Global Insurance Law Connect has launched its first product liability report providing insights from 17 countries, including Australia, on product liability insurance in their domestic markets. The report provides details on the changes to the product liability market globally and forecasts future developments. Growing consumerism, the globalisation of supply chains, the emergence of new technologies, and the need to innovate are driving an increase in product liability claims globally.
Gillian Davidson, Sparke Helmore Partner and Chair of Global Insurance Law Connect, commented: “These current and future trends in claims globally stem from a combination of consumer and regulatory pressures. While modernisation and innovation are increasingly important factors in today’s consumer society, at the same time, concerns around privacy and environmental preservation are also front of mind for many consumers. Alongside this, the growing body of legislation affording greater consumer protection rights has led to increased awareness of product liability insurance.
“Some less mature insurance markets are still relatively underdeveloped, and in these markets product liability coverage is a relative newcomer and often occupies a small niche in the overall product mix. Nonetheless, the global tide of regulatory and legislative change is set to encourage consumers and corporates alike to increasingly hold manufacturers, importers and suppliers to account for the products and services that they provide.”
The research highlighted one of the latest and most rapidly evolving issues impacting product liability is artificial intelligence. As Gillian explains, “One area that has thrown up challenges for regulators and legislators alike is the unprecedented growth of new technology platforms and tools such as artificial intelligence—and particularly the speed at which they are entering the daily lives of consumers and businesses. Although regulators are making a concerted effort to introduce frameworks that will both mitigate the risks to users of this new technology and protect them from harm, many are playing catch-up, and we are likely to continue to see an increase in the number of claims.
"As awareness of product liability issues grows, the market for insurance coverage is expected to grow alongside it. In more developed insurance markets, the strengthening of consumer protections across a range of industry sectors (including the expanded definition of who or what constitutes a consumer in the eyes of regulators) is bringing more businesses into scope for potential product liability claims, driving appetite for coverage."
Australia’s product liability regime is a combination of common law, contract and the Australian Consumer Law (ACL). The ACL contains a unique prohibition on misleading and deceptive conduct, a regime of consumer guarantees, and imposes strict liability for products found to have safety defects. The ACL allows consumers to take action against suppliers, manufacturers and importers with the onus on the defendant business to seek contribution from other parties at fault; importers may be classified and deemed ‘manufacturers’ if the actual manufacturer does not have an Australian presence.
Kiley Hodges, Sparke Helmore Partner, commented, “Large product liability claims are usually commenced in the Federal Court of Australia or the Supreme Courts of the states and territories. With the recent changes and developments in case law, the defendants in product liability matters can be broad and include manufacturers, suppliers and retailers, although they are usually corporate entities. A wide spectrum of claimants also exist—from individual consumers and small businesses to large corporates and the Australian Competition and Consumer Commission depending on the scale and complexity of the matter.”
Continued Kiley, “Product liability class actions have been a well-established part of the Australian legal landscape for the last decade, aided in part by the increasing role of litigation funders and ‘no win, no fee’ lawyers. Australian product liability litigation often follows product recalls, overseas lawsuits, or regulatory investigations and enforcements.
“Class actions have more recently involved pharmaceuticals, pesticides, chemicals, medical devices, motor vehicles and a range of consumer products. Under the ACL, the definition of ‘payment of goods’ by a ‘consumer’ in respect of the breach of consumer guarantees has increased from $40k to $100k, which may also be contributing to an increase in litigation.
“A number of legislative changes were passed in November 2022 to increase penalties for companies that breach Australian competition and consumer laws. These changes include the introduction of penalties for businesses that use unfair contract terms in standard form contracts entered into with consumers and small businesses. The amendments will take effect in November 2023 allowing businesses enough time to change their standard contracts. Sparke Helmore has released three articles on unfair contract terms amendments—the articles can be accessed here, here and here).”
In closing, Gillian says, “Whether countries have the most consumer-friendly laws in the world and a mature product liability market to match, or whether they have evolving legislation and a nascent insurance market for these risks, it is clear that this class of business will continue to grow at a fast pace in the coming years.
“In this rapidly evolving market, insurers will need to be alert to new exposures and opportunities alike.”
The product liability report covers Australia, Belgium, Brazil, Chile, China, Denmark, Finland, France, India, Italy, Mexico, Netherlands, New Zealand, Norway, Poland, Spain and the United Kingdom. Click here to access the full report.