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Beware the effect of the Consumer Protection ACT on Product Liability and goods sold and supplied

This is the second part of the article on the changes and issues which arise now that the Consumer Protection Act has been passed into law. This is by no means an exhaustive study of the implications of the proposed Act and only touches on some of the possible effects on liability insurance.

SOME OTHER ISSUES OF INTEREST CONCERNING THE ACT ARE:

Of interest, although not relevant, to liability insurance, Section 112 of the Act introduces a penalty for intentional or grossly negligent persons who transgress the terms of the “Act”. The penalty is in the form of a fine of R1 million or 10% of the person’s turnover. Provision is also made for possible prison sentences of up to 10 years which could be imposed on individuals in an organisation who are grossly negligent or who transgress the law.

The Act also deals with recalling of products which, in itself, has cost implications and could be subject to insurance particularly when a person in the supply chain is not the manufacturer. All parties in the supply chain may need to keep an accurate record of purchases and sales to ensure that, should it be necessary to recall products before damage or harm is caused by the product or goods, they are able to do so. This could also mean the voluntary recall of goods to avoid a products liability claim.

Section 113 provides that, if an employee or agent of a person is liable in terms of this Act for anything done or omitted in the course of that person’s employment or activities on behalf of their principal, the employer or principal is jointly and severally liable with that person. Whereas presently under common law this protection is available to a consumer, the proposed section makes this easier to enforce as the element of negligence is no longer a requirement for liability for the actions of an employee or agent.

The testing and keeping of accurate records by persons in the supply of goods chain may be the only remedy available to sustain the defence that it is unreasonable to expect a distributor or retailer to have discovered the characteristics of a product which may render it unsafe and/or hazardous.

What has not changed is that, unlike in the courts in the USA, there are no punitive damages. The “goodwill” and the reputation of business could suffer incalculable harm because of adverse publicity which could emanate from press reports on a court award. Press coverage could also spur other consumers to lodge complaints and so escalate the cost of claims.

For completeness, Section 61 of the Bill together with Section 113, as an extension of Section 61, is included below.

Liability for damage caused by goods

61. (1) Except to the extent contemplated in subsection (4), the producer or importer,

distributor or retailer of any goods is liable for any harm, as described in subsection (5),

caused wholly or partly as a consequence of—

(a) supplying any unsafe goods;

(b) a product failure, defect or hazard in any goods; or

(c) inadequate instructions or warnings provided to the consumer pertaining to any hazard arising from or associated with the use of any goods, irrespective of whether the harm resulted from any negligence on the part of the producer, importer, distributor or retailer, as the case may be.

(2) A supplier of services who, in conjunction with the performance of those services, applies, supplies, installs or provides access to any goods, must be regarded as a supplier of those goods to the consumer, for the purposes of this section.

(3) If, in a particular case, more than one person is liable in terms of this section, their liability is joint and several.

(4) Liability of a particular person in terms of this section does not arise if—

(a) the unsafe product characteristic, failure, defect or hazard that results in harm is wholly attributable to compliance with any public regulation;

(b) the alleged unsafe product characteristic, failure, defect or hazard—

(i) did not exist in the goods at the time it was supplied by that person to another person alleged to be liable; or

(ii) was wholly attributable to compliance by that person with instructionsprovided by the person who supplied the goods to that person, in which case subparagraph (i) does not apply;

(c) it is unreasonable to expect the distributor or retailer to have discovered the unsafe product characteristic, failure, defect or hazard, having regard to that person’s role in marketing the goods to consumers; or

(d) the claim for damages is brought more than three years after the—

(i) death or injury of a person contemplated in subsection (5)(a);

(ii) earliest time at which a person had knowledge of the material facts about an illness contemplated in subsection (5)(b); or

(iii) earliest time at which a person with an interest in any property had knowledge of the material facts about the loss or damage to that property contemplated in subsection (5)(c); or

(iv) the latest date on which a person suffered any economic loss contemplated in subsection (5)(d).

(5) Harm for which a person may be held liable in terms of this section includes—

(a) the death of, or injury to, any natural person;

(b) an illness of any natural person;

(c) any loss of, or physical damage to, any property, irrespective of whether it is movable or immovable; and

(d) any economic loss that results from harm contemplated in paragraph (a), (b) or (c).

(6) Nothing in this section limits the authority of a court to—

(a) assess whether any harm has been proven and adequately mitigated;

(b) determine the extent and monetary value of any damages, including economic loss; or

(c) apportion liability among persons who are found to be jointly and severally liable.

Vicarious liability

113. (1) If an employee or agent of a person is liable in terms of this Act for anything done or omitted in the course of that person’s employment or activities on behalf of their principal, the employer or principal is jointly and severally liable with that person.
(2) This section does not apply in respect of criminal liability.







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