INSURANCE OF RESPONSIBILITY RISK FOR QUALITY OF TRANSFERRED
Recently, a proposal has often been made to legislate the institution of liability insurance for the quality of goods for the period of the warranty period. According to the author, such insurance will serve as an additional guarantee for the realization of the legitimate rights of buyers, regardless of the seller’s property status and integrity, and manufacturers (sellers) buying an insurance policy will be freed from the heavy burden of economic losses that they may incur as a result of compensation for damage caused harm due to the release and sale of low-quality products.
At present, economists and lawyers are actively discussing the advisability of insurance by sellers (manufacturers) of their liability for the quality of the goods for the duration of the warranty period.
According to one point of view, such insurance may become an additional guarantee of the fulfillment by them of their obligations under the contract of sale. If the seller (manufacturer) has an agreement on liability insurance for the quality of goods, works (services), all issues related to quality claims will be decided by the insurance company. This will protect the insured from material costs that he is obliged to bear in accordance with the legislation of the Russian Federation in order to compensate the damage caused to the buyer .
Liability insurance for the quality of goods is the only financial instrument beneficial both to producers (sellers) and consumers . The foregoing is confirmed by the experience of countries with developed market economies. Buyers receive additional guarantees for the prompt and effective implementation of their legal rights, regardless of the property status and integrity of the seller. Sellers (manufacturers), buying an insurance policy, are exempted from the heavy burden of economic losses that they may incur as a result of compensation for damage associated with the damage caused by the release and sale of low-quality products.
It was also argued that the introduction of the economic mechanism of liability insurance for quality stimulates an honest manufacturer to produce quality products, and also compensates for the damage associated with accidental deviations from the standards. In addition, the cost of insurance in this case is reduced. At the same time, for an unscrupulous manufacturer (seller), the entire economic effect that he receives due to savings on quality (low-grade raw materials, defective components, inappropriate storage conditions, failure to meet sales deadlines, etc.) is completely offset by the high cost of insurance. Moreover, the production of such products becomes economically inexpedient .
Such an insurance system assumes that the claims of victims are satisfied on the basis of expert opinions and without a trial , thereby making it much easier for victims to receive compensation. The proposed procedure for out-of-court settlement of the dispute imposes a great responsibility on the expert, since the possibility of receiving compensation for the injured or refusing to pay significant insurance amounts to the consumer depends on his conclusion. Thus, both parties – the insurance company and the seller, on the one hand, and the buyer, on the other hand, are interested in appointing experts who are loyal to themselves.
To ensure the independence and competence of experts, it is proposed to attract specialized structures professionally dealing with quality issues. These may be, for example, federal executive agencies, whose competence includes product quality control, for example, the bodies of the Federal Service for Supervision of Consumer Rights Protection and Human Welfare . Such state bodies, evaluating the possibility of categorization of insurance cases of product failure, will be able to skillfully establish the cause of the deficiencies. In addition, you can use the services of experts of the Chambers of Commerce, who have long proved their professionalism.
Consider the current legal framework of Russia in the field of liability risk insurance for product quality.
According to Art. 490 of the Civil Code of the Russian Federation an agreement of sale may provide for the obligation of the seller or buyer to insure the goods. Under the insurance of goods is understood insurance against the risk of its loss (loss), shortage or damage.
“Damage” may include, but is not limited to “damage” and “malfunctioning” of the product. Therefore, it is acceptable to insure the risk of damage (malfunctions) of the goods associated with poor-quality manufacturing. By virtue of paragraph 1 of Art. 930 of the Civil Code of the Russian Federation, property may be insured in favor of a person (policyholder or beneficiary) who has an interest in preserving this property, based on a law, other legal act or contract. Thus, the seller has the right to insure the goods being sold against the risk of possible damage in favor of the buyer, who, if necessary, will be able to apply for compensation for losses to the insurance company.
In accordance with Art. 929 of the Civil Code of the Russian Federation “under a property insurance agreement, one party (insurer) undertakes to compensate the other party (the policyholder) or another person in whose favor the agreement is concluded (to the beneficiary) for the event specified in the agreement (insured event) losses caused as a result of this event in the insured property or losses due to other property interests of the insured (to pay insurance compensation) within the amount specified by the contract (country total amount). “
Through a property insurance contract, the following risks can be insured, in particular:
- risk of loss (loss), shortage or damage to individual property (Article 930 of the Civil Code of the Russian Federation);
- the risk of liability for obligations arising from harm to the life, health or property of others, and in cases provided by law, also the risk of civil liability – liability under contracts (Articles 931 and 932 of the Civil Code of the Russian Federation);
- the risk of losses from entrepreneurial activity due to violation of its obligations with the counterparties of the entrepreneur or a change in the conditions of this activity due to circumstances beyond the control of the entrepreneur, including the risk of not receiving the expected income – entrepreneurial risk (Article 933 of the Civil Code of the Russian Federation).
Property insurance is intended to compensate for losses incurred, and not to extract additional income. Accordingly, the amount of insurance compensation cannot exceed the actual amount of losses incurred .
Article 932 of the Civil Code of the Russian Federation states that liability risk insurance for breach of contract is permitted in cases provided by law. Under the contract of insurance of the risk of liability for breach of the contract, only the risk of liability of the policyholder can be insured .The risk of liability for breach of the contract is considered insured in favor of the party to which, under the terms of this contract, the policyholder should be liable, i.e., the beneficiary. Thus, the seller could insure his risk under the contract of sale related to holding him liable due to defects of the goods discovered, for example, during the warranty period for the goods. In the presence of such an insurance contract, the buyer, having proved the existence of an insured event and the size of his losses, would have the right to demand compensation from the insurer within the insured amount. However, so far no federal law contains a rule that provides liability insurance for violation of the contract of sale (supply), and therefore it is impossible to carry out such insurance. Given the economic and legal feasibility of this type of insurance, it is proposed to supplement Art. 490 of the Civil Code of the Russian Federation the norm allowing insurance of liability risk for breach of contract, including in connection with the supply of low-quality goods.
Note that the seller can insure his entrepreneurial risk under the contract of sale, using Art. 933 of the Civil Code of the Russian Federation. However, in this case, entrepreneurial risk is insured only in favor of the insured, and the sum insured is determined only presumably taking into account the possible amount of losses. When identifying defects in the goods, the buyer should routinely state all his requirements related to the quality of the goods to the seller, and not to the insurer. This type of insurance guarantees the insured full or partial reimbursement of material costs incurred by him in reimbursing the buyer for the losses incurred. The disadvantage of this type of insurance for the buyer is that it is impossible to make claims for damages directly to the insurer.
In addition, we must not forget that civil law provides not only liability for violation of the quality of the goods in cash (losses, forfeit), but also other civil measures aimed at eliminating the consequences of the delivery of goods of inadequate quality. So, in Art. 475 of the Civil Code of the Russian Federation (“Consequences of the transfer of goods of inadequate quality”), the right of the buyer to whom the goods of inadequate quality was transferred, if the defects of the goods were not agreed upon by the seller, is required to demand from the seller:
- a commensurate reduction in the purchase price;
- gratuitous elimination of product defects within a reasonable time;
- reimbursement of their costs to eliminate the defects of the goods.
In the event of a significant violation of the requirements for the quality of the goods (detection of fatal flaws, flaws that cannot be eliminated without disproportionate costs or time, or are identified repeatedly, or appear again after they are removed, etc.), the buyer has the right, at his choice:
- refuse to fulfill the contract of sale and demand the return of the sum of money paid for the goods;
- to require the replacement of goods of inadequate quality with goods that comply with the contract.
Is it possible to consider that the measures of responsibility listed in Art. 475 of the Civil Code, relate to civil law?
To answer this question, we first clarify the concept of civil liability.
V.P. Gribanov defined civil liability as one of the forms of state coercion associated with the application of property sanctions aimed at restoring violated rights and stimulating normal economic relations of legally equal participants in civil turnover .
N.D. Egorov considered civil liability as a sanction applied to the offender in the form of imposing on him an additional civil obligation or deprivation of his civil law .
O.S. Joffe noted that responsibility is not just a sanction for an offense, but a sanction that entails certain deprivations of property or personal nature.
According to M.I. Braginsky, “liability for violation of an obligation is defined by law as a measure of property impact on a debtor who has violated an obligation. There are two forms of liability for violation of an obligation … firstly, compensation for losses and, secondly, payment of a penalty” .
M.I. Braginsky, from our point of view, most accurately reveals the essence of the concept of civil liability. His opinion is fully consistent with the content of Chapter 25 of the Civil Code of the Russian Federation “Responsibility for violation of the obligation.”
Based on the provisions of this chapter, the consequences referred to in Art. 475 of the Civil Code of the Russian Federation, cannot be attributed to civil liability, since they are neither losses nor forfeit. Based on the foregoing, it can be argued that referred to in Art. 475 of the Civil Code of the Russian Federation, the consequences of the transfer of goods of inadequate quality are civil measures aimed at fulfilling obligations by the seller to deliver goods of good quality, that is, on the actual fulfillment of the
seller’s warranty obligations.
Such civil-law measures cannot be insured, since, firstly, their application is inextricably linked to a specific seller, and secondly, they represent certain actions, for example, troubleshooting, replacing defective goods, canceling the contract and demand return of the sums paid under the contract. Insurance reimbursement can only be expressed in the payment of cash.
Summing up, we note that the statement that in the case of liability insurance for the quality of goods, all issues related to claims for quality will be resolved by the insurance company, not supported by applicable law. Complaints related to inadequate quality of goods, as a rule, contain requirements not only for damages and payment of forfeit, but also to eliminate the consequences of the transfer of goods of inadequate quality, listed in Art. 475 of the Civil Code of the Russian Federation. In this regard, insurance companies will be able to present only monetary claims related to the seller’s liability within the insurance amount.
This type of insurance is of great economic importance, as it contributes to the additional protection of the rights of both the buyer and seller, as well as increasing the competitiveness of the insured goods.