Strict Product Liability on the cards

The new Consumer Protection Bill, which has now been enacted, will have far reaching consequences for South African business in that Section 68 imposes Strict Liability on producers, distributors or suppliers to supply or manufacture goods free of defect. The Bill establishes fundamental consumer rights to “fair value, good quality and safety” which in effect precludes the producer, distributor or supplier from contracting out of Product Liability.

The Current Position

In the past it was extremely difficult for consumers to prove wrongfulness (i.e. could the defendant have reasonably prevented the defective products from reaching the market) on the part of the manufacturer. Moreover, the complaining party would further have to prove that the damage resulting from the defective product was the fault of the manufacturer. Fault has always been complex for the consumer to prove as the defect would usually have occurred in the production process.

Strict Liability

South Africa will now conform to international practice (particularly in European law where Strict Product Liability already applies) as the Bill will attribute Strict Product Liability in terms of any damage to property or death / injury to consumers as a result of defective products sold, manufactured or supplied and includes economic loss which arises due to inadequate product instructions or warnings. Joint and Several liability is permissible where more than one party is liable i.e. manufacturer, distributor and supplier could be sued jointly

Consumer May Sue For Damages

Consumers are now able to sue for damages without the onus of having to prove fault of the manufacturer, supplier or distributor. This elimination of the burden of proving fault will make it far easier for consumers to pursue defective product claims via the South African legal system

Solution

It is business critical, in light of the pending legislation, that your Product Liability risk is adequately transferred to your insurance policy. Various forms of Product Liability cover are currently available in South African insurance market. Chadwicks has access to all these markets including international markets (mainly LLoyds) and the expertise to handle all forms of Product Liability enquiries – from entry level Products Liability cover right through to Products Guarantee / Recall and Products Inefficacy to name but a few. We recommend that high Limits of Indemnity are effected given that the potential liability to third parties (consumers) is infinite. A few days in the Supreme Court can cost millions of Rands aside from awards made by the courts. Product and General Liability Insured limits of at least R20m have become the norm rather than the exception in South Africa.

Conclusion

Manufacturers, Suppliers and Distributors will need to review their risk management protocols and insurance contracts to ensure they have dealt with this development in Product Liability appropriately.