This is according to Simon Colman, underwriting executive of SHA Specialist Underwriters, who said that retailers need to ensure that their insurance policies will respond to the strict liability provisions of the CPA. "Retail stores have a responsibility to their consumers to ensure the safety of the products that they sell and a failure to meet this responsibility could result in an expensive lawsuit."
When it comes to faulty merchandise specifically, the CPA may prohibit retailers from simply 'passing the buck' to manufacturers, said Colman. "Many retailers forget that being the client-facing element in the supply chain places them in the line of fire for litigation as far as the CPA is concerned."
In some instances, both the manufacturer and the store could be jointly and severally liable for harm caused by a product. The law does allow for some defences on the part of the retailer, particularly where it is impossible for them to test the safety of every single product (like examining the contents of tinned food), he said. "Nonetheless, retailers need to remember that a multitude of products are imported into South Africa, which means that consumers will find it very difficult to take action against the manufacturer and will instead focus their attention on the 'lower hanging fruit' or local retailer."
He explained that, for this reason, retailers must have broad-form liability policies in place that include adequate product liability, even if they are not involved in the manufacturing of the product. "The limits of indemnity traditionally purchased by retailers on their insurance policies are also generally too low. A good liability insurance programme should take into account the potential for escalating legal defence costs in the increasingly litigious modern-day South Africa, as well as the ever-increasing quantum of awards for personal injuries."
In addition, Colman added that it is vital for retail staff to be regularly trained on the prerequisites of the CPA to ensure that internal procedures are consistently adhered to. Returns policies and the consumer complaints processes must also be carefully engineered to adhere to specified requirements and to mitigate the potential damages as far as possible.
He advises that retailers also need to rethink their quality assurance protocols as an additional measure to mitigate the effects of any possible litigation and awards/judgements, especially if the retailer can demonstrate that it has done everything reasonably possible to ensure safety.
"The CPA also empowers the National Consumer Commission to require a manufacturer/retailer to initiate a product recall if they feel a dangerous product is on the shelf. The costs of a recall can run into the millions within a few days. Traditional liability policies do not cover these costs and retailers should speak to their insurance brokers about such cover," Colman concluded.
