On Dec. 22, 2007, a bill signed by President Bush a year earlier became law. It set a required reporting system of profoundly adverse events (SAE) for dietary supplements sold and used in the United States. With further requirements, it mandated the company whose name appears on the product hold records related to every report for six years from the time the report is initially received.

In spite of this, just those adverse events that are “serious” must be reported. The definition of “serious” is understandable and includes, but isn’t restricted to, death, a life-threatening experience and in-patient hospitalization.

But has any person studied the implications of not disclosing SAE reports to their product liability insurance carrier? No, and the consequences of not doing so could be dire.

Almost each application for product liability insurance for dietary supplement companies has a question identical or very similar will this: “Is the applicant aware of any fact, circumstance or situation which one might reasonably expect could give rise to a claim that would fall within the scope of the insurance being requested?” Companies subject to the new SAE notification requirements should think about this subject carefully prior to responding either “yes” or “no.” If a business is maintaining the required SAE records, can the company in good faith answer “no” to the question? Hardly.

And what are the aftereffects of answering the question falsely? Put plainly, if a lawsuit arises from a previously documented SAE incident, the insurance company will confidently deny the claim after it discovers (and it will) the SAE was documented in the company’s records. The insurance company will allege fraud for inducing it to issue a policy based on concealed information. It will not simply deny the claim, but most likely will look to rescind the policy completely.

Thus, the latest SAE reporting requirements have introduced a new necessity to disclose such events to a product liability insurance company when applying for the insurance, or risk a claim turned down when a claim is created.

The GMP (good manufacturing practice) inspection procedure holds comparable risk. It is well known the amount of FDA inspections for GMP conformity have risen dramatically. According to FDA data, only seven GMP inspections occurred in 2008, which increased to 34 in 2009 and to 84 in ’10. As of Sept. 13, there have been 145 inspections in 2011. A lot of of these inspections have resulted in warning notices to companies citing a range of violations and calling for a swift reply outlining remedial steps to be followed. These letters are a matter of public record and can be seen on the FDA’s website. With the number of inspections and enforcement undertakings overall on an abrupt rise, it stands to reason that more companies will be receiving a warning notice of some gravity in the near future.

An additional question on nearly all product liability applications is virtually the same as or identical to this: “Have any of the applicant’s products or ingredients or components thereof, ever been the subject of any investigation, enforcement action, or notice of violation of any kind by any governmental, quasi-governmental, directorial, regulatory or oversight body?” Once more, a “yes” or “no” answer is called for. If a business has had an audit that resulted in a warning letter, it again should ponder carefully before answering the question. If the company has been issued a warning notice, the only logical response to the question is “yes.”