Is your business involved in an international manufacturing or wholesale supply chain?
We know that the local link in an international supply chain is the one most likely to be targeted with product liability claims. But did you know there is an additional risk if international parties are also named in the action?
Under Ontario’s Negligence Act, if at least two parties are found liable, they are jointly and severally liable to the plaintiff.
The One Percent Rule may allow a plaintiff to recover 100% of the damages from a defendant that is only 1% responsible. In turn, the paying defendant has to seek contribution from the other liable parties.
Thus, the defendant residing in the local jurisdiction is more likely to be hit with the One Percent Rule as it allows the plaintiff to be made whole to the full extent of injuries or damages. As the onus shifts to the indemnified defendant, it may be difficult for the paying defendant to recover from parties outside of the judicial jurisdiction. Even if recovery from international parties is possible, the delay between payment of damages and payment of restitution could prove financially intolerable.
It is possible an Ontario insured could end up on the hook for the judgment payments of a negligent international supply chain partner.
Consider these scenarios:
Scenario 1
The insured is a manufacturer who receives raw materials from overseas. A shipment of raw materials is flawed. The insured fails to detect the flaw and manufactures a defective product. As a result, a class-action suit is filed on behalf of thousands who purchased the defective product.
Scenario 2
The insured makes a component for a printing press that is assembled overseas. A finished press is purchased by 123 Limited. A flaw in the press causes it to fail, resulting in major delays and financial loss for 123 Limited. They seek financial compensation.
Scenario 3
The insured is a wholesale distributor of forestry products manufactured overseas. Improper use of a product results in severe injury for an end-user. It is found that an important warning label on the product was not in English.
Ask yourself:
- Which party is more likely to be named in a local lawsuit?
- If the insured must payout 100% of damages under the One Percent Rule, could the Insured’s assets be exposed to satisfy a Court award that exceeds insurance policy limits?
- How difficult would it be to seek contribution from an international party?
Do you have a business that is part of an international supply chain? Find a broker today and learn about your exposures, liability limits, and ask how Unica can help protect your business.
