Challenges and Opportunities for Innovation in the Public Works ...

to properly manage and structure its technology transfer activities, it may not only
increase the risk of loss but also decrease the availability of loss transfer mechanisms and
increase the cost of those that remain accessible.
There are three basic approaches to loss transfer: insurance, indemnification and
assumrtion of risk. The most common way to shift the burden of loss is insurance.
Insurance is simply a contractual agreement through which a third party agrees that, upgQI
the occurrence of specified events under specified circumstances, to defend the insured
against specified claims and to pay for any losses arising out of such claims, ug to a
specified sum. The insurance contract (the "policy") will typically not only state the kinds
of things covered by the insurance, but also those that are mt. Often, the policy will also
provide for a retention of risk by the policyholder; that is, an initial portion of any loss
would be borne by the insured, not the insurer. Insurance carriers intensely dislike being
surprised, and they write their policies to minimize that eventuality. Obtaining adequate
insurance for technology transfer activities requires an extremely careful analysis of the
agency's or institution's present loss control situation as well as examination of alternative
strategies to control potential losses.
The distinguishing characteristic of a technology transfer program is the fact that
it is typically an activity outside of the customary role of the agency or institution. Thus,
it is likely that in writing general liability coverage for the agency or institution, the
insurance carrier did not contemplate university in technology transfer, and therefore may
have excluded coverage for claims arising from such activities. The primary question,
therefore, is whether existing general liability insurance extends to all aspects of the
technology transfer activities of the agency or institution. Such policies typically also
exclude product liability claims where such claims arise from goods and services in
commercial use. Finally, policies commonly only cover separate corporate entities related
to the agency or institution if they are specifically identified in the application for coverage
(or in an amendment to that application). Obviously, such exclusions would leave an
institution naked with respect to key aspects of its technology transfer activities. It is
therefore essential that the terms of the contract of insurance be carefully reviewed by the
risk manager or counsel to ensure that all aspects of the technology transfer operation
are insured, to the extent that a separate risk assessment (as discussed in this analysis)
determines that liability arising from those activities might be assessed against the
institution. Where the agency's or institution's existing insurance policies are not
determined to extend to its technology transfer activities or to provide adequate coverage
for such activities, it is necessary to obtain either separate coverage or to negotiate an
extension of coverage to afford adequate protection.
The second means of shifting the burden of loss is through indemnification.
Indemnification is nothing more than a private form of insurance. However, instead of a
regulated insurance carrier agreeing through a contract of insurance to defray the cost
of defense and pay for losses arising out of certain causes, a private party contracts to
do so. In the context of technology transfer, indemnification is commonly utilized in the
negotiation of licenses for the use of the agency's or institution's discoveries. The
licensee agrees, as a condition of receiving the license, to "indemnify and hold harmless"
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