BREAKING THE LIABILITY

INSURANCE MOLD THE

BROAD-FORM CONVERSION

The pending Consumer Protection Act and its impact on the public liability insurance
market has been discussed ad nauseam in most insurance circles and savvy insurance
brokers are readily acknowledging that its time to start introducing their clients to the
concept of broad-form liability coverage.

The Multimark (MM) (Commercial) policy was introduced to the South African market in
1987. The policy was used extensively by most insurers up until 2007 when SAIA
decided that the continued use of a market agreed wording could be construed as
contrary to the conditions of the Competitions Act no. 89 of 1998. While the policy is no
longer endorsed as market agreed, many insurers and brokers continue to offer the
same cover under a different name (which varies from insurer to insurer). While it is
understandable, this is not necessarily in the best interests of the client.

While its a well-known fact that the vast majority of SME commercial policyholders have
only ever been exposed to the now defunct Multimark 3 (MM) type policy, the question
that begs answering is: Why change? Aside from the promise of cover so wide that you
can drive a proverbial bus through it, the other grounds become transparently clear when
the differences between the covers are stacked up. By illuminating the inequalities a
strong case is made for Broad-form and a conversion seems the obvious choice.

There are many variations of the coverage but most have the following elements:
1. The Non Accidental Trigger:
a. In order for the MM policy to respond, the insured has to establish that the third-party
loss occurred as a result of an accident. The word accident appears in the operative
clause and means that the onus of proof lies with the insured.
b. The Broad-form policy responds to actions where the insured is legally liable for
damages or injuries. The cover is referred to as non-accidental. The word accident
does not appear and means that if the insurers wish to repudiate based on the fact that
an intentional act caused the loss, the onus of proof rests with them, rather than the
insured.
This can be of great benefit to the insured when submitting a claim. There can be many
different legal interpretations of the word accident avoiding the use of such an operative
clause can be of great value to the prudent broker.
Conclusion: Broad-form provides a wider trigger that is less likely to lead to a claims
dispute.

2. Definition of Property Damage:

a. In the MM wording, damage is defined only as loss of or damage to tangible
property.
b. In the Broad-form policy the definition is wider and includes:
i. Actual damage to property
ii. Loss of possession or control of property (as may be the case if the property is not
damaged as such but is simply inaccessible)
iii. Loss of use (as in (ii) above)
iv. Prevention of access
Conclusion: Broad-form provides an extended definition of damage meaning the TP
property need not be physically damaged, merely unable to be used. This could be a
consequential loss where no actual damage has occurred.

3. Definition of Injury:
a. MM provides for death, injury or illness to a person.
b. Broad-form defines injury as:
i. Bodily injury
ii. Death
iii. Illness
iv. Disease
v. Mental anguish
Conclusion: Mental anguish is the differentiator here. Many insurers do not view pain and
suffering and loss of amenities as bodily injury. The absence of mental anguish cover
could therefore produce a problem. If one uses the Road Accident Fund as a barometer
to measure the awards for such cases, a greater appreciation of the benefits of the wider
cover can be experienced. Each year around 60% of the total benefits paid out related to
non-pecuniary injuries such as pain and suffering and loss of amenities.

4. Territorial Limits:
a. MM restricts coverage to RSA, Namibia, Botswana, Lesotho, Swaziland, Zimbabwe
and Malawi.
b. Broad-form provides worldwide cover.
Conclusion: In the modern South Africa many companies trade with foreign partners and
undertake contracts throughout Africa, beyond the MM borders. Broad-form moves
through all territories with the insureds business.

5. Pollution:
a. MM covers sudden and accidental seepage, pollution or contamination.
b. Broad-form covers sudden and unforeseen pollution. Pollution is defined as:
i. Release of liquids, gases, contaminants or pollutants
ii. Smells
iii. Noise, light, vibrations, electricity
iv. Temperature changes
Conclusion: MM cover may have been adequate in the past but disputes over what is
accidental often negated the cover. Further to this, many insureds are often faced with
Nuisance type law suits (especially in respect of noise and light pollution), as is the case
with restaurants and nightclubs in residential areas. Broad-form provides more
comprehensive pollution cover.

6. Products Liability and Defective Workmanship:

a. MM excludes losses caused by defective design.
b. Broad-form covers losses caused by products designed, manufactured, constructed,
installed, repaired, and altered by the insured.
Conclusion: Broad-form displaces the argument over whether a claim is covered due to
design vs. manufacturing faults.

7. Negligent Advice:
a. Some MM policies provide limited Gratuitous Advice cover as part of the product
liability section.
b. Broad-form provides specific negligent advice cover supplied with products and work
performed. The cover can also be extended to cover full errors and omissions.
Conclusion: With the advent of Consumer Protection Legislation governing advice
rendered, wider E&O type covers and advice protection are becoming critical.
Camargues General Liability (CGL) delivers this.

Even in the absence of legislative changes and increased litigation it would be remiss
not to consider the broadest possible insurance solution for clients. Innumerable
extensions are available to the standard broad-form policy: from custody and control to
medical malpractice and inefficacy. The net on broad-form is wide enough to cover just
about any scenario.
Complied by: Camargue Underwriting Agency