This is part 4 of our series written by legal consultant Beth R. Jacobson, PLLC, entitled The Biggest Mistakes You Can Make When Negotiating a Consulting Arrangement with A Pharma/Biotech Company. Today’s section will cover Pitfall Number Three: Not Having Indemnification In Your Agreement.
In the simple agreement that was proffered to the doctor, there was no language in the agreement taking care of the doctor if he gets sued by someone based on his work for the consulting company. The doctor doesn’t even think of this potential issue and if he does, he wrongly thinks that his hospital malpractice insurance will cover him – they’ve always been helpful in the past he thinks.
It pays to ask a professional for advice when entering into a business relationship. Doctors aren’t trained in the law – but you can bet that pharmaceutical companies have their lawyers draft and review all of their agreements. Many will ask – why do I need this indemnification anyways – I’m not really sure what it means – just forget about it – let’s not complicate things.
If you like your house and your assets – it behooves you to care. First off, if a company is sued – plaintiffs typically sue anyone with a potential deep pocket. In the above example, if the doctor is sued along with the company – the doctor may be the only deep pocket left if the company goes belly up. Most likely any hospital malpractice insurance will NOT cover your activities outside of the hospital. As a result, you are on the hook for potentially huge legal bills and a judgment.
Solution: once again, companies will easily give you this point since it’s reasonable, fair and costs them nothing. They will not fight you on this – but they will admire your business acumen. A provision will simply be added to the agreement which states that the company will pay all of your legal fees and protect you from any liability if you are sued.
If you are not indemnified, this may result in a significant amount of money in legal costs to you in addition to any judgment brought against you. Please remember a point discussed in pitfall number one – only work for solvent companies who are trustworthy. Indemnification – even in an agreement – may be worthless if the company goes bankrupt and the management flies off to somewhere without a return address. You may be the only one that plaintiff’s lawyers can go after. What a headache for a mere $24,000.
To access the other parts of this series, please select the links below.
Part 1: Introduction
Part 2 : Pitfall Number One: What Do You Know About This Company?
Part 3 : Pitfall Number Two – Agreeing to Below Market Compensation
Part 5 : Pitfall Number Four – Having No Idea What You Are Committed To Doing, AND Summary
Prepared by BR Jacobson, PLLC. If you have any questions regarding the topics discussed above or if you would like further information about BR Jacobson, PLLC, please visit their website at http://www.brjacobson.com/ or send an email to beth@brjacbson.com.
