Public Liability Additional Information
The New Zealand Environment
New Zealand is experiencing an increased challenge from both legislation and case law, combined with international trends in litigation outcomes.
Changes to the accident compensation, health and safety and consumer legislation during the last decade have exposed both private enterprise and the public sector to the increased prospect of claims by members of the public either under statute, at common law or under the terms of a contract.
Manufacturers, exporters, retailers and suppliers of products and services alike are potentially at risk by the mere fact of their being in business.
Exemplary Damages
New Zealands “no fault” Accident Compensation Legislation is unique in the world and essentially bars legal action for compensation inrespect of personal injury.
However, there is a perception that accident compensation legislation does not provide adequate redress for persons injured in New Zealand. This has prompted victims to explore the possibility of bringing common law actions for personal injury seeking exemplary damages (sometimes called punitive damages) - even though our highest courts have repeatedly stated that these awards are intended to punish outrageous conduct, are limited to exceptional circumstances, and are not available to supplement a perceived shortfall in the statutory compensation regime.
These judicial comments have helped to ensure that exemplary damages, although often claimed are rarely awarded; and to ensure that any award is modest and reflects a sense of proportion with contemporary standards and attitudes to money and its purchasing power.
Consumer Legislation
Changes to consumer law in 1993 saw the Sale of Goods Act supplemented, and in a number of respects overshadowed by the Consumer Guarantees Act, which considerably enlarged the scope for actions to be taken in respect of property damage and economic loss caused by defective or substandard products or services. The Act gives domestic consumers an enforceable guarantee that goods will be of “acceptable quality”.
The Consumer Guarantees Act 1993 considerably enlarged the scope for actions to be taken in respect of property damage and economic loss caused by defective or substandard products or services.
This statutory regime of increased trading accountability has had and will continue to have implications for small and large business enterprises alike.
The Australian Situation
The Australian litigation environment has been changing at a rapid pace in recent years and these changes are having a profound impact on the incidence and cost of liability claims.
The attitude of society in relation to claims for injury is that “if something happens, someone pays”.
Class actions in the courts are becoming commonplace.
Changes to regulations covering the legal profession have led to a more active pursuit of class and other large scale group actions since the early nineties.
Promotion of a “no win, no pay” system of remuneration and aggressive advertising by the legal profession has also contributed to the situation.
Strict liability based on the European community system applies in respect of actions involving defective products.
The Trade Practices Act, Fair Trading and other consumer legislation have contributed to new causes of action where there are limited grounds of defence, and where contractual exclusions or limitations of liability are unenforceable.
The level of awards, whether they be the outcome of a simple slip and fall accident or a more complex product liability issue are ballooning, particularly in the state of New South Wales.
Australia's litigation environment is now considered more akin to that of the United States.
Trade in the Asia Pacific Region
The contributions of countries within the Asia Pacific region are becoming of greater significance in the global economy.
Most countries have been experiencing rapid economic development and some are only just beginning to recognise the need to address consumer protection and the legal liability of manufacturers and sellers of defective products.
Increasing trade within the region and the diversity of laws presents numerous new challenges to New Zealand manufacturers, importers and exporters.
They will increasingly need to become familiar with, not only the bases of liability in the Asia Pacific jurisdictions but also their procedural rules and the level of damages that may be awarded.
The United States of America
The United States represents a highly attractive outlet for New Zealand exporters.
It is however a notoriously litigious nation with a legal system based largely on judge-made precedent, made increasingly complex by the existence of various federal, state and local codified legislation.
Litigation in the US is very expensive. Class actions and the prevalence of contingency fees are standard with punitive damages awards among the most alarming aspects of US liability litigation in civil cases.
Liability cases are generally decided by a jury. Often, cases involve complex technical evidence and testimony from expert witnesses retained by opposing parties. Then the litigation outcome turns on the evaluation of this competing evidence by laypeople. This can lead to emotional and perhaps even biased verdicts. The amounts awarded, particularly by way of punitive damages, may be astronomic and out of all proportion to what in New Zealand we would regard as a fair and reasonable result.
The risks faced by exporters doing business in the US are many and varied and should not be underestimated. The product liability environment can be a major factor in a manufacturer's decision of whether or not to sell its products. A properly evaluated insurance programme will go a long way to making that decision a positive one.
