Product liability insurance; Silent in Ghana?
Nearly eight years ago, at a funeral in Koforidua, I had the unpleasant experience of being served a bottle of soft drink, which turned out to be bad. As I gulped a sip, I felt a poisonous substance going down my throat and I had to chuck it out immediately.
Advertisement
Standers-by, consequently, suggested a suit against the manufacturer. A few days later, I turned the exhibit at the manufacturer’s office. After moving me around from one floor to another severally at the manufacturer’s offices, they finally declined liability. Inasmuch as I may not be litigious to proceed to court, not everyone will leave it at that.
The complex business environment
Suffice it to say the business environment continues to be complex. The relationship between manufacturers and consumers is now one of a social contract, particularly as a result of increased demand for goods and services; leading to increased competition and consumers’ sophistication.
Consumers will, therefore, stop at nothing to uphold their rights under the social contract with manufacturers. It is, therefore, equally imperative for manufacturers to indemnify themselves against their financial liabilities to consumers.
Quality control at manufacturing points
Even though manufacturers of consumable products often uphold high level quality check and controls in the course of manufacturing, there still exist overruns, which may cause the companies to pay out huge compensations in lieu of manufacturing defects with dire consequences, particularly for human lives.
Paying out huge compensations also has dire consequences for the financial stability of these manufacturers. This, therefore, brings to the fore the need for product liability insurance, which indemnifies manufacturers against the financial consequences of their products defects; often resulting from legal suits.
Product liability insurance
PL insurance is a policy that protects the insured against claims of personal injury or property damage caused by products sold or supplied through the insured business. It indemnifies the insured against liability to a third party; resulting from the use of their defective products.
Instructively, defective products can be injurious both to human life and property; hence, victims are given protection under the Consumer Protection Act, 1987. In this regard, victims of defective products may sue for breach of contract or a tortuous act.
Other Trending Stories
Types of defects considered under PLI
There are basically two types of PL insurance. First, PL may be based on fault. This involves non-disclosure, misrepresentation of products defect or effect. A manufacturer becomes liable if a consumer sustains injury after relying on the manufacturer’s non-disclosure or misrepresentation of the product defects or effects.
Second, PL may be based on strict liability. Strict liability simply applies liability without fault. Typically, it involves product failure resulting from inadequate provision of instructions. Attorneys have a great deal of responsibility in the interpretation and application of this rule.
Manufacturers/distributors responsibility
Manufacturers and wholesalers/retailers must consistently ensure that their products meet the desired quality, as they will be legally liable for consequential damages resulting from the use of their defective products.
Since the payouts are usually high, there is the need to transfer the risk to an insurer so that the insurer will be responsible for consequential damages.
Does your business have PL insurance?
PL insurance is a necessary requirement for all types of businesses. In the manufacturing sector, it typically covers during and after manufacturing processes.
Indeed, even if defective products find their way through the chain to wholesalers and then retailers, they can as well be sued; hence, both wholesalers and retailers also require PL insurance.
Claims payment
The validity of claims is a significant factor in PL insurance. The claims of the injured are barred beyond three years, after the victim becomes aware of the damage. This limitation is, however, based on the negotiations between the parties.
Moreover, the law refers to the Provisions of the Civil Code. However, if more than 10 years has passed since the marketing of the product, there can be no more claims. In this case, you may not need PL insurance.
Nevertheless, the claim will remain valid if there is a pending dispute or pending collection procedures.
PL insurance for imported products
As most developing countries such as Ghana continue to import several goods from overseas for local consumption, such products may have the tendency to cause PL suits; leading to huge claims.
In this regard, importers, wholesalers and distributors must either ensure that their manufacturers have PL insurance, with an extended cover to them or take their own PL insurance.
The PL insurance schedule
The schedule will usually define the scope of coverage, as well as both the per unit and total indemnity limits. The premiums are normally based on a defined rate of the estimated annual turnover of the business.
In most situations, however, the manufacturer will take a general public liability policy with extensions to include product liability insurance.
Advertisement
The way forward
There appears to be a seeming misunderstanding of the working of PL insurance; hence, the reason for the apparent low patronage. Suffice it to say the benefits of PL insurance are enormous, as already discussed.
In this regard, the National Insurance Commission (NIC), the Association of Ghana Industries (AGI), the Chamber of Commerce and Industry, the Ghana Insurers Association (GIA) and other stakeholders must collaborate and have discussions on increasing the PL insurance portfolio so that both industry and the economy at large will be protected.
Indeed, thinking strategically is no longer only a norm but also a way of life for most organisations, particularly those in industry and commerce.
Until next week, ‘This is insurance from the eyes of my mind.’ — GB
Advertisement