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Is your company in a product supply chain? The Consumer Protection Act affects you!

By Kayser Baird | Durban | March 28, 2013

The new 2008 Consumer Protection Act came into effect in April 2011 and immediately companies could be held liable for loss or damages cause by their products irrespective of whether or not they are negligent.

product liability insurancePrior to the new act, a consumer would have to prove that the person or business that they received the product from had been negligent following loss, injury or damage caused by the product. Under the new act, the consumer can choose where to go in the product supply chain to look for recourse, and is no longer required to prove negligence.

Products Liability insurance has had to adapt – with the “no fault” clause being removed to cater for new claims where the insured’s client is not negligent.

“Many of our clients never took Products Liability insurance in the past or they were inadequately insured. Companies involved in a product supply chain simply cannot get away with this anymore.”

This liability is joint and several, which means that a consumer can decide to take action against any one of the players in the product supply chain – even if they don’t have an agreement with that party and even where they are unable to establish negligence. Furthermore, suppliers, manufacturers and distributors may not opt out of this strict liability ensuring that every party in the supply chain has equal amounts of accountability.

Types of products liability that could result in claims against your company:

→ Defect (design defect, failure to warn, misrepresentation of product)

→ Breach of warranty (failure of goods to fulfill the terms of promise)

→ Negligence (breach of contract)

A products liability claim can ruin your firm’s reputation and send sales plummeting. If your firm is being sued because your products allegedly harmed consumers, it is imperative for your company to be insured correctly as this type of immense financial pressure could result in the firm not being able to survive.

With the new consumer protection act in play products liability insurance is a necessity for any business that is part of the product supply chain. The insurance will also handle  legal costs that accumulate against the company in the event that they have manufactured, distributed or sold a defective product and are being sued for such.

If you would like to discuss Products Liability insurance and get this cover in place for your company, get in touch with us.

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