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									                  ILA

           LIABILITY INSURANCE
              PRESENTATION
(PUBLIC / PRODUCTS & RELATED LIABILITY)

                  BY

         STEFAN TERBLANCHE

             (15 May 2008)




1
    CONTENTS


    1.    The Liability Policy

    2.    Legal Liability

    3.    Cover Provided

    4.    Public Liability

    5.    Products Liability

    6.    Defective Workmanship

    7.    Financial Loss

    8.    Products Guarantee

    9.    Products Recall

    10.   Examples


2
    THE LIABILITY POLICY

    •   Differences in Style, Format, Cover
        provided etc.

        •   Some common elements:

            1. Cover provided

            2. Definitions

            3. Exclusions

            4. Warranties

            5. Operative Clause/Defined
               Events/Insuring Clause

            6. General Conditions




3
    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 claimant’s 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)




6
    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)




7
    THE OPERATIVE CLAUSE
    (Obvious Commonalities)

    Shakespearian descendants

    1. (Premium)

    2. Legal Liability

    3. Personal    Injury/Property   Damage
       (Financial Loss)

    4. Period (claims made/occurrence)

    5. Business




8
    LEGAL LIABILITY

    Causes of Action:

    1. Contract: - A voluntary agreement
       between the parties to enter into legal
       obligations.

    2. Delict   (Tort):  -   The     wrongful
       infringement of another’s interest and
       for which the wronged party can claim
       damages.




9
     LEGAL LIABILITY

     Contract as a Cause of Action:

     1. 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.




10
LEGAL LIABILITY

Contract as a Cause of Action:

2) 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:

•    Pay price;
•    Remove/receive object.



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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.




12
     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):

         1.   An act/omission;
         2.   Wrongfulness;
         3.   Fault (in form of intent or negligence);
         4.   Patrimonial Damage/Personal Injury;
         5.   Causality.

         Also “no fault”- actions;

         Actio   de pastu;
         Actio   de pauperie;
         Actio   de effusis vel deiectis;
         Actio   positi vel suspensi.




13
     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) A reasonable man in the position of the
        defendant …;

         1.   Could foresee the reasonable possibility
              of his conduct injuring another and
              causing him patrimonial loss;
         2.   Would    take    reasonable   steps    to
              successfully guard against occurrence;

     b) The defendant failed to take such steps.



15
     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.



16
     COVER PROVIDED

     Depending on the Policy wording, the following
     types of liability cover are common:

     1.    Public Liability;
     2.    Products Liability;
     3.    Defective Workmanship;
     4.    Product Guarantee;
     5.    Product Recall;
     6.    Inefficacy/Financial Loss;
     7.    Professional Indemnity;
     8.    Employers;
     9.    Directors and Officers;
     10.   Environmental.

               (Not exhaustive, examples only).




17
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;
     •   Goods/Products;
     •   After hand over of work, defect/error etc. in
         work;
     •   Agreement;
     •   Fines, Penalties, etc.
     •   General … Pollution, War, HIV,
         Radiation, etc.




19
     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.”




20
     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.




22
     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




23
     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
                    … fireman’s pole

      - Gen Acc Ins Co v. Uijs 1993
                   … safety belt




24
     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:-

     1.    Seller aware at time of sale;
     2.    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.

     (Pothier’s Rule)

     Also extends liability to seller …
     as opposed to manufacturer.

29
     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.




30
     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.




31
     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.




32
     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?




34
     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.

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