ILA

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ILA LIABILITY INSURANCE PRESENTATION (PUBLIC
/ PRODUCTS RELATED LIABILITY) BY STEFAN
TERBLANCHE (15 May 2008)
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• CONTENTS
• The Liability Policy
• Legal Liability
• Cover Provided
• Public Liability
• Products Liability
• Defective Workmanship
• Financial Loss
• Products Guarantee
• Products Recall
• Examples

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• THE LIABILITY POLICY
• Differences in Style, Format, Cover provided etc.
• Some common elements
• Cover provided
• Definitions
• Exclusions
• Warranties
• Operative Clause/Defined Events/Insuring Clause
• General Conditions

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THE OPERATIVE CLAUSE MultiMark III Damages
which the Insured shall become legally liable to
pay consequent upon accidental death of or bodily
injury to or illness of any person (hereinafter
termed injury), or accidental loss of or physical
damage to tangible property (hereinafter termed
damage), occurring within the territorial limits
during the period of insurance in the course of
or in connection with the business (Defined
Events-Claims made/Occurrence basis)
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THE OPERATIVE CLAUSE Example 2 The Insurers
will indemnify the Insured against their legal
liability to pay damages and claimants costs in
connection therewith in respect of claims first
made against the Insured during the period of
insurance arising out of the performance of the
Business within the territorial limits
(Operative Clause)
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THE OPERATIVE CLAUSE Example 3 The Insured is
indemnified up to the Indemnity Limit against the
legally enforceable consequence of causing
personal injury, property damage or financial
loss in the course of carrying out the business,
but only in respect of resultant claims made by
others for compensation, damages, costs, fees and
expenses. (Insuring Clause)
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THE OPERATIVE CLAUSE NEW HAMPSHIRE NHIC in
consideration of the payment of premium and
subject to the terms and conditions contained
herein agrees to indemnify the Insured against
all sums which the Insured shall become legally
liable to pay as damages for personal injury or
property damage resulting from an occurrence
arising from and in the course of the business of
the Insured by reason of legal liability as more
specifically defined in any section to which this
Policy applies imposed upon the insured by law or
assumed by the Insured under any written contract
or agreement entered into by the Insured in the
course of the business. (Insuring Agreement)
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• THE OPERATIVE CLAUSE
• (Obvious Commonalities)
• Shakespearian descendants
• (Premium)
• Legal Liability
• Personal Injury/Property Damage (Financial Loss)
• Period (claims made/occurrence)
• Business

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• LEGAL LIABILITY
• Causes of Action
• Contract - A voluntary agreement between the
  parties to enter into legal obligations.
• Delict (Tort) - The wrongful infringement of
  anothers interest and for which the wronged
  party can claim damages.

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• LEGAL LIABILITY
• Contract as a Cause of Action
• The Essentials
• Consensus
• Offer and acceptance
• Requisite intention
• Agreement on all material matters
• Legal capacity of Parties
• Performance must be possible
• Performance must be lawful
• Performance must be determinable
• Formalities complied with.

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• LEGAL LIABILITY
• Contract as a Cause of Action
• Residual Obligations
• (Common law obligations which will operate by
  law, unless expressly altered by the parties to
  the contract).
• Seller
• Make object sold available (care)
• Transfer ownership (warrant against eviction)
• Warrant fitness for purpose
• Warrant reasonable merchantable quality
• Warrant skill of art
• Warrant against latent defects.
• Buyer

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• LEGAL LIABILITY
• Contract as a Cause of Action
• 3) Remedies for Breach of Contract
• Cancellation
• Cancellation and Restitution
• actio redhibitoria
• Damages (positive interesse) If the parties
  did not specifically agree as to the
  quantification of damages then the innocent
  party must be placed in the position he would
  have been in had the contract been property
  performed (financially).
• Actio quanti minoris
• Specific performance.

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• LEGAL LIABILITY
• Delict as a Cause of Action
• Claimant has onus to prove on a balance of
  probabilities all elements were present,
• (actio legis aquiliae, actio iniuriarum)
• An act/omission
• Wrongfulness
• Fault (in form of intent or negligence)
• Patrimonial Damage/Personal Injury
• Causality.
• Also no fault- actions
• Actio de pastu
• Actio de pauperie
• Actio de effusis vel deiectis
• Actio positi vel suspensi.

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LEGAL LIABILITY Delict as a Cause of
Action Wrongfulness (Unlawfulness) Conclusion
of law cannot prove, prove facts from which a
court of law will draw conclusion Criteria is
the concept of the boni mores or legal
convictions of the community Objective
reasonableness test (which differs from the
subjective reasonableness test for
negligence). General rule An author of a deed
does not act deliberately unlawfully when he
merely fails to prevent damage/bodily injury to
another. Liability only follows if indeed this
failure was unlawful and it would be unlawful if
under the specific circumstances there was a
legal duty on the author to act positively, to
prevent the damage and he failed in this legal
duty.
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• LEGAL LIABILITY
• Delict as a Cause of Action
• Fault Negligence
• Well known test for negligence, the so
  called Reasonable Man test
• Kruger v Coetzee 1966 (2) SA 428
• for the purpose of liability, culpa (in this
  context negligence) arises if
• A reasonable man in the position of the defendant
  
• Could foresee the reasonable possibility of his
  conduct injuring another and causing him
  patrimonial loss
• Would take reasonable steps to successfully guard
  against occurrence
• b) The defendant failed to take such steps.

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LEGAL LIABILITY Delict as a Cause of
Action Causation Factual causation (sine qua
non/but for test) Legal causation (is the
harm not to remote?) Direct Consequences Test
whether the harm flowed directly as a consequence
of the conduct, irrespective of whether it was
foreseeable. Foreseeability Test question is
whether the harm was foreseeable. Was foreseeable
if essentially same kind or type of harm, or if a
natural consequence of the conduct.
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• COVER PROVIDED
• Depending on the Policy wording, the following
  types of liability cover are common
• Public Liability
• Products Liability
• Defective Workmanship
• Product Guarantee
• Product Recall
• Inefficacy/Financial Loss
• Professional Indemnity
• Employers
• Directors and Officers
• Environmental.
• (Not exhaustive, examples only).

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PUBLIC LIABILITY Operative Clause Damages which
the Insured shall become legally liable to pay
consequent upon accidental death of or bodily
injury to or illness of any person, or accidental
loss of or physical damage to tangible
property Definitions Damage means physical
damage to, loss of or destruction or damage or
loss of use of tangible property, including
conversion, trespass, nuisance or wrongful
interference with the enjoyment of rights over
property. Personal Injury includes bodily
injury, false arrest, invasion of the right of
privacy, detention, false imprisonment, false
eviction, discrimination, libel, slander or
defamation of character, malicious prosecution,
discrimination or wrongful dismissal.
Bodily Injury death, injury, disability,
sickness or disease or death sustained by a
person resulting from such injury, disability,
sickness or disease and shall include mental
injury, mental anguish, shock, fright,
humiliation or loss of amenities.
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• PUBLIC LIABILITY
• Exclusions/Exceptions
• Injury employee
• Property belonging to care, custody and
• control
• Part working on/ have been working on
• Advice/treatment of professional nature
• Vehicles (mechanically propelled) unless,
• Beyond limits, loading,
• Tool of trade
• Aircraft/Watercraft

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PUBLIC LIABILITY EXAMPLES Spread of
Fire Section 34 of the National Veld and Forest
Fire Act, 101 of 1998 34 (1) If a person who
brings civil proceedings proves that he or she
suffered loss from a veld fire which a) The
Defendant caused b) Started on or spread from
land owned by the defendant, (2)
The Defendant is presumed to have been negligent
in relation to the veld fire until the contrary
is proved, unless the Defendant is a member of a
fire Protection Association in the area where
the fire occurred.
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• PUBLIC LIABILITY EXAMPLES
• Spread of Fire
• Section 34 (1) Act 101 of 1998
• reverse onus of proof
• relates to both cause and spread
• Minister of Forestry Quathalamba 1973(A)
• legal duty on a landowner to take precautionary
  action to prevent a fire from spreading from his
  property.

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• PUBLIC LIABILITY EXAMPLES
• Vicarious Liability
• Feldman v Mall 1945 AD
• Delict
• Employer/Employee relationship
• In execution of duties
• Scope and course of Employment question of fact
  determined in each case.

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PUBLIC LIABILITY EXAMPLES Vicarious
Liability Feldman v Mall 1945 AD Employee
Driving Van, Drinking after delivery before
returning to garage Viljoen v. Smith 1997 AD
Employee in vineyard, contrary to prohibition,
crossed into neighbouring farm, relieved whilst
smoking De Jager v. Taff Hamman 1993 (O) Not
liable for actions of sub-contractor, easily
controlled/ eliminated by sub, employer cannot
reasonably anticipate or prevent
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• LIABILITY GENERAL
• Contributory Negligence
• Section (1) of the Apportionment of Damages Act
  34 of 1956
• - only in delict, not contract
• - Butter v. CT Municipality 1993
• full into canal
• - Payne v. Minister of Transport 1995
• firemans pole
• - Gen Acc Ins Co v. Uijs 1993
• safety belt

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• PUBLIC LIABILITY EXAMPLES
• No Fault Liability
• Actio de pauperie (dog bite)
• Defendant is owner
• Animal acted contra naturam sui generis
• Animal acted sponte feritate commota (from
• inward excitement or vice)
• Claimant legally present
• Lever v. Purdy 1993 (A)

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PRODUCTS LIABILITY MultiMark Operative Clause -
notwithstanding specific exception 3(d) will
indemnify in respect of the defined events
caused by goods or products, (including
containers and labels), sold or supplied,
(including wrong delivery or delivery of
incorrect goods), Definitions Product any
good or product (after it has ceased to be in the
possession or under the control of the Insured)
designed, specified, formulated, manufactured,
constructed, repaired, serviced, treated, sold,
supplied or distributed by the Insured, including
any container thereof of instructions provided
therewith.
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• PRODUCTS LIABILITY
• MultiMark
• Exceptions
• Repair, alteration, recall, replacement
• Demolition, breaking out, dismantling,
• delivery etc
• Defective/faulty design, formula, plan or
• specification except if a retailer
• Inefficacy, failure to conform to
  specification
• unless negligence in following
• specification
• Aircraft
• USA.

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• PRODUCTS LIABILITY
• Contractual Third Party Claim
• Strictly liable for latent defects
• Breach of an express/implied warranty that
  product is fit for intended purpose.
• Latent Defect an abnormal quality or
  attribute which destroys or substantially impairs
  the utility or effectiveness of the thing sold
  for the purpose for which it was sold or for
  which it is commonly used.
• (Holmdene Brickwords vs Roberts Construction
  1977)
• Voetstoets Clauses buy item as is with all
  defects but no protection against fraudulent
  sale.
• Purchaser must prove-
• Seller aware at time of sale
• Maliciously concealed, with intent
• to defraud.

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PRODUCTS LIABILITY Liability avoided by
Disclaimer Such liability can only be avoided in
the contract of sale. In Kroonstad Westelike
Boer Ko-op vs Botha 1964 (A) the court
held Liability for consequential damage caused
by latent defect attaches to a merchant seller,
who was unaware of the defect, where he publicly
professes to have attributes of skill and expert
knowledge in relation t the kind of goods sold
where a seller falls within the category
mentioned will be a question of fact and degree,
to be decided from all the circumstances once
it is established that it does fall within the
category, the law irrebutably attaches to him the
liability in question, save only where he has
expressly or by implication contracted out of
it. (Pothiers Rule) Also extends liability to
seller as opposed to manufacturer.
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• DEFECTIVE WORKMANSHIP
• Operative Clause - Specific Exceptions 2(b) and
  3 (e) deleted.
• Exceptions
• Rectifying or recalling
• Inefficacy, not producing anticipated/claimed
  result
• Prior to hand over
• Defective design
• Aircraft.

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FINANCIAL LOSS Operative Clause Insured is
indemnified for damages and claimants costs and
expenses arising as a result of any financial
loss which is incurred by customers or Third
Parties as a result of any Product which fails to
fulfill its intended function or to perform as
specified, warranted or guaranteed.
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FINANCIAL LOSS Product defined as any
tangible property, after left custody and
control, which has been manufactured, designed,
specified, formulated, constructed, sold,
supplied, distributed, treated, service, altered,
repaired Financial Loss means a pecuniary or
economic loss or expense.
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• FINANCIAL LOSS
• Exclusion Injury and/or Damage as defined.
• Solely because of contract/agreement
• The cost of removal, repair, recovery,
  alteration, replacement, demolition, breaking
  out, dismantling, delivery, rebuilding, supply,
  installation or recall

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PRODUCTS GUARANTEE Operative Clause for the
cost of removal, recovery, repair, alteration,
treatment or replacement of any Product (or part
thereof) which fails to fulfill its intended
function to perform as specified, warranted or
guaranteed. No exclusions? Consequential loss?
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• PRODUCTS RECALL
• Operative Clause in respect of expenses
  incurred by the Assured for the recall of
  products (or part) necessary to recall
  because their use or consumption (or continued
  use/consumption) may cause the Assured to incur
  legal liability as defined.
• Expenditure includes-
• Cost to return to Assured, manufacturing
• Agent
• Advertising/Announcements
• Examination/Inspection
• Sometimes replacement/re-working.
• Exclusions
• Not delivered
• In care, custody of Insured.