for products sold in California. When no other coverage is available manuscript policy agreements are written and policies are individually placed. Surplus Lines Brokers, place coverage with Lloyds and many other insurance markets around the world. In the case of supplements all of the products liability policies can be written with coverage for losses worldwide. There is no sign that changes in the insurance industry will slow down any time soon.
 
Health E-Insights: Is coverage for Proposition 65 still a major necessity?
 
Mr. Griffin: From an insurance perspective it is also important to mention that there is no law that requires that businesses doing business in California must have insurance to do business. The Proposition 65 coverage we developed is an endorsement to the Converging Risk Liability Insurance Form and its main purpose is to provide coverage for defense and penalty payments that come due as a result of incorrect labelingof products sold in California. There is no other policy form available that will pay for claims for defense and settlement when no property damage or bodily injury resulted. The law is applicable to many different industries such as toy manufacturers, costume jewelry manufacturers, distributers of all these products and of course dietary supplement label claims. Claims are being brought by a number of plaintiff attorneys, and many claims have been filed since the California law was passed. One defense attorney’s office in California has confirmed to me that at least 600 claims are being worked on at any one time in their Sacramento office. They have also told me that if a company receives a claims notice that the cost to defend against the claim will be a minimum of $50,000 and that will not include the additional cost of the plaintiff attorney’s fees. This could be as much as $80,000. Should the company actually be found guilty of fraud in their advertising, the cost could end up being a minimum of $80,000 and some have been in excess of $250,000 or higher. Companies doing business in California can, on their own, do a great deal to prevent these plaintiff’s attacks. First and foremost they can make certain that they are not in violation of the law. Good Manufacturing Practices are a must but to be certain of a products content there are two things to make certain that the products are not labeled incorrectly – test to make certain that the elements listed in the California attorney general’s offices that are likely to harm people are not in their product, and if in fact there are trace elements in their products a proper label should be placed on each container warning against their use. Companies that do not do the above are the ones most likely to be caught in the plaintiff attorney’s web. The problem is exacerbated for companies that use ingredients from foreign countries, or companies that have no easy way to make certain of the end product. Many companies in the supplement industry have been selling products for years that contain trace elements that are in the product naturally, and are within FDA standards, that do not normally test for exposure. Natural products of all kinds have trace elements that occur naturally in the soil and end up being in the finished product. Companies selling in California in this position might want to consider insurance as an alternative to paying the high cost of plaintiff expense, defense cost and maybe fines, or penalties that could cost millions. Believe it or not it is rare when the cost of one million of insurance will exceed more than .01% of the sales, with these trace elements in them. Weigh .01% premium cost against an unexpected expense of $80,000, or $250,000 or more.
 
Editor’s note: According to Mr. Griffin, to answer the Proposition 65 question, it is important for readers to visit Statement of Compliance: California Proposition 65.
 
Sheldon Baker wants to interview you. Contact him at SBaker@BakerDillon.com. Follow him on Twitter @NutraInk and visit his website at www.BakerDillon.com.