By Ingrid Hobbs, Insurance Partner, Mayer Brown
In recent years reduction in the cost of additive manufacturing has made it both affordable and accessible. This is particularly apparent in the 3D printing market where the growing demand for desktop machines has brought the technology to high street retailers — meaning you can now create your own three-dimensional designs at home from as little as £700. It’s therefore not surprising that additive manufacturing is commanding the same kind of interest from insurers as nanotechnology did a few years ago.
If predictions about the revolutionary impact of these technologies become a reality, existing supply chains and manufacturing trends could be transformed. Component parts on failing machinery could be replaced with new ones made on site. Companies need only have access to equipment, files and materials to create a part or product, as and when required.
It is important the insurance industry understands the extent of the risks involved – which may prove multifaceted. An area of insurance that could be affected by developments in additive manufacturing is professional indemnity cover. Product designers producing digital files for this technology may be exposed to claims if one of their designs could be alleged to have resulted in the creation of a defective product.
Many digital designers who work with additive manufacturing will need to consider the scope of their PI insurance and insurers will need to assess carefully, at the inception or renewal stage, whether there is any increase in the risk insured due to the manufacturing process.
PI policies include cover for intellectual property risks, so it will also be important to ensure that designers are aware of the IP, piracy and counterfeiting infringement risks surrounding using or refining someone else’s software in their own designs.
There may also be important supply chain issues in addition to risks of claims in respect of products created using 3D printers. Additive manufacturing may lead to new complexities around traceability, again of concern to insurers who will need to consider the impact of this on subrogation/recovery rights. Insurers will wish to understand the number of jurisdictions in which their insureds operate, who the regulators are and how those factors may impact on the ability to trace parties responsible for defects in the manufacturing claim (if a design has simply been downloaded the product manufacturer may be in the dark as to recovery rights, if any).
With this in mind, it is important that there are discussions between risk managers on the insurance side and business product developers at the client they’re looking to insure. This will enable a common understanding to be reached about where this type of manufacturing is likely to have an impact.
Every new innovation throws up new questions for the current legal framework as those innovations become mainstream products, and the same will be true of additive manufacturing processes. The insurance sector is alive to these new risks and keen to discuss the legal issues wider adoption may give rise to. In light of the overall speed with which the technology is advancing, the insurance industry will be anxious to keep up to date with its implications for risk and potential liability exposures.
Ingrid Hobbs is an insurance partner at Mayer Brown experienced in policy coverage disputes, including those involving product liability insurance, professional indemnity risks, financial institutions, technology companies, media and publishing houses and directors and officers insurance.