Recently there has been much publicity surrounding the horsemeat debacle. The abuse of horsemeat is of particular interest to Camargue who strongly disapprove of such scandalous behaviour. The crisis has, however, created a greater public awareness of the risks that suppliers face in terms of the content of their food. Clearly, these risks extend far beyond the abuse of horsemeat since many suppliers claim that their food products adhere to certain standards such as being Halal, Kosher, gluten free, etc. Read on for some specialist advise from a specialist liability insurer.
Ethical labelling – a food business risk
If the insured’s product is incorrectly labelled, the ingredients could cause physical harm to the consumer. The resulting liability would usually be covered by the Insured’s general liability policy since the policy covers injury, sickness or death. With that in mind, consider the example of Red Meat Industry Forum of South Africa and Others v Orion Cold Meat Storage (Pty) Ltd (22704/2011) [2011], in which Orion Cold Meat Storage was accused of distributing non-halal meat under a halal label. Although the meat distributed by the wholesaler did not cause physical injury to the consumers, their religious convictions were violated. Suppose this became grounds for the consumers to bring an action against both the wholesaler and the retailer, which policy would cover the innocent retailer?
This would not be covered by a professional indemnity policy since those policies typically exclude liability caused by a product. A medical malpractice policy, despite its surprisingly wide application, is hardly the purview of the average retailer neither would it be the appropriate cover.
Can issues with ethical labelling be covered by insurance?
The answer is that such a claim would fall under a broadform general liability policy. The definition of injury under these policies has been extended to include mental injury, which covers the emotional harm caused by the violation of a person’s personal convictions.
It’s worth understanding the history of mental injury since the evolution of South African law over the past 100 years has made this an increasingly important source of liability. South African law is based on Roman-Dutch law which only provided for pecuniary losses i.e. medical and other expenses, loss of earnings and loss of support. Around the start of the twentieth century the courts started making awards for non-pecuniary losses.
Initially this was just for pain and suffering endured by the person who was injured. However, this has since been expanded into general damages which include bodily disfigurement and loss of life expectancy.
Despite this, the compensation was still limited to the pain and suffering endured by the person who was injured – there was no compensation for loved ones who suffered mental injury when they saw that injury or death. A well-known example of this was the 1957 court ruling on Mulder v South British Insurance Co Ltd. A mother who saw her child killed by a bus was denied compensation for her mental anguish because she did not fear for her own safety.
A significant development occurred in 1999 when the Supreme Court of Appeal ruled on the matter of Barnard v Santam Bpk. The court awarded Barnard compensation for the psychiatric injury she sustained upon being advised telephonically that her son had been killed. The ruling changed to the law to the point where a traumatised person need not even be physically present at the time of the accident.
What is mental injury? It sounds contagious
Lastly, it’s worth exploring what mental injury is. Mental injury includes fright, feelings of distress, anxiety, depression, grief, psychosomatic physical symptoms and embarrassment. Although different to physical pain it is nonetheless legal grounds for awarding damages. Some examples of this include witnessing the death of a loved one, or as in the case of Clinton-Parker v Administrator Transvaal, a hospital negligently mixing up two babies shortly after birth. In order to legally succeed in a mental injury claim the plaintiff must show that they have suffered a detectable psychiatric injury. Mere grief would not be adequate. Mental injury does not include a breach of contract such as a shop failing to deliver the wedding dress in time.
Author
John Stebbing of Carmargue
Camargue is an Authorised Financial Services Provider (License Number 6344) and an underwriter of niche insurance products and a provider of risk management solutions to a broad spectrum of industries in Southern Africa. Camargue’s unique M3 approach focuses on managing, mitigating and migrating critical business risks. For further information on Camargue, contact john@camargueum.co.za, visit www.camargueum.co.za or find us on Facebook.
