Managing the business of liability
By Simon Colman, Underwriter , Camargue Underwriting Managers
As brokers prepare themselves for the implementation of the new Consumer Protection legislation, many will be wondering how they can best protect their client’s interests. Historically, general insurance practitioners (both brokers and underwriters) have avoided delving too deeply into public liability insurance business.
This is largely due to:
· A perceived lack of claims activity
· The perceived non-litigious nature of the South African public and
· A lack of knowledge of the laws of delict and contract and how they impact on providers of products and services
In light of this, public liability premiums are generally quite low and the level of coverage granted by the traditional insurance market is still very narrow. In fact many insurers still use versions of the now defunct, Multimark form. To put it bluntly, this offers very little cover, especially as we move into a new era of litigation conscious South Africans.
Defining the New Era
Like some kind of cosmic consumer karma, the Consumer Protection Bill seeks to make retailers, property owners, manufacturers, installers, distributors and basically anyone else involved in the supply chain, strictly liable for any injury or damage that may be caused to a third-party consumer. Negligence will no longer be a prerequisite in establishing liability.
The Bill enforces an extra duty of care on all the parties involved in getting a product or service to market. Further to this, the legislation will also make it easier for consumers to take action against the offending suppliers through the implementation of a consumer tribunal (which could in effect operate like a CCMA for consumers). This would invariably lead to higher levels of litigation and dispute resolution (incidentally, the CCMA has been going for 12 years and now hears over 600 cases a day).
Creative Risk Management
The first step in managing this new exposure should be to adopt a more creative approach to risk management. Clients should be encouraged to deal with underwriters who not only provide broad-form liability insurance coverage but also provide a range of value added benefits that assist the hapless product or service provider in meeting any new obligations they may have.
One should always remember that while broad-form liability policies will pick up most of the damages and legal fees arising out of delict, the insured might find that the reputational damage following an injury or death of a consumer has far greater, uninsured consequences. The value of many businesses lies in the relationships and reputations they have with customers. A well-publicised lawsuit could spell a drop in consumer confidence and lead to the ultimate demise of the business. Effective liability risk management can avoid such events.
Liability risk management can be split into three categories:
• Pre-Loss Physical risk:
A team of qualified surveyors look at the environment that the insured operates in and identifies areas that could lead to injury of visitors and customers or damage to third-party properties.
Some risks are purely premises-based, such as in shopping centres and offices and involve an assessment of precautions during cleaning or renovating. General maintenance of the property also plays a role.
In environments where products are being manufactured or sold, quality control becomes a bigger factor. The risk surveyors should be versed in quality control procedures and should be able to guide the insured in tracking and batching of products. While the retailer may not have manufactured the products, they’d be well advised to have their own quality control measures in place as well. If the media frenzy identifies them as part of a lawsuit in a claim for injuries, evidence of effective QC procedures may stand them in good stead.
The new legislation also imposes liability for negligent advice so a risk team that can help the employer assess the competence of sales staff would prove to be an integral part of efficient skills development and liability risk management.
• Pre-Loss Legal risk:
Underwriters that have qualified attorneys and advocates on their risk management teams are in an excellent position to offer pre-loss legal support to clients. This involves assessment and assistance with:
Disclaimers and indemnities for visitors/customers.
Standard Trading Conditions – while the CPB may impose strict liability, the insured’s own ability to seek recourse from the actual negligent party may be impeded by badly worded trading conditions or hold harmless clauses. Professional advice can be invaluable to client and insurer alike in this instance.
Agreements with sub-contractors such as cleaners and security companies may also present high-risk areas in premises-based risks and a proper assessment of such agreements enhances the risk management model.
• Post-Loss Action:
Once a customer lodges a complaint or notifies the insured of an injury or loss, the steps that follow in dealing with the matter are critical. Many smaller companies only consult with attorneys once the case has reached the point of no return. Post-loss risk services mean that the client has:
• Access to 24-hour legal advice from a qualified attorney.
• Access to 24-hour medical emergency services (particularly relevant in the hospitality sector).
• Proper incident reporting services to ensure that witnesses are interviewed and evidence is gathered.
• Access to private arbitration facilities such as those provided by Tokiso Dispute Settlement. This ensures that the media exposure is kept to a minimum and the expectations of all parties concerned are kept within the bounds of reality.
Of course one could wax lyrical about the long-term value of integrated risk management but the reality is that some of the largest companies in South Africa have employed their own teams of risk managers and have been enjoying the benefits of such initiatives. Brokers would do well to work with underwriters that seek to bring the same benefits to smaller businesses that may not be in a position to employ their own risk managers.
Businesses owners often look to insurers to guide them through uncertain times of change and transferring unknown risks. Today’s liability specialists recognise that this involves more than just cleverly worded insurance policies; it involves real business enriching, legacy protecting risk management.
Camargue Underwriting Managers (Pty) Ltd
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