THE IMPACT OF THE CONSUMER PROTECTION ACT 68 OF 2008 (CPA) ON INSURANCE

ANDREW PACKMAN and DREW SCHNEHAGE

PURPOSE OF ACT

• • • • Establish national norms and standards Provide improved standards of consumer information Prohibit unfair marketing Provide consistent enforcement of transactions and agreements

PURPOSE OF ACT(2)

• • • Fulfil rights of historically disadvantaged people and promote their full participation as consumers Protect interests of all consumers – redress for consumers subject to exploitation in the marketplace Effect to internationally recognised consumer rights

OPERATIONAL DATES

• • • • Assented to Published on : : 24 April 2009 29 April 2009 Come into effect : Already, operative ± October 2010 Give suppliers opportunity to comply and re-draft agreements

THE ROLE PLAYERS

“Consumer” –

• a person to whom particular services are marketed/rendered in the ordinary course of the supplier’s business; • a person who has entered into a transaction with the supplier in the ordinary course of the supplier’s business (unless the transaction is exempt from the application of the CPA by Section 5(2) or Section 5 (3); • the user of particular goods or recipient or beneficiary of services irrespective whether they are a party to a transaction concerning the supply of the goods and services.

“Supplier” –

• a person who markets any goods or services;

“Market” – (as a verb)

• means to promote or supply any goods or services;

“Goods” Includes –

• anything marketed for human consumption; • any tangible object, including any medium on which anything is or maybe written or recorded; • any literature, music, photograph, motion picture, game, information, data, software, code or other intangible product written or encoded on any medium, or a license to use any such intangible product; • a legal interest in land or any other immovable property, other than an interest that falls within the definition of “service” in this section; and • gas, water and electricity

“Services” –

• includes but is not limited to; • the undertaking, underwriting or assumption of any risk by one person or on behalf of another; • the undertaking, underwriting or assumption of any risk by one person on behalf of another, except to the extent that any such service – • constitutes advice or intermediary services that is subject to the Financial Advisory and Intermediary Services Act; • is regulated in terms of the Long-Term and Short-Term Insurance Acts

The exclusion of the Short-Term Insurance Act, 1998 (Act No. 53 of 1998), and the Long-Term Insurance Act, 1998 (Act No. 52 of 1998), is subject to those sector laws being aligned with the consumer protection measures provided for in the CPA within a period of 18 months from the commencement of the CPA, failing which, the provisions of the CPA will apply.

“Supply” – (As a verb)

• In relation to goods, includes sale, rent, exchange and hire; • In relation to services means the selling of services or to perform or causing to be performed or provided

“Retailer” –

• with respect to any particular goods is a person who in the ordinary course of business supplies those goods to a consumer

“Distributor” –

• In relation to any particular goods is the person who in the ordinary course of business is supplied with those goods by producer, importer or other distributor and in turn supplies them either to another distributor or a retailer

“Importer” –

• With respect to any particular goods is a person who brings those goods or causes them to be brought from outside the Republic into the Republic with the intention of making them available for supply in the ordinary course of business

“Producer” –

• With respect to any particular goods is a person who,

inter alia

, grows, mines, creates, manufactures or otherwise produces goods within the Republic or who causes that to be done with the intention of making course of business

“Intermediary” –

• A person who, in the ordinary course of business and for remuneration or gain, engages in the business of – • representing another person with respect to the actual or potential supply of any goods or services; • accepting possession of any goods or other property from a person for the purpose of offering the property for sale; or • offering to sell to a consumer, soliciting offers for selling to a consumer any goods or property that belongs to a third person, or service to be supplied by a third person

REALISATION OF CONSUMER RIGHTS

• Section 4(1) • Person may approach court, tribunal, commission • • Rights are infringed, impaired, threatened Person • Own behalf • Interest of group • Public interest

REALISATION OF CONSUMER RIGHTS

• • Section 4(4) Court, tribunal, commission must interpret (o.b.o. supplier): • • • Standard form Contract Other documents • For benefit of consumer

REALISATION OF CONSUMER RIGHTS

• Section 4(4)(a) • • • Ambiguity that allows more than one reasonable interpretation Interpret in favour of consumer Statutory

contra proferentum

rule

•

REALISATION OF CONSUMER RIGHTS

Section 4(4)(b) • • • • • Any restriction, limitation, exclusion, deprivation of consumer’s legal rights • Limited to the extent that reasonable person would contemplate or expect: • • • Content of document Manner and form of contract presented Circumstances of transaction Interpret in favour of consumer Statutory

contra proferentum rule

Section 40(2) –

• It is unconscionable for a supplier knowingly to take advantage of the fact that a consumer was substantially unable to protect the consumer’s own interests because of physical or mental disability, illiteracy, ignorance inability to understand the language of an agreement, or any other similar factor

• • •

RIGHT TO FAIR, REASONABLE, JUST TERMS AND CONDITIONS

Section 48(2) “Unfair, unreasonable, unjust” – meaning?

Without limiting generality: • Excessively one sided in favour of person other than consumer • • • Terms so adverse to consumer as to be inequitable Consumer agreed on • • False Misleading • Deceptive misrepresentations Consumer agreed subject to conditions should have been notified of (but was not)

RIGHT TO FAIR, REASONABLE, JUST TERMS AND CONDITIONS

• • Section 49(3) Provision, condition, notice must be: • In writing • Plain language

RIGHT TO FAIR, REASONABLE, JUST TERMS AND CONDITIONS

• • Section 49 Consumer’s attention must be drawn to: • Provisions • • Condition Notice

RIGHT TO FAIR, REASONABLE, JUST TERMS AND CONDITIONS

• • Section 49(5) Consumer must have adequate opportunity to: • Receive provision / notice • Comprehend it

RIGHT TO FAIR, REASONABLE, JUST TERMS AND CONDITIONS

• • • • • Section 49(1) Limits risk / liability of supplier / another Assumes consumer’s risk of liability Duty on consumer to indemnify supplier / another Acknowledgement of any fact by consumer

RIGHT TO FAIR, REASONABLE, JUST TERMS AND CONDITIONS

• • Section 48(1)(c) Supplier must not require consumer to: • Waive rights • • Assume obligation Waive liability of supplier • On terms that are: • Unfair • • Unreasonable Unjust

RIGHT TO FAIR, REASONABLE, JUST TERMS AND CONDITIONS

• • Section 49(4) Fact, nature and effect of provision / notice must be: • • • Conspicuous manner and form Likely to attract attention of consumer in circumstances Before consumer enters into transaction / required to offer compensation for the transaction, whichever one is earlier

EXEMPTIONS There are certain exemptions - not important to us

RIGHT TO FAIR, REASONABLE, JUST TERMS AND CONDITIONS

• • Section 48(1)(a) & (b) Prohibits offers / marketing on: • Prices • Terms • that are: • Unfair • • Unreasonable Unjust

RIGHT TO FAIR, REASONABLE, JUST TERMS AND CONDITIONS

• • • • Section 49(2) Unusual character / nature No reasonable expectation of its presence Condition results in serious injury / death

POWERS OF COURTS

• • Section 52: If Act has no remedy, court may make order

POWERS OF COURTS

• • • • • • • Section 52(3) Transaction unconscionable, unjust, unreasonable, unfair in whole / part Make further order deemed just and reasonable Restore money / property Compensate consumer for losses / expenses relating to transaction and court proceedings Require supplier to stop activities and practice Serve any part and declare void if person alleges agreement terms and conditions void

POWERS OF COURTS

• • Section 52(2) Court considers • Fair value of goods and services • Nature of agreement, subjective elements: • Education • Experience • Sophistication • Bargaining power

POWERS OF COURTS

• Section 52(2) (continue) • • Circumstances reasonably foreseeable?

Objective conduct of parties • • • • Extent of negotiations Documents in compliance with Act?

Actual / reasonable expected knowledge of consumer of provisions Amount of identical / equivalent goods / services in market

LIABILITY FOR DAMAGES CAUSED BY GOODS

Section 61(5) –

• Harm for which a person may be held liable in terms of this section includes – • the death of or injury to, any natural person; • an illness of any natural person; • any loss of, or physical damage to, any property, irrespective of whether it is movable or immovable; •

any economic loss

that results from harm contemplated above

Section 61(1) –

• Except to the extent contemplated in sub-section (4), the producer or importer, distributor or retailer of any goods is liable for any harm, as described in sub-section (5), caused wholly or partly as a consequence of – • supplying of unsafe goods • a product failure, defect of hazard in any goods; • inadequate instructions or warnings provided to the consumer pertaining to any hazard arising from or associated with the use of any goods;

POWERS OF COURT TO ENFORCE CONSUMER RIGHTS

CLASS ACTIONS Section 76(1)(c) –

• In addition to any other order that it may make under this Act or any other law, a court considering a matter in terms of this Act may award damages against a supplier for collective injury to all or a class of consumers, generally, to be paid on any terms or conditions that the court considers just and equitable and suitable to achieve the purposes of this Act

PENALTIES

Section 111(1) –

• Any person convicted of an offense in terms of this Act is liable – • in the case of a contravention of Section 107(1) to a fine or to imprisonment for a period not exceeding ten years, or to both a fine and imprisonment, or • in any other case, to a fine or to imprisonment for a period not exceeding twelve months, or to both a fine and imprisonment • Despite anything to the contrary contained in any other law, a Magistrate’s court has jurisdiction to impose any penalty provided for in this section

ADMINISTRATIVE FINES

Section 112(1) –

• A tribunal may impose an administrative fine in respect of prohibited or required conduct.

• An administrative fine imposed in terms of this Act may not exceed the greater of – • 10% of the Respondent’s annual turnover during the preceding financial year • R1,000 • When determining an appropriate administrative fine, the tribunal must consider the following factors; • the nature, duration, gravity and extent of the contravention • any loss or damage suffered as a result of the contravention • the behaviour of the Respondent • the market circumstances in which the contravention took place • the level of profit derived from the contravention

Section 112(1) (continued) –

• the degree to which the Respondent has cooperated with the Commission and the Tribunal • whether the Respondent has previously been found in contravention of this Act • For the purposes of this section, the annual turnover of the supplier at the time when an administrative fine is assessed, is the total income of that supplier during the immediately preceding year, as determined in the prescribed manner • A fine payable in terms of this section must be paid into the National Revenue Fund

CONCLUSION

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