David Lewin, Managing Director
On March 12, 2009, the Federal Convention of the Swiss Confederation enacted a new federal law covering product safety, which became effective on July 1, 2010. The new law is intended to replace the Act on the Safety of Technical Facilities and Equipment (STEG) of May 19, 1976, as well as to comply with international regulations.
First and foremost, the law aims to bring the safety requirements of products under Swiss law in line with European law and to ease the free movement of goods in the economic area of the European Union (EU) and Switzerland. Accordingly, Swiss producers are likely to benefit from the new law. At the same time, the introduction of the new law marks the implementation of the so-called “Cassis de Dijon” principle of Swiss law. In short, the “Cassis de Dijon” principle generally permits products authorized in one member state of the EU to also be traded in Switzerland without any restrictions.
Scope of the PrSG
The Produktsicherheitsgesetz (PrSG) is designed as a framework law that will always be applied if there are no specific sectoral federal regulations with the same objectives. Compared with the STEG, the scope of application of the PrSG is expanded to all products. It is not, therefore, restricted to only technical devices and facilities.
With the PrSG in effect, products that meet the requirements according to the former law (STEG) but not the requirements of the new law (PrSG) may continue to be placed in circulation until December 31, 2011. Additionally, all producers, importers and traders need to establish the preconditions for discharging their duties after they bring products on the market, until December 31, 2011.
The PrSG applies to any entity that puts products into circulation, either commercially or professionally. Products placed on the market include those that are non-gratuitous, gratuitous, new, used, recycled or essentially modified (Section 2, para. 3 PrSG). In addition to affecting product producers and importers, the PrSG affects traders and service providers (Section 1 para. 2 PrSG). Placing a product on the market also includes the use or application of a product within the bounds of the performance of services or the holding of a product in stock for the use of a third person (Section 2 para. 3 lit. c PrSG).
Responsibilities for Placing Products
Pursuant to Section 3 PrSG, products can only be placed on the market if they do not endanger the security and health of users or third parties by normal or rational foreseeable use. This means that products may not endanger the safety and health of users and third parties – not even to a small extent. The burden of proof that a product fulfills the basic safety and health requirements belongs to the entity that places the product on the market (Section 5 para. 1 PrSG).
Even after placing products on the market, producers and others will continue to be responsible, according to Section 8 PrSG. Appropriate measures must be taken during the stated or scheduled operating life of products to recognize and avert dangers, for example, by revocation, recall or warning and to make products clearly traceable. Complaints concerning the safety of a product must be assessed carefully. If producers or any other parties placing products on the market have reason to believe that their products may cause danger to safety and health, they must inform the enforcement authority.
Also, the law regulates the representation and description of products. In particular, presentation and labeling, warnings and cautions, product-specific notes and manuals and instruction materials must comply with the specific risk potential of a product. Even the details and information in advertisements or publicity campaigns must not convey a false image of the risk potential or tempt users to use the goods in risky ways.
Sanctions and Liability
If public authorities find that the safety requirements are not strictly observed further placement of the product on the market may be prohibited. Additionally, public authorities can order danger warnings for products, redemption of products or product callbacks (Section 10 para. 3 lit. b PrSG), ban the export of products (Section 10 para. 3 lit. c PrSG) or revoke and destroy or dismantle products if an imminent and serious danger originates from those products.
Furthermore, the PrSG contains penalty provisions that include a threat of fine or imprisonment of up to three years (Section 16 PrSG) for the willful or negligent attempt to place products on the market that do not meet safety requirements and endanger the health or safety of others.
In terms of liability, the Product Safety Act does not address the liability of the producer. The regulations of the Product Liability Act dated June 18, 1993 must be applied.
Insurance Law Implications
Product liability insurance
If a product lacks a clear indication of the time frame of its safe use, it must have been proven to be absolutely safe during the presumable service life, which may last even longer than the general limitation period of 10 years applicable in product liability law. Until now, product liability insurance has been limited to manufacturers and importers. In the future, anyone who places products on the market can potentially be held liable for a loss related to a product’s lack of safety. However, many of the parties newly affected by the law will not carry corresponding product liability insurance.
Reimbursement of costs
A company that notices a presumable or actual lack of safety in its product is required to take safety precautions in accordance with the issue. If a company underrates a dangerous situation and does not recognize the need for a response, it can be forced to recall the product by the state executive (Section 10 para. 3 lit. b PrSG). If, however, the company does not recall the product, then the state executive may take corrective action on its own.
Furthermore, a product’s manufacturer or importer is committed to verify and investigate complaints and feedback concerning a product’s safety with the level of diligence required by the statute. The company must make random spot checks of the product’s use, if necessary (Section 8 para. 3 PrSG).
Both of these actions may incur enormous costs, making reimbursement of the outlays essential in the future.
Isurance industry implications
Especially small companies and service providers are often not aware that the new PrSG contains new product monitoring and reporting obligations. Because the state executive has the ability to recall dangerous products, recall coverage is recommended for all companies subject to the PrSG. As a result of the new law the danger of coverage gaps has increased rapidly. While policyholders are responsible for minimizing losses, insurers and insurance intermediaries must respond to the new product safety act by adapting existing insurance protection or providing sufficient insurance protection.
However, the insurance industry faces new challenges because the liability risks are not yet completely foreseeable. It is now possible for a party dealing with damage from a dangerous product to seek redress from a distributor if there is proof of an infringement of the protection norms. Moreover, the PrSG facilitates proof of infringement by including many concrete demands for product safety.
In the future, it will be an absolute necessity for employers to carefully check the safety standards of their products. If there are any doubts about safety the responsible authority should be contacted to clarify further actions. Manufacturers and importers should also create systems that ensure their products are monitored closely to meet all safety requirements. Finally, all risks should be covered by appropriate liability insurance.
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David Lewin, Managing Director