HENNIE VAN ECK JUSTIN MALHERBE

24 JULY 2015

BROADFORM LIABILITY:

WHAT EVERYONE SHOULD KNOW

What is broadform liability?

• Broadform liability is essentially legal liability

• Loss or damage due to conduct of another

• Criminal liability (State vs XYZ) – jail/fine

• Civil liability (A vs B) - damages/money i.e.

– Contractual liability e.g. breach of contract

– Delictual liability e.g. negligence, beach of duty

• Liability is mostly delictual

• 5 Requirements for a delictual claim

- Act/omission

- Wrongful

- Fault (intention or negligence)

- Damages

- Causal link between act/omission and damages

Where could claims come from? Can your client be liable i.r.o ?

• Contracts with third parties

• Any injury or damage sustained by third parties

• Damage caused by your client

• Examples:

– Public liability: e.g. slip and trip

– Product liability: e.g. failed product

– Wrongful arrest: e.g. municipal traffic officer

– Professional Indemnity e.g. medical practitioners, brokers

– Carriers liability: e.g. damaged goods

– Spread of Fire: e.g. veld fires

• What cover does your client need?

Elements of liability: Wrongfulness

• Will the potential conduct (act or omission) infringe a legally recognised interest or right of a third party?

• Test for wrongfulness The legal convictions of the community

– An objective test – Based on reasonableness – Balance opposing interests of insured and third party

• Brokers – Don’t need to be lawyers to assess this – Should consider client’s insurance needs against the above – Use logical and practical considerations

Recent case: Wrongfulness

Deacon v Planet Fitness Holdings [2015] (GP)

Facts – Gym member injured at exit turnstile – No warning signs Court held

– Gym’s failure to warn members not wrongful – The turnstile is a ‘regular feature of modern society’ – Claim dismissed

Elements of liability: Fault • Fault generally

– Intention or

– Negligence

• Strict liability

- Statute (Consumer Protection Act)

- Common law (dog bites)

• Disclaimers, notices and conditions of trading

– Can assist/limit your client’s exposure

– Check your client’s documentation

Discussion of fault: negligence

Kruger v Coetzee – “Reasonable Man” test

Facts

– Farmer knew gate often left open by others

– He closed it when he reasonably could & complained to the

authorities about it

– Car collided with his horse in road

Court held

– Plaintiff did not prove reasonable steps required of farmer

– Claim dismissed

– Test for negligence confirmed

1. Would reasonable person in position of wrongdoer have

foreseen conduct causing damage?

2. If so, could steps have been taken to prevent damage?

3. If yes to both questions = negligent

Who is the Reasonable Person?

Fictional person:

– The average man/woman/client to be insured

– Not reckless or overcautious

– Aware of surroundings and dangers in activities

Professionals/experts e.g drivers, doctors, lawyers, brokers

- Did the professional/expert act with same skill and caution as reasonable members of profession?

- In the same circumstances?

Recent case: Negligence

Nicholls v Burbridge t/a Dulce Café [2015]

Facts

– Slip and trip at Dulce coffee shop – No substance proved to be on floor

Court held

– Trial court dismissed claim – negligence not proved

– Appeal court agreed - failed to discharge onus of proving negligence

– Opposing witness’ versions, equally credible

– Negligence not proved on balance of probabilities

– No claim

But- brokers must advise property owners to take precautions

Elements of liability: Causation

• Factual causation

– ‘but for’ test

• Legal causation

– Various theories

• Proximate cause

• Intervening causes?

– Can be very technical

– Consider logical and common sense issues in advising clients on what to insure against

Recent case: Causation Za v Smith and another [2015] (SCA)

Facts

– Breadwinner fell down a snowy cliff in private reserve – Loss of support claim by wife and children – 4x4 trail to peak – no warning of danger to visitors

– Husband went to edge , slipped, fell of cliff and died

Court held

- Discussed concepts of wrongfulness, negligence & causation

- Failure to take steps to warn or prevent harm was wrongful

- Expert evidence: measures to be taken to prevent

- But for failure to implement measures, husband would not have died

Examples of liability claims

Negligent Attorneys

Mlenzana v Goodrick and Franklin (2011)

Facts

- M sued attorney G for R493 574.00

- G failed to lodge claim against RAF timeously

Court held

- G negligent

- Did not take reasonable steps to obtain information required

- Failed to exercise skill expected of average attorney

- G liable

Negligent Property Owners

Holm v Sonland Ontwikkeling (2010)

Facts - Shopping complex has volleyball court on site next to dam - H kicked volleyball over fence, into dam - H dived in and broke his neck in shallow water - H paralysed for life - No warning signs not to dive into dam Court held - H 50% negligent - Complex 50% negligent

Medical negligence • Distinction between malpractice and negligence

• What may constitute medical negligence?

– Failure to inform

– Failure to monitor

– Failure to instruct

– Failure to perform

• Reasonable medical practitioner test:

– belonging to the same branch of profession

– not expected to show highest degree of professional skill, only reasonable skill and care

– Reliance on experts

– Res ipsa loquitur – do the facts speak for themselves?

Recent case: Medical Negligence

Medi-Clinic Ltd v Vermeulen (2014) Facts - V contracted malaria, hospitalized, in ICU - V got bedsores which caused permanent nerve injuries - V paralysed, wheelchair bound, sued hospital

Court held - Expert evidence compared: logical ? - Hospital staff not negligent - Claim dismissed

Negligent Brokers

• Clients blame their broker if claims are rejected

MY BROKER NEVER TOLD ME/SHOULD HAVE TOLD ME …..

• Broker is the insured’s agent, acts on behalf of insured

• Has duty to exercise reasonable care and skill

• Expected of reasonable average member of profession

Negligent Brokers cont…

Durr v Absa Bank (1997)

Facts - Mrs D 65 years old, asked advice with investments - Advisor recommended investment in “Supreme” - “Supreme” liquidated shortly after investment made Court held - Advisor did not investigate “Supreme” or its creditworthiness - Ignored warning signs - High returns and commission offered - A knew Mrs D relied on his advice - Broker liable

Conclusions • Have a service level agreement with your client e.g.

– Record the client’s duties to make full disclosure etc

– Limit your liability

• Know your client and the risks he is exposed to e.g.

– Visit his business

– Analyze his business i.r.o. risks to be insured

• Know your insurance products

• If you lack skills/expertise -- get help/refer

• Record your advice

• Use common sense and logic

- to assess the client’s insurance requirements

- to protect yourself

- the law expects nothing more

• Insure yourself !!

Disclaimer

These slides set out general legal principles and are for information purposes only. The contents should not be deemed to be legal advice. We recommend that before you rely on the contents hereof you should obtain legal advice.

For more information contact;

• Hennie Van Eck T 041 3969 220 E hve@jgs.co.za

• Justin Malherbe T 041 3969 250 E justinm@jgs.co.za