Stupidity insurance – why your business needs it?

People do stupid things all the time so why shouldn’t you be able to get insurance for that? Or maybe you can? Read on to find out if you need Stupidity Cover today.

Thank you to everyone that read my last blog. The response from brokers who are interested in liability has been quite amazing. I thank you for that. All 5 of you. So now that we all understand what a liability is and who the mysterious third party is, lets get real here. Let’s just tell it like it is; liability cover in many ways is just human stupidity insurance. Nine times out of ten, either someone has done something stupid in the business, which leads to a customer getting injured or the customer has done something stupid which leads to them suffering some kind of harm. Its a circle of idiocy.

Many product liability claims stem from a moment of sheer Darwinian brilliance where a consumer imagines that they have found a better way to use a product other than that specified by the manufacturer. Take for example the genius in this video clip:

A drill should not be used to eat a mielie (that’s corn on the cob if you’re reading this outside SA). Nothing is foolproof, because the fool is extremely inventive. Without the fool we would have far less content on Youtube, the social media platform built upon the broken bodies of individuals who push the boundaries of stupidity, for our entertainment every day.

In SA, like many territories around the world, we have some pretty robust consumer protection legislation. This means we are protected, often even when we’re being stupid. The Consumer Protection Act places a big responsibility on manufacturers and many others in the supply chain to ensure that the instructions and warnings on products are clear. See this article on the subject.

Fortunately most product liability insurance policies do recognize that the label is a part of the product, so if the injury happens as a result of poor labeling, the claim should still be covered. There is of course an onus on the supplier – don’t you love the word “onus“? Sounds so…anatomical. If you don’t observe the onus, you could soon see your anus. I’m the master of lavatorial digression, please forgive me.

As I was saying, there is an onus on the supplier to comply with local legislation when putting the product into the Republic of South Africa. Businesses that are importing stuff from say, China, shouldn’t assume that their insurers will pick up the tab every time someone chokes on a squidgy because the label was in Mandarin. Mandarin is a language spoken in China to those of you less travelled. It is also a type of fruit. Labels cannot be in Chinese or Fruitese in South Africa.

So obviously warnings and instructions need to be in a language people understand in that territory. SA businesses do not produce manuals in all eleven languages. I remember buying a TV set once and after removing the set from the box, discovering an operating manual the size of a phone book. The book weighed almost as much as the TV and just before I panicked and handed it to my teenage son for interpretation, I realized that the instructions in English only made up about 5 pages. The balance of the tome was in a language from almost every country in the world. To be honest, I may as well have read the Greek section.

I really love this bit in our CPA. The part that tells you about plain language reads:

“For the purposes of this Act, a notice, document or visual representation is in plain language if it is reasonable to conclude that an ordinary consumer of the class of persons for whom the notice, document or visual representation is intended, with average literacy skills and minimal experience as a consumer of the relevant goods or services, could be expected to understand the content, significance, and import of the document without undue effort, having regard to:
– The context, comprehensiveness and consistency of the notice, document or visual representation;
– The organisation, form and style of the notice, document or visual representation;
– The vocabulary, usage and sentence structure of the notice, document or visual representation; and
– The use of any illustrations, examples, headings, or other aids to reading and understanding.”

Plain and simple right?

The bottom line is that businesses have to assume that their customers are going to do something stupid and should factor that into the instructions and warnings. They also need to spend time thinking about the way in which the information will be presented. 11 official languages in SA do present a logistical problem but as the CPA suggests, diagrams are a useful alternative to text. That is why some businesses have cleverly done away with wordy labels and instructions and have instead opted for pictures. Nowhere is this more evident than in the air travel business. Airlines have to contend with a whole host of language problems so they very effectively use pictures to get their message across clearly:

Keep it plain and simple. I’m the LiabilityGuy.

Note that as I am the LiabilityGuy I have to include a suitable disclaimer so please don’t treat any of these blogs as legal or financial advice. Be sure to chat to your broker if you’re a policyholder or if you’re a broker yourself, chat to your favourite insurance underwriter (follow my eyes) to get some detailed training or product information. The opinions expressed here are all my own, written in my personal capacity.

What the hell is a liability anyway?

Setting fire to the neighbours property, kids bouncing off jumping castles, cosmetics that burn your face off…. What the hell is a liability? Who the heck is a third party? Whatever happened to the second party? These and other conundrums solved in the first blog in a series that demystifies my world of liabilities.

A lot of people ask me what on earth a liability actually is? If you’re an accountant, too much liability is not a good thing. In the financial world a liability is the other side of the balance sheet; the dark and scary side that keeps you up at night. For many South Africans it’s the only side of the balance sheet unfortunately. Debts and sacks of money owed to other people often make up the bulk of financial liabilities.

By now you are thinking, “I knew this blog was going to be crap, if I wanted to be reminded of my financial woes I’d check my shares in a certain furniture and clothing retailer” I know you are thinking this because as I am writing it, I too am contemplating a much needed root-canal treatment rather than completing the blog.

Fortunately the type of liability that I am involved with, has nothing to do with accounting. Sorry bean-counters, there’s no ledger-porn to see here. I am the Liability Guy and welcome to the wondrous world of legal liability. This you’ll soon find out is much more exciting because it is here that we deal with:

  • Killer cosmetic compounds that want nothing more than to give your customer that permanently surprised, “where are my eyebrows?” look.
  • Erratic and irresponsible employees that light up more than a cigarette in your client’s warehouse whilst having a sneaky fag in the no-smoking area.
  • Clumsy customers who fall down the stairs in your shop because they’re more into WhatsApp than watching where they are going. If you break it, you buy it doesn’t count when the damaged goods are your client’s legs.
  • Sugar spiked toddles on a such a high in that play area at your restaurant that they bounce right off the jumping castle and straight into Mrs. Mathebula celebrating her 80thbirthday. Maybe that’s why they call them off-spring?

You may be wondering what all these ridiculously, tragic scenarios have in common? Well the truth is they will all probably result in a lawsuit against the owner of the business. There is of course insurance that can cover these events and the source of claims against these policies are generally those that have resulted in injury or damage sustained by a mysterious group of people we call, “third parties”.

“A third party”, I see you raise both eyebrows. “I’m always up for a party, maybe even a second party but a third party? Will there be beer-pong, balloons, a cake or a cow on a spit? Three parties though. Who has that kind of staying power?” you may wonder.

Again, you’ve been misled, just like our accounting friends earlier in this article. The kind of third parties we talk about in liability insurance circles have nothing to do with people drinking and carrying on like teenagers, unless the business being sued is a bar. By the way, if you get drunk in a bar in some parts of the USA and cause an accident, the injured parties may actually sue the bartender for getting the driver drunk. True story, and similar things are on the cards in South Africa in proposed amendments to our own liquor laws.  Did you see what I did with the word “parties” there?

The third parties we talk out in liability insurance are the hapless group of individuals (or even other businesses) who seem to have zero luck and are always on the receiving end of dangerous goods or poor services, inevitably leaving them out of pocket , injured or worse. We call them third parties because they are not a party to the insurance contract directly. The first party is the policyholder (the butcher, baker, candlestick maker or whomever had the foresight to buy the policy), the second party is generally accepted as the insurance company although you will never hear mention of the second party. We don’t ever talk about them. Are they are like the uncle who gets drunk at the family dinner and tries to get amorous with the garden gnome on the front lawn?  Or are they the invisible heroes who want no credit for saving us from financial ruin? That I suppose depends on whether the claim gets paid…

In any event, this tale is not about the invisible second party. Just remember that the third party is the disgruntled, injured and often litigious individual who wants to take you to court. Unless you are a former president of a beautiful country at the tip of Africa, in which case a whole country may want to take you to court.

 

Don’t get me wrong, many third parties have good grounds for litigating and it is possible that the business actually did something to warrant being sued. Accidents do happen and someone is generally to blame when they do. If it’s not obvious whodunnit then both sides may have their day(s) in court. That’s generally where things get expensive and legal liabilities quickly start to turn into financial liabilities. Lawyers of the world rejoice. Accountants, you are back in play.

It’s these expensive processes in court and the fact that the business may have to compensate the injured third party that warrants buying liability insurance. This is also the primary reason why I have a job. So if you’re a broker, please sell more liability insurance.

Over the next few months I’ll be writing more about the wonders of liability so please be sure to follow this blog.

Note that as I am the LiabilityGuy I have to include a suitable disclaimer so please don’t treat any of these blogs as legal or financial advice. Be sure to chat to your broker if you’re a policyholder or if you’re a broker yourself, chat to your favourite insurance underwriter (follow my eyes) to get some detailed training or product information. The opinions expressed here are all my own, written in my personal capacity.

Related article on this blog : Coffee Cups, Ladders and Vibrators