Every day, it seems, brings news of another milestone achieved thanks to 3D printing. Just last month doctors at Penn State Children’s Hospital surgically implanted a 3D-printed esophageal “splint” in 13-month-old Ramiah Martin, who was born without a trachea and with a malformed esophagus.
Digital manufacturer Carbon and football helmet designer Riddell recently announced plans to make a 3D-printed football helmet liner. And large-scale 3D printer BigRep recently unveiled plans for a futuristic-style 3D-printed motorcycle.
Known in the manufacturing and technology space as additive manufacturing, 3D printing uses multiple processes to physically replicate objects created by computer-aided design (CAD). It can often be accomplished without the need for tools or a block of raw material. The 3D printed products are often light and durable while the process can save manufacturers time and money.
While its applications are inspiring and transformative on many fronts, 3D printing is not without risk. Insurance risks can be substantial for parties involved in 3D printing any product, because the process involves more players than traditional manufacturing. There can be one person writing code to control the printer, another person operating the printer, a company supplying materials the printer uses, and more, so companies often need multiple policies to ensure protection.
The stakes — and costs — can be especially high for companies that 3D print products for the medical and automotive sectors, said Susie Parks, Vice President and Senior Broker, Burns & Wilcox Brokerage, Scottsdale, Arizona.
“In the case of a medical mistake, a family may blame a (medical) device that is 3D printed rather than the doctor, even if the mistake is likely to have been caused by human error,” Parks said. “(A litigant) may choose to sue everyone who could have been involved, not knowing who was ultimately at fault.”
Even if company is found not to be at fault for a mistake discovered in a 3D printed product, the average legal costs for defending a charge can range from $50,000 to $250,000, Parks said. That alone can be a prohibitive cost for many companies to afford out-of-pocket.
3D printing a growth industry for medical, automotive sectors
A recent industry study reported by Forbes found 93 percent of companies from a variety of industries using 3D printing in 2018, gaining competitive advantages such as time-to-market reductions and the ability to support shorter production runs. Because of these and other benefits, 70 percent of the companies surveyed increased their investments in printing technology and tools in 2018, compared with 49 percent in 2017.
The 3D printing of medical devices alone is expected to reach more than $2.3 billion in revenue by the end of 2024, according to Zion Market Research. This growth is largely driven by technological advancements in 3D printing and processing, an influx in private investments in the technology and the cost savings associated with it. Market research firm Frost & Sullivan named “image-based, 3D-printed implants and anatomical guides” as one of the top 10 opportunities for imaging companies and other tech vendors in early 2019.
The 3D market for the global automotive sector is anticipated to exceed $8 billion in the U.S. by 2024, according to a recent industry report that concluded “the growing need for developing complex and high-quality components while keeping the manufacturing costs low is a primary factor driving the demand for the 3D printing solutions in the automotive sector.”
“The (insurance) cost is dependent largely on risk liability and that is based on the product that is being (3D) printed and who’s using it.” – Tyson Peel, Burns & Wilcox Canada
Because the growth is recent, relatively little historical data exists to inform actuarial formulas for 3D manufacturing policy pricing.
Yet as the proliferation of 3D printing continues, insurance pricing is likely to stabilize, said Tyson Peel, National Property and Casualty Manager, Burns & Wilcox Canada, Toronto, Ontario.
“Like with any insurance product, the more time we have to evaluate, prices may come down,” Peel said. “The cost is dependent largely on risk liability and that is based on the product that is being (3D) printed and who’s using it.”
Multiple insurance products may be required
In both the U.S. and Canada, companies that 3D print products or use 3D printed products should consider several types of policies. General Liability and Products Liability policies can cover bodily injury and property damage, Parks said.
A separate Product Recall policy will usually pay for an investigation following a recall, the costs to fix it and other costs associated with a large-scale recall. According to Burns & Wilcox there are nearly 4,200 products recalled by U.S. federal agencies every year.
Operators of 3D printers may be exposed to various health risks. A study by the Centre for Research Expertise in Occupational Disease (CREOD) in Canada indicated that 57 percent of workers it surveyed experienced respiratory symptoms more than once a week in the past year on the job. In addition many tools used in the 3D printing and manufacturing process are designed for right-handed people, putting left-handed employees at a higher risk for injuries, Parks said.
“We often see that protective coatings and covers aren’t flipped for left-handed workers because we live in a right-handed world,” Parks said. “That’s one of the most common reasons for on-the-job injuries.”
Companies handling 3D printing jobs also should have Cyber & Privacy Insurance, Peel said. The creation of a customized, 3D printed medical device requires disclosing personal information such as medical conditions, measurements and so on to the manufacturer to ensure proper fit.
“The more information they have about consumers, such as for a medical device, the higher risk they are at having that information accessed by third parties,” Peel said.
Given the many processes and applications associated with 3D printing, errors can lead to injuries, damages or defective parts. Manufacturers Insurance and Technology Errors and Omissions (E&O) Insurance can cover the costs of financial losses, including legal and investigative costs to defend a claim, certain intellectual property claims, some cyber costs and other liabilities, said Erica Rangel, Broker, Professional Liability, Burns & Wilcox, Chicago, Illinois.
Clients that write software for 3D printers and 3D printed parts should consider Technology E&O Insurance, while non-software driven manufacturers would be a better fit for Manufacturers Insurance, Rangel said. Typical limits for either policy range from $1 million to $5 million.
“We’ll see companies developing software that helps to create 3D objects,” Rangel said. “We also work with companies that make a component within a device, such as a 3D printer, that ends up failing. These are two examples where E&O policies would be triggered.”
Understanding your risk profile to make informed decisions
“Some business owners might think that just because they follow manufacturing specs they won’t be at danger of being sued, but that’s not the case.” – Susie Parks, Burns & Wilcox Brokerage
Manufacturers, engineers and designers should be aware of the risks and liabilities of operating in the 3D printing sector. They should work with an insurance broker or agent who understands the space and has counseled 3D printing manufacturers, engineers, designers, and researchers and developers.
“Some business owners might think that just because they follow manufacturing specs they won’t be at danger of being sued, but that’s not the case,” Parks said. “Manufacturers, engineers and designers all need proper insurance to protect their business assets.”
While multiple-policy coverage requires a significant investment, incomplete coverage could leave a company open to a financial catastrophe. In the case of a product recall, for instance, certain legal costs to defend a claim may only be fully covered under a Product Recall Insurance policy. In other cases, coverage for legal costs might be included under Manufacturing or Technology E&O Insurance policies.
As with any coverage need, an insurance broker or agent must be consulted. Click here to forward this article to your insurance broker or agent to ask if you need this coverage, or share this with clients to start the conversation and ensure proper protection.
This information was provided by Burns & Wilcox, North America’s leading wholesale insurance broker and underwriting manager. Burns & Wilcox works exclusively with retail insurance brokers and agents to assist clients like you with their specialty insurance needs. Ask your insurance broker or agent about Products Liability, Product Recall, Manufacturers, Technology E&O or Cyber and Privacy Insurance policies that might be right for you.