Credit-crunched 2008 saw a further rise in product recalls – as well as interesting regulatory changes in the product liability field. This article highlights the most significant developments in England and examines their impact on their audience of consumers, manufacturers and insurers in order to find the X-Factor winner.

X-Factor finalist 1: the Statement

The first finalist is a solo act statement released by the Financial Services Agency (the FSA) on 25 July 2008. The statement warns that clauses in general insurance contracts, which use the phrase “consequential loss” may be unfair and in breach of the Unfair Terms in Consumer Contract Regulations 1999 (the UTC regulations). Under the UTC regulations, firms must ensure that all terms of a standard-form consumer contract are in plain and intelligible language.

The FSA’s view is that a term excluding consequential loss is “unclear” and “ambiguous” because it refers to a legal expression that a consumer would not understand. The FSA believes that this can lead to “a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer” since it leaves the consumer not knowing what the policy covers.

As a result, any consequential loss exclusions that are not written in plain and intelligible language will now be considered unfair. Insurers may therefore have to make payments in respect of the loss they have tried to exclude.

The FSA gave the following example of a term that excludes consequential loss without using that particular phrase: “We will only pay costs which are incurred as a direct consequence of the event which led to the claim you are making under the policy”.

Insurance firms should therefore review their consequential loss exclusions to ensure that they are plain and intelligible. They should also regularly assess their terms and conditions to ensure that they meet the standards of fairness set out in the UTC regulations, and take any necessary steps to ensure compliance.

X-Factor finalist 2: the Regulations

The second finalist is a double act known as the Consumer Protection from Unfair Trading Regulations 2008 (the CPUT regulations) and the Business Protection from Misleading Marketing Regulations 2008 (the BPMM regulations).

Both sets of regulations came into force on 26 May 2008 implementing the EU’s Unfair Commercial Practices Directive and criminalising misleading marketing and sales practices.

The CPUT regulations primarily aim to protect consumers from unfair trading. For example, if an advertisement claims that a beauty product can clear a consumer’s acne when it doesn’t, that would be a breach of the CPUT regulations.

The BPMM regulations, on the other hand, are mainly concerned with protecting other traders. Advertising that is likely to deceive the trader whom it reaches would be an offence. The regulations also set out the conditions that must be fulfilled before an advertisement comparing one particular product with that of an identified competitor will be regarded as acceptable.

Investigations will be carried out by the Office of Fair Trading, as well as local authorities, and offenders face a fine of up to £5,000 or two years’ imprisonment. Companies should therefore reassess their marketing and advertising practices in the light of these regulations before they get caught.

X-Factor finalist 3: the Rules

The third finalist is a group of rules known as the Coroners (Amendment) Rules 2008, which came into force on 17 July last year. Under rule 43 of the Coroners Rules 1984, in order to prevent a similar death to the one in question, a coroner has a discretion to submit a written report (a rule 43 report) to an authority or individual who may have the power to take appropriate action.

Under the Coroners (Amendment) Rules 2008, the person who receives a rule 43 report now has to respond in writing within 56 days. They must indicate what action will be taken to prevent future deaths, or provide an explanation as to why no action will be taken.

A coroner can share the rule 43 report and any responses with the bereaved families. The coroner can also make this information centrally available so as to allow others to learn lessons from the information shared.

Although the coroner cannot force someone to take any proposed remedial action, a failure to heed such a warning would probably count heavily against a defendant facing a criminal prosecution. If, for example, a death is linked to a drug, the pharmaceutical company making that drug might be wise to respond appropriately to the coroner within the set time limit.

If any company finds itself potentially involved in a coroner’s hearing, it should obtain suitable advice on how to participate and protect its interests, given the importance of these new powers of coroners.

X-Factor finalist 4: the Recalls

The fourth finalist is a further group entry known simply as PR – but it is made up of the three sexiest UK product recalls of 2008:

(1) Sofas. In June 2008, Nottingham Crown Court made a group litigation order in respect of consumers that allegedly suffered from extensive skin reactions as a result of sitting on imported Chinese sofas contaminated with fungicide.

The sofa burns were caused by dimethyl fumarate, a chemical known to cause skin irritation. This is a fungicide contained in a sachet placed inside sofas in order to protect against mould during transportation and delivery.

Over 2,000 claimants have started proceedings but as many as 50,000 households could be affected. This is likely to be the biggest ever defective product group litigation order, with estimated claims in excess of £6m.

(2) Biscuits. In October 2008, following an alert from the Food Standards Agency, thousands of packets of household-name biscuits were recalled because they contained a small amount of melamine. The biscuits had been distributed to retailers across the UK.

Melamine is an industrial chemical used in plastics.

The alert marked the first case of melaminecontaminated food to arrive in the UK since the health scare in China, which killed four babies and left 53,0000 babies ill after drinking formula milk containing the chemical. The melamine had been used to make the milk appear higher in protein.

It was said that the biscuits could cause stomach pain and kidney stones. The FSA stressed that the biscuits were being withdrawn as a “precaution” and were unlikely to pose a significant health risk.

(3) Pork. In November 2008, Ireland's Department of Agriculture found that a number of slaughtered pigs had high levels of potentially dangerous dioxins and polychlorinated biphenols (PCBs). As a result, all pork products made in the Republic of Ireland since 1 September 2008 were recalled.

According to the UK Food Standards Agency, the health risk only results from eating food with high levels of dioxins and PCBs “over a long period”. The effects include cancer, damage to the immune and reproductive systems, as well as skin disease.

The FSA confirmed that any products containing less than 20% Irish pork do not have to be tested or withdrawn from sale. However, Irish pork products in the UK will now have to carry special labels confirming that they are safe to eat and have no link to potentially contaminated feed.

Who will be crowned the winner?

The final vote, as usual, comes down to members of the public – in particular, those that are directly affected by the product recalls and regulatory changes as they emerge. However, the real winners will be the consumers, manufacturers and/or insurers who take on board these developments and protect themselves in future.