Product Liability Insurance Policy and Consumer Protection Act of 2019

In today’s world where misleading claims about products are rampant, Product Liability has assumed more importance than ever. The Indian Consumer Protection Act, 2019 has for the first time defined Product Liability.

This article will provide a detailed overview of the Indian Consumer Protection Act, 2019 and its impact on product liability and role of the Product Liability Insurance Policy.

INDIAN CONSUMER PROTECTION ACT, 2019

The Indian Consumer Protection Act of 2019 makes the manufacturer or seller of product liable for manufacturing defects or for inadequate warnings on the product. So the Indian Consumer Protection Act has shifted the responsibility when using a product from ‘Buyer Beware’ to ‘Seller Beware’.

What are the rights given to consumers under Consumer Protection Act, 2019?

The Indian Consumer Protection Act 2019 provides consumers with various rights and protections when purchasing goods or services. The Act covers a range of consumer rights, including the right to be protected, the right to be informed, the right to be assured, the right to be heard, and the right to seek redressal.

The Consumer Protection Act of 2019 gives the following rights to the consumers of products:

1. the right to be protected against the marketing of goods, products or services which are hazardous to life and property;
2. the right to be informed about the quality, quantity, potency, purity, standard and price of goods, products or services, as the case may be, so as to protect the consumer against unfair trade practices;
3. the right to be assured, wherever possible, access to a variety of goods, products or services at competitive prices;
4. the right to be heard and to be assured that consumer’s interests will receive due consideration at appropriate fora;
5. the right to seek redressal against unfair trade practice or restrictive trade practices or unscrupulous exploitation of consumers; and
6. the right to consumer awareness;

Who is a Consumer under Consumer Protection Act, 2019?

Consumer under Consumer Protection Act, 2019 is defined as any person who:

1. buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or
2. hires or avails of any service for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such service other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person, but does not include a person who avails of such service for any commercial purpose.

For the purposes of this clause:

(a) the expression “commercial purpose” does not include use by a person of goods bought and used by him exclusively for the purpose of earning his livelihood, by means of self-employment;

(b) the expressions “buys any goods” and “hires or avails any services” includes offline or online transactions through electronic means or by teleshopping or direct selling or multi-level marketing;

What is a Product under Consumer Protection Act, 2019?

Consumer Protection Act, 2019 defines “product” as “any article or goods or substance or raw material or any extended cycle of such product, which may be in gaseous, liquid, or solid state possessing intrinsic value which is capable of delivery either as wholly assembled or as a component part and is produced for introduction to trade or commerce, but does not include human tissues, blood, blood products and organs.”

What are Goods and Services under Consumer Protection Act, 2019?

Consumer Protection Act, 2019 defines Goods as “every kind of movable property and includes “food” as defined by the Food Safety and Standards Act, 2006.”

Consumer Protection Act, 2019 defines Services “as service of any description which is made available to potential users and includes, but not limited to, the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, telecom, boarding or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service.”

What is a Product Liability under Consumer Protection Act, 2019?

Consumer Protection Act, 2019 defines Product Liability as:

“Product Liability” means the responsibility of a product manufacturer or product seller, of any product or service, to compensate for any harm caused to a consumer by such defective product manufactured or sold or by deficiency in services relating thereto.

The Act thus holds the Product Manufacturer or Seller responsible for any defective product manufactured or sold which causes harm to the consumer and holds them liable to pay compensation to the consumer.

A consumer may initiate a ‘Product Liability Action’ against the Product Manufacturer or a Product Service Provider if it causes harm to the consumer.

The Consumer Protection Act, 2019 defines Product Liability Action as:

“product liability action” means a complaint filed by a person before a District Commission or State Commission or National Commission, as the case may be, for claiming compensation for the harm caused to him”

What is the Liability of Product Manufacturer under Indian Consumer Protection Act, 2019?

1. Section 84 of the Consumer Protection Act, 2019 holds the Product Manufacturer liable in a Product Liability Action, if
2. the product contains a manufacturing defect; or
3. the product is defective in design; or
4. there is a deviation from manufacturing specifications; or
5. the product does not conform to the express warranty; or
6. the product fails to contain adequate instructions of correct usage to prevent any harm or any warning regarding improper or incorrect usage.
7. A product manufacturer shall be liable in a product liability action even if he proves that he was not negligent or fraudulent in making the express warranty of a product.

The Consumer Protection Act defines a Product Manufacturer as a person who:

• makes any product or parts thereof; or
• assembles parts thereof made by others; or
• puts or causes to be put his own mark on any products made by any other person; or
• makes a product and sells, distributes, leases, installs, prepares, packages, labels, markets, repairs, maintains such product or is otherwise involved in placing such product for commercial purpose; or
• designs, produces, fabricates, constructs or re-manufactures any product before its sale; or
• being a product seller of a product, is also a manufacturer of such product

What is the Liability of Product Service Provider under Indian Consumer Protection Act, 2019?

1. Section 85 of the Consumer Protection Act, 2019 holds the Product Service Provider liable in a Product Liability Action, if
2. the service provided by him was faulty or imperfect or deficient or inadequate in quality, nature or manner of performance which is required to be provided by or under any law for the time being in force, or pursuant to any contract or otherwise; or
3. there was an act of omission or commission or negligence or conscious withholding any information which caused harm; or
4. the service provider did not issue adequate instructions or warnings to prevent any harm; or
5. the service did not conform to express warranty or the terms and conditions of the contract

The Consumer Protection Act, 2019 defines a Product Service Provider as a person who:

• in relation to a product, means a person who provides any service in respect of such product;

Thus, Consumer Protection Act thus includes Product Service Provider where the Service has a direct impact on performance of the product.

What is the Liability of Product Seller under Consumer Protection Act, 2019?

1. Section 86 of the Consumer Protection Act, 2019 holds the Product Seller (who is not a Product Manufacturer) liable in a Product Liability Action, if
   • he has exercised substantial control over the designing, testing, manufacturing, packaging or labelling of a product that caused harm; or
   • he has altered or modified the product and such alteration or modification was the substantial factor in causing the harm; or
   • he has made an express warranty of a product independent of any express warranty made by a manufacturer and such product failed to conform to the express warranty made by the product seller which caused the harm; or
   • the product has been sold by him and the identity of product manufacturer of such product is not known, or if known, the service of notice or process or warrant cannot be effected on him or he is not subject to the law which is in force in India or the order, if any, passed or to be passed cannot be enforced against him; or
   • he failed to exercise reasonable care in assembling, inspecting or maintaining such product or he did not pass on the warnings or instructions of the product manufacturer regarding the dangers involved or proper usage of the product while selling such product and such failure was the proximate cause of the harm.

The Consumer Protection Act, 2019 defines a Product Seller as a person who:

product seller”, in relation to a product, means a person who, in the course of business, imports, sells, distributes, leases, installs, prepares, packages, labels, markets, repairs, maintains, or otherwise is involved in placing such product for commercial purpose and includes—

1. a manufacturer who is also a product seller; or
2. a service provider,

but does not include:

1. a seller of immovable property, unless such person is engaged in the sale of constructed house or in the construction of homes or flats;
2. a provider of professional services in any transaction in which, the sale or use of a product is only incidental thereto, but furnishing of opinion, skill or services being the essence of such transaction;
3. a person who—
4. acts only in a financial capacity with respect to the sale of the product;
5. is not a manufacturer, wholesaler, distributor, retailer, direct seller or an electronic service provider;
6. leases a product, without having a reasonable opportunity to inspect and discover defects in the product, under a lease arrangement in which the selection, possession, maintenance, and operation of the product are controlled by a person other than the lessor;

What are the exceptions to Product Liability Action under Consumer Protection Act 2019?

Section 87 of the Consumer Protection Act, 2019 lists the exception to the Product Liability Action as follows:

1. A Product Liability Action cannot be brought against the product seller if, at the time of harm, the product was misused, altered, or modified.
2. In any Product Liability Action based on the failure to provide adequate warnings or instructions, the product manufacturer shall not be liable, if—
3. the product was purchased by an employer for use at the workplace and the product manufacturer had provided warnings or instructions to such employer;
4. the product was sold as a component or material to be used in another product and necessary warnings or instructions were given by the product manufacturer to the purchaser of such component or material, but the harm was caused to the complainant by use of the end product in which such component or material was used;
5. the product was one which was legally meant to be used or dispensed only by or under the supervision of an expert or a class of experts and the product manufacturer had employed reasonable means to give the warnings or instructions for usage of such product to such expert or class of experts; or
6. the complainant, while using such product, was under the influence of alcohol or any prescription drug which had not been prescribed by a medical practitioner.
7. A product manufacturer shall not be liable for failure to instruct or warn about a danger which is obvious or commonly known to the user or consumer of such product or which, such user or consumer, ought to have known, taking into account the characteristics of such product.

What are the Penalties imposed under the Consumer Protection Act in case of a Product Liability Action?

Following penalties may be imposed in case of a violation of Consumer Protection Act 2019

1. recalling of goods or withdrawal of services which are dangerous, hazardous or unsafe;
2. reimbursement of the prices of goods or services so recalled to purchasers of such goods or services; and
3. discontinuation of practices which are unfair and prejudicial to consumers’ interest
4. In case of a false advertisement or misleading advertisement which is prejudicial to the interest of any consumer or is in contravention of consumer rights, the concerned trader or manufacturer or endorser or advertiser or publisher may be directed to discontinue such advertisement or to modify the same in such manner and within such time as may be specified in that order.
5. A Penalty of upto Rs10 lakhs may also be imposed in respect of false or misleading advertisement, by a manufacturer or an endorser and additional penalties can also be imposed for every subsequent contravention by a manufacturer or endorserwhich may extend to fifty lakh rupees.
6. Additionally, if deemed necessary, the Central Authority may prohibit the endorser of a false or misleading advertisement from making endorsement of any product or service for a period which may extend to one year and upto 3 years for for subsequent contraventions.

Role of Product Liability Insurance Policy

The Consumer Protection Act, 2019 has made the product manufacturer/seller responsible for any defects in their products. A Product Liability Insurance Policy reimburses the Insured Company for the Defence Costs and Compensatory Damages because of Bodily Injury and Property Damage caused by an Insured Company’s faulty products.

 The Cost of Product Liability Insurance Policy is also very reasonable and it is a wise decision to secure oneself with a Product Liability Insurance Policy so that one can get peace of mind.

If you wish to purchase a Product Liability Insurance Policy, email us at insurance@qian.co.in or call us on 022-22044989. We would be glad to assist you.