Products Liability Quiz

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Questions and Answers

What are the two most common causes of action used to recover damages for defective products?

Strict liability and negligence (correct)

Intentional torts and strict liability

Breach of warranty and negligence

Negligence and breach of contract

What is 'the defect' in a product?

The potential losses from the production, supply, and circulation of products

The type of insurance coverage that a product requires

The sum that the insured is legally liable to pay as damages

Defective manufacture, defective design, and inadequate instructions or warnings (correct)

What is 'inefficacy risk'?

The physical damage to property caused by a defective product

The damage caused by a product to perform its intended function (correct)

The risk of legal obligation to replace or repair a product

The risk of financial loss associated with a product recall

What is 'product recall'?

The cost and legal implications of product recalls Signup and view all the answers

What is the Lugano Convention of 1988?

A convention that provides for the plaintiff's freedom of choice to sue the manufacturer in his country or in the country where the product caused damage Signup and view all the answers

What is the North America exclusion in products liability policies?

An exclusion that applies to products exported to the United States and Canada Signup and view all the answers

What is the Product Liability Directive 85/374/EEC?

A directive that imposes strict liability on producers in cases of damage caused by a defective product in all member states of the European Union Signup and view all the answers

What is the specific harm for which a supplier may be held liable under section 61 of the Consumer Protection Act?

All of the above Signup and view all the answers

What are the risk assessment factors in product liability cases?

All of the above Signup and view all the answers

What is the purpose of products liability insurance?

To cover claims arising from defective products Signup and view all the answers

What are the two most common causes of action used to recover damages for defective products?

Strict liability and negligence Signup and view all the answers

What is 'the defect' in a product?

Defective manufacture, defective design, and inadequate instructions Signup and view all the answers

What is 'inefficacy risk'?

Damage caused by the product to perform its intended function Signup and view all the answers

What is 'product recall'?

The cost of recalling a defective product Signup and view all the answers

What does the Product Liability Directive 85/374/EEC impose on producers in cases of damage caused by a defective product?

Strict liability Signup and view all the answers

What is the specific type of harm for which a supplier may be held liable pursuant to section 61 of the Consumer Protection Act?

All of the above Signup and view all the answers

What is the difference between voluntary and mandatory product recalls?

Voluntary recalls are based on proactive management of risk and liability, while mandatory recalls are required by the National Consumer Commission Signup and view all the answers

What must a supplier initiating a voluntary recall do?

All of the above Signup and view all the answers

Study Notes

Liability for Defective Products - Statutory and Insurance Issues

Products liability insurance covers claims arising from defective manufacture, defective design, and inadequate instructions or warnings of a product.
Strict liability and negligence are the two most common causes of action used to recover damages for defective products.
Defective manufacture, defective design, and inadequate instructions constitute what is called ‘the defect’ in a product.
The production, supply, and circulation of products can result in various potential losses, including death, illness, bodily injury, physical damage to property, financial loss, legal obligation to replace or repair, inefficacy risk, and costs associated with product recall.
A products liability insurance contract seeks to indemnify the insured of the sums he shall become legally liable to pay as damages because of bodily injury, death or property damage caused by a defective product and defend the insured in any suit against him/her seeking damages on account of such bodily injury, death or property damage.
A products liability insurance contract will cover liability for loss types (a), (b), and (c) only. Liability for loss type (d) is regarded as a ‘trade risk’ and may be insurable to a limited degree if at all.
Loss type (e) is ‘inefficacy risk’. It refers to damage caused by the product to perform its intended function as opposed to a mere financial loss arising from the product’s failure to perform as expected.
Loss type (f) is liability for pure economic loss arising from a product that fails to perform its intended function without physical damage.
Loss type (g) is ‘product recall’ and can be substantial depending on the product recalled.
There has been a significant uptick in the number of claims related to both the cost and legal implications of product recalls since 2018.
Products liability insurance seeks to indemnify the insured product producer for claims it becomes legally liable to pay as damages arising from the supply of a defective product and defend the insured against allegations of liability or any lawsuit seeking damages relating to the supply of a defective product.
Most products liability policies may contain exclusions largely similar to those seen in public liability policies. In addition, the policies also exclude product recall, product guarantee, and financial loss covers.Products Liability Insurance: Coverage, Exclusions, and Defences
Products liability policies include the duty to defend the insured against allegations of liability by a customer or member of the public.
The insurer controls the defence of its insured, and most large producers of products want to export to other countries.
Products liability policies can address the concern of defending the insured sued in a foreign jurisdiction by inserting the Applicable Law Clause or the Jurisdiction Clause.
The Lugano Convention of 1988 provides that the plaintiff has freedom of choice to sue the manufacturer either in his country or in the country where the product caused damage, and applies to EU member states only.
Liability arising from products exported to the United States and Canada is excluded by many insurers in South Africa due to the risk involved in covering product liabilities from these jurisdictions.
The North America exclusion in products liability policies is justified by structural features of American and Canadian legal systems that create the perception that they are risky jurisdictions.
Reasons used to justify the North America exclusion in products liability policies include the use of the contingent fee system, the prevalent use of strict liability, the prevalent use of punitive damages, and forum shopping.
The Product Liability Directive 85/374/EEC imposes strict liability on producers in cases of damage caused by a defective product in all member states of the European Union, the other EEA members, and the United Kingdom.
A claimant must prove actionable damage, the existence of a defect, and a causal link between the defect and the damage to succeed.
The Directive provides several defences to producers which, if successfully pleaded, exempt them from liability.
Liability for defective products in contemporary South Africa largely falls under the purview of the Consumer Protection Act 68 of 2008, which imposes a wide range of obligations on suppliers and related entities aimed at protecting consumers.
The Act provides a number of defences that can be pleaded against liability for damage caused by defective products, and damages may be awarded against the offending party even in cases where there is a class of consumers who were prejudiced by the offending party’s conduct.Product Liability and Risk Management: A Guide for South African Manufacturers
Section 61 of the Consumer Protection Act creates strict liability for producers, importers, distributors, and retailers of goods where harm is caused by goods that are "unsafe," suffer from a "product failure, defect, or hazard," or where goods were not accompanied by appropriate instructions or warnings.
Risk assessment factors in product liability cases include the nature of the product, its use and target market, instructions accompanying the product, position of the insured in the product value chain, product history and reputation of the insured as a producer, the system of quality control that the product undergoes before it lands on the market, and the terms and conditions on which the product is sold to consumers.
Manufacturers must consider risk management issues such as product design, testing, certification, and protocol to be followed in the event of discovery of a defect.
Product recalls in South Africa are regulated primarily by the Consumer Protection Act and can be voluntary or mandatory.
The specific types or categories of harm for which a supplier may be held liable pursuant to section 61 of the CPA include the death of, or injury to, any natural person; an illness of any natural person; any loss of, or physical damage to, any property, irrespective of whether it is movable or immovable; and any economic loss that results from harm referred to above.
Voluntary recalls are based on the proactive management of a supplier's potential risk and liability, while mandatory recalls are required by the National Consumer Commission (NCC) where reasonable grounds exist to believe that any particular goods may be unsafe, or that there is a potential risk to the public from the continued use of or exposure to the goods.
Guidance on the voluntary recall process has been published by the NCC in terms of the CPA under GN490 in GG 35434 on 13 June 2012.
A supplier initiating a voluntary recall must conduct a risk analysis of the safety hazard, cease production or modify the manufacturing process for the product that has been identified for recall, notify the relevant regulator/s and relevant parties, determine a course of action, prepare a written recall strategy/plan, create a communication plan for consumers, make arrangements for the retrieval of the recalled product, and fulfill significant reporting obligations.
Product recalls inevitably involve serious issues, including consumer welfare and manufacturer reputation and liability.
Manufacturers, consumers, and all stakeholders between them (including suppliers and distributors) must take note of their legal rights and obligations in respect of product recall in South Africa.
The globalisation of industry means that materials and components used in the manufacture of products may be sourced from multiple countries and suppliers, making it difficult to enforce contractual rights when things go wrong.
A defective product can trigger other risks for the responsible manufacturer, such as reputational damage.

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Description

Think you know all there is to know about liability for defective products? Test your knowledge with this quiz! From the types of product defects to the different types of loss covered by products liability insurance, this quiz covers it all. Challenge yourself to understand the legal and insurance issues involved in product liability, including strict liability, negligence, and the Consumer Protection Act. Learn about risk assessment factors, voluntary and mandatory product recalls, and the legal rights and obligations of manufacturers, consumers, suppliers, and distributors. Get