Litigious foreign consumers threaten SA exporters
According to a leading insurance company, the increased risk of liability claims against exporters could cripple South African businesses.
Manufacturers have been forced to fork out millions of rands after products sold in overseas markets have given rise to product liability claims.
“Any business is vulnerable to product liability claims, but globalisation and the growth in exports bring additional problems to companies,” says Keith Marshall, Regional Manager, Liabilities Group at AIG SA.
“Organisations often need product liability programmes that cover international as well as local liabilities.”
What many manufacturers don’t realise is that they can’t always control where their products will end up. A liability claim could arise from a country they don’t export to directly and where they aren’t aware their product has presence.
While South African exports to the rest of the world have tripled since 2002 – good news for manufacturers - there has also been a rise in costly product liability claims, especially on goods exported to more litigious markets such as the United States, the UK and the European Union.
SA exports to the U.S. in 2008, for example, reached US$ 8.8 billion (R67 billion). Each day, hundreds of SA products hit the shelves of U.S. stores. As these products reach the consumers, the likelihood of product liability claims increases.
“Suppliers need to ensure they have comprehensive export product liability and product recall insurance in place,” says Marshall.
AIG South Africa, which recently announced a brand conversion to Chartis, is one of the only underwriters that can write North American domiciled operations with full compliance to the rules and regulations which vary across the 52 states within the U.S.
The difference, notes Marshall, is that AIG has a centralised claims operation with offices around the world, allowing customers to make a claim wherever the offices are located.
“Liability claims overseas can be exorbitant,” says Marshall. “A recent claim by a South African manufacturer in the U.S. is a case in point. AIG is currently defending a class action law suit on behalf of the client for US$1 million.”
Product liability cover pays for the claimants' legal costs, the costs of defending the action as well as the cost of compensation to the third party. It also includes recall cover.
Product liability claims can be filed by those who have been injured by a consumer product, against any party in the production and distribution chain including the designer, manufacturer, distributor, seller, and repairer of the harmful product.
Strict liability can hold a manufacturer responsible for injuries caused by its products, even if the manufacturer took every precaution to prevent consumer harm. In these product liability claims, the injured party only has to show that the product was a proximate cause of injury for the manufacturer to be held liable.
“The broad application of product liability in countries like the U.S. makes it vital for producers and distributors to have this cover,” notes Marshall.
AIG SA has the ability to tailor solutions to each client’s unique needs and a worldwide network of Chartis (formerly AIG) member companies to service global programs.
