Brexit has brought product liability insurance sharply into focus
The regulations surrounding product liability and the need for specialist insurance cover has been brought sharply into focus by the United Kingdom’s decision to leave the European Union.
As a result, of the UK’s exit on January 1, an application was made to join the Lugano Convention, however, in May 2021 the European Commission rejected this request.
The Convention had originally been established between the European Union, Denmark, and the European Free Trade Association (EFTA) states of Switzerland, Norway and Iceland to regulate international jurisdiction and the recognition and enforcement of foreign judgments in civil and commercial matters.
The Convention determines which countries may hear cross-border disputes and also ensures recognition of judgments across the member states, which reduces legal costs for individuals and small business seeking legal redress outside their home countries.
The Commission’s rejection means any future cooperation between the UK and the EU in matters of civil judicial cooperation will likely be dictated by the 2019 Hague Judgments Convention, which also governs cross-border recognition of civil and commercial judgments.
Brexit and the Consumer Protection Act 1987 (CPA)
Before Brexit, the two key pieces of legislation that outlined a retailer’s duty of care to its customers were the Consumer Protection Act 1987 (CPA) and the General Product Safety Regulations 2005.
Following the decision to leave the EU, more UK online businesses are liable for injury caused by products sourced from the EU leading to an expected increase in product liability insurance claims.
Since Brexit, compliance with an EU law requirement will only constitute a valid defence if that EU law requirement has been retained as part of domestic UK law. Moving forward, the Hague Convention and English common law will be the focus for product liability disputes.
English common law has a comparatively low threshold for allowing the Courts of England and Wales to seize jurisdiction. It is sufficient for a defendant to be physically present in England and Wales to have proceedings served upon him or her, regardless of whether the claim has any connection with the jurisdiction.
If a claimant wishes to serve proceedings on a defendant outside the jurisdiction, then it is necessary to seek the permission of the court.
Burden of proof under common law falls to the claimant to prove its case on the balance of probabilities. Where a party makes allegations of deliberate wrongdoing, a raised civil standard may be applied.
There are limitations depending on the type of claim and contract and this expires six years after the breach of the contract.
In the context of product liability, this is commonly the date of supply. In tort claims in general, the limitation expires six years after the date of damage, while in tort claims specifically relating to personal injury or death, limitation expires three years after the date of damage or the date of the victim's knowledge of the damage. This is subject to a 15-year longstop.
Under the CPA, the limitation expires three years after the date on which the claimant became aware, or should reasonably have become aware, of the damage, the defect and the identity of the producer. This is subject to a 10-year longstop.
To decide whether a product is defective, courts take into consideration all the relevant circumstances including the way in which the product has been marketed, and any instructions or warnings that come with the product. The 'learned intermediary' is a defence in tort. It is not strictly a defence under the CPA, but it is one of the factors to be considered in deciding whether a product is defective. The learned intermediary defence applies where the manufacturer supplies the necessary information about its product to an expert intermediary who then deals directly with the end consumer.
No negligence is likely to attach to a product if the design, manufacture and sale comply with all applicable regulations. Regulatory compliance is not an automatic defence under the CPA, although it will be considered as an indication that the level of safety of the product was as persons generally were entitled to expect.
There are a number of additional defences available under the CPA including that the defect in the product is attributable to compliance with a requirement imposed by or under UK and EU law. Since January 1 this year compliance with an EU law requirement will only constitute a valid defence if that EU law requirement has been retained as part of domestic UK law.
Damages under the CPA, as in tort, are intended to restore the injured party to the position had the product not been defective. There is no provision for the award of punitive damages.
In England and Wales there are four ways damages can be awarded; for general damages; special damages: punitive damages and also exemplary damages. It is rare that punitive and exemplary damages are awarded.
Any damages awarded in contract are done on the basis of expectation where the claimant is put in the position it would have been if the contract had been performed as expected – subject to rule on the remoteness of damage.
Damages awarded for negligence are aimed at restoring the victim to the position they would have been had the negligence not happened and include personal injury and property damage.
UK Product Liability insurance rates are likely to rise as a result of Brexit as well as other inflationary pressures and W Denis Insurance Brokers plc have more than 50 years’ experience in arranging Product Liability Insurance including insurance for products that are deemed “high risk”. Please contact Daniel Moss if you would like to discuss our services in more detail Daniel.Moss@wdenis.co.uk or on 0113 243 7243.
Call us today on 0044 (0) 113 243 9812 or arrange a call back to find out how you could benefit from our intelligence-led insurance policies.