«Objective» Liability Insurance

Article 35 of law No.7472, “Law to Promote Competition and provide effective Protection to the Consumer” states: …manufacturers, provider of services, and merchants are concurrently responsible, independently of whether or not they were negligent, of any loss or damage a consumer may experience derived from goods or services provided, from inadequate or unsufficient information regarding their use and the derived risks…..

This is a radical change in attitude toward liability in this country. Traditionally, it is considered that persons are responsible for their own wellbeing, and should take care to avoid incidents, hazards or accidents.

This has now been overturned by article 35, which infers that when there is a client/provider relationship, the provider will be found guilty and should pay for any damage or loss the client experiences from the relationship. For example, if a passenger riding on a public bus were injured when another vehicle ran a red light and broadsided the bus, the bus company would be made to pay for the damages.

It is said that the new law was enacted specifically in response to frequent situations where cars were stolen from free parking lots of malls or department stores, and the merchants responded with a virtual shrug and denied all responsibility or compensation. Since Article 35 was passed, this no longer happens.

Fortunately, judges have softened the impact of the law, and have established jurisprudence by ruling against the plaintiff in clear cases where he/she has been negligent. For example: if a guest were to drown in the swimming pool of a hotel, a judge would rule that the event was the fault of the guest, alleging that if he didn’t know how to swim he should have kept way from the pool.

The traditional General Liability (“RCG”) policy offered by INS pays for damages in clear cases of negligence on the part of the insured – this is called SUBJECTIVE LIABILITY.

To cover this new interpretation of liability, known as OBJECTIVE LIABILITY, INS unveiled of a new type of Liability insurance policy, which is called a “Responsabilidad Civil Extracontractual Derivada de la Protección al Consumidor” (“RCPC”) policy. We could translate this as Liability Derived from the Consumer Protection Law.

INS recommends that this policy be offered initially to

- clinics and hospitals

- hotels and similar

- parking lots

- auto repair shops

- petrol stations

- commercial centres, malls, stores

- guard services

but in the future it will be available for a variety of different activities.

* The RCPC policy can only be sold to applicants who have an RCG policy – in other words, RCG and RCPC are supplementary.

* Both policies must combine limits for personal liability for injury or death of third parties, with limits for liability for third party property damage.

* The insured amount on an RCPC policy can not exceed the coverage of the applicant’s RCG policy.

* The coverage of RCPC policies starts at C.5 million as a minimum, and the maximum is C.250 million.

* As a prerequisite for RCPC, an addendum on the RCG policy covering incidents in parking lots is required of hospitals, clinics, hotels, parking lots, auto repair shops, service stations, malls, department stores, and factories. (INS issues no directive if those applicants do not have parking facilities for their clients.)

* The rates for RCPC are on a sliding scale – the higher the required coverage, the lower the rate. Also, rates depend on the commercial activity or service being insured, and per the rate table provided by INS will fall between 1% and 2%. However, as part of the application/acceptance process, an INS inspector can visit the applicant to see if there is aggravated risk, in which case INS may demand additional security measures, may surcharge the premium, or both. To the premium derived, add 13% sales tax.

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