CPA highlights need for retailers to rethink liability risks
Simon Colman, Underwriting Executive at SHA Specialist Underwriters.
The recent increase in cases made against retailers regarding faulty merchandise, brings to the fore the need for retail outlets to implement adequate liability cover as the Consumer Protection Act (CPA) may prohibit these stores from simply ‘passing the buck’ to manufacturers.
This is according to Simon Colman, Underwriting Executive at SHA Specialist Underwriters – the largest liability underwriting management agency (UMA) in Southern Africa – who says that retailers need to ensure that their insurance policies will respond to the strict liability provisions of the CPA.
He says that many retailers forget that being the client-facing element in the supply chain places them in the line of fire for litigation as far as the CPA is concerned. “Retail stores have a responsibility to their consumers to ensure the safety of the products that they sell and a failure to meet this responsibility could result in an expensive lawsuit.”
Colman points to the recent lawsuit lodged against hardware giant, Massmart as well as its retail store, Builders Warehouse, claiming millions-of-rands for injuries caused by alleged defective ladders. “This is a prime example of the dispersion of litigation which may occur when more than one party has played a role in the supply chain.”
In such a case, both parties are jointly and severally liable for harm caused by the product. The law does allow for some defenses on the part of the retailer, particularly where it is impossible for them to test the safety of every single product (like examining the contents of tinned food), he says. “None the less, retailers needs to remember that a multitude of products are imported into South Africa, which means that consumers will find it very difficult to take action against the manufacturer and will instead focus their attention on the ‘lower hanging fruit’ or local retailer.”
He explains that for this reason, retailers must have broadform liability policies that include adequate product liability in place, even if they are not involved in the manufacture of the product. “The limits of liability traditionally purchased by retailers on their insurance policies are also generally too low. A proper liability insurance programme takes into account the escalating legal defense costs in the modern day South Africa, as well as the increasing number of awards for personal injuries.”
Colman advises that retailers can also rethink their quality assurance protocols as an additional measure to mitigate the possibility of litigation and awards, especially if the retailer can demonstrate that they have done everything reasonably possible to ensure safety.
“The CPA also empowers the National Consumer Commission to initiate a product recall if they feel a dangerous product is on the shelf. The costs of a recall can run into the millions within a few days. Traditional policies do not cover these costs and retailers should speak to their insurance brokers about such cover,” Colman concludes.
