It’s no secret that defending against product liability lawsuits can be costly. But surgical robot manufacturers sometimes ask me to give them hard numbers. To read the tea leaves and estimate how much they’ll have to spend to resolve such claims. Unfortunately, the answer is hard to swallow.
Though the specifics of any given circumstance will dictate the exact legal costs, you can draw some reasonable assumptions by looking at the experience of Intuitive Surgical—arguably the leading surgical robot manufacturer in the United States. According to the company’s regulatory filings, in 2014, Intuitive incurred pre-tax charges of $82.4 million reflecting “the estimated cost of settling a number of the product liability claims covered by … tolling agreements.” In 2015, 2016, 2017, 2018, and 2019 those charges were $13.8 million, $8.3 million, $16.3 million, $2.7 million, and $0.5 million, respectively. This amounts to a total sum of $124 million over six years, a mean of $20.7 million and a median of $11.1 million.
According to Intuitive’s regulatory submissions, in 2014 the company also recorded charges of $49.5 million “in other accrued liabilities . . . related to the tolled product liability claims.” In 2015, 2016, 2017, 2018, and 2019 those charges were $24.4 million, $20.5 million, $12.8 million, $10.5 million, and $4.2 million respectively. This amounts to a total sum of $121.9 million over six years, a mean of $20.3 million and a median of $16.7 million.
What these data tell us is that under a perfect storm scenario, the cost of product liability litigation may well exceed $200 million in only a few short years.
As Intuitive acknowledges in its regulatory filings, “significant risks of product liability claims, . . . are inherent to the medical device industry.” Although these risks cannot be entirely eliminated, they can be mitigated. Legal risk assessments by experienced counsel at key points during a surgical robot’s development and testing phases can go a long way towards limiting a company’s exposure.