Liability is a subject that is never a cut and dry situation. While they exist on very definite foundations, the road towards these foundations is often not so clear. In an effort to clarify the issue of liability sales with its brokers, Camargue recently held a roadshow where it explained the issues by way of example
The story of the plumber
John Stebbing, Divisional Director of General Liability at Camargue, opened the roadshow with the story of a plumber, “a plumber and a warehouse manager are having drinks at a bar one night. The warehouse manager asks the plumber to come to his warehouse in the morning to install a geyser. The geyser is installed and while it is filling up with water it falls through the roof damaging the warehouse. Where does the liability lie?” asked Stebbing.
It depends on ownership, and this can at times be an issue. If payment for the sale takes place by way of cash, then ownership is transferred upon payment. If it is a credit payment (e.g. settle up at the end of the month) then ownership is transferred when the settlement occurs at the end of the month.
This is pretty straight forward right? Well what about electricity supply from Eskom? Eskom is providing a product – electricity – and the councils who act as vendors probably have a mixture of clients – consumers – who have prepaid electricity as well as accounts. During load shedding, who takes the blame in an instance where an account is settled at the end of the month? Technically that electricity still belongs to Eskom.
The plot thickens
Let’s move away from the Eskom example into the world of the internet and the growing trend of robo-advice.
In most cases, liability claims cover injury or damage, and pure financial loss. We will focus on pure financial loss here as it is most pertinent to the robo-advice example.
Pure financial loss is covered by a professional indemnity policy whereby the insured is the company who will mainly face claims from clients who partake of the products or services offered by the company. The bottom line here is that in order for a Professional Indemnity Policy (PI) to pay out, advice needs to be given to a customer by a professional who has a qualification in a specific field.
Consider the following situation; a person, say Mr X, wants to save for his retirement. He cannot afford the services of an adviser, so he gravitates towards an online investment platform. He plugs in all of his information into the algorithm and a saving vehicle is calculated. Mr X goes through life dealing with kids, saving for their education, providing for ailing parents and dealing with his own health issues. When it’s time for retirement; he discovers he doesn’t have as much money as he thought he would have. The advice, while correct at the time of policy inception, did not keep track of his personal life changes.
Here is the argument. If Mr X approaches the company who runs the online service he partook in claiming product inefficacy, will the company be able to hide behind a PI policy? After all, was the advice provided by a professional? No it wasn’t. Mr X can then probably argue that the employees who designed the algorithm were professionals, but this is a grey area which probably needs clarification from industry regulators who are currently looking into online advice platforms.
Challenging the norm
While you may be reading this thinking that these are wild examples, they are examples that challenge the traditional boundaries within which business is conducted.
While the lights have remained on the whole winter without any planned load shedding, the familiarity of the situation we faced only a year ago is fresh in our minds. And Eskom claims that we cannot seek reciprocity from them because planned load shedding is not fortuitous, not sudden and is not unforeseen. Sufficient warning is provided to the public who make plans to mitigate the effects of load shedding.
But what if the lights are off for longer than promised? The back-up battery on your alarm at home will only work for so long. If a break in occurs after the battery of your alarm system runs out, can you institute a claim from Eskom or our electricity vendor claiming product inefficacy? Why not?
Again, some of you may argue that the robo-advice example is a bit far-fetched. But is it? How often do we order products over the internet from online vendors? Surely if we receive the product from them and it does not meet our satisfaction we can again shout product inefficacy? Yes they go back to the person who supplied the product to them, but if we were dealing directly with the source we would claim from them and not the online vendor. But if the online vendor is the product/service originator, surely there is some complicity in the product or service?
Editor’s Thoughts:
Liability cover is becoming a big issue, not only because the world is following the American example and becoming more litigious, but because the traditional way in which we do business is becoming blurry and exists more and more in the realm of areas that are covered by liability products. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za
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