Liable in the USA

We recently looked again at our USA risks.

In cooperation with FHI we have found that exports to the USA have increased by an average of 43%. Several companies still do not have their exports to the USA insured, while the risks are still quite large. We would like to explain the rules of liability in the USA.

What are the major differences with the Netherlands?

To understand this, we first need to consider the risks that FHI companies run and the costs. The first difference we encounter is the fact that each state has its own jurisdiction. 50 states, so 50 different jurisdictions. Jurisprudence in the USA is completely different from our Dutch jurisdiction. First of all, the USA has a 'common law' and the Netherlands has a 'continental law'.

In continental law, the jurisprudence is based on codes of law that contain abstract rules (for example, the Civil CodeThe judge must use these to find a solution in the cases brought before him or her. Continental law generally does not have strict precedent: the continental judges are not bound by the older case law. The common law, on the other hand, does have a strict precedent effect, which ensures that a common law judge is almost completely bound by the older case law. And since each state has its own older case law, which again deviates from the state next to it, there are so many differences in the USA.

Another notable thing is that the judge can award 'punitive damages', or at least an advance payment thereof. Punitive damages is a typical American phenomenon. It is a kind of civil fine, we find what you did so bad that we add something on top of the real damage, just because we can and in the hope that it hurts. We do not know that. Only the actual damage (proven with receipts) is eligible for compensation.

FHI mantle premium

It is this liability, which is uncontrollable for the insurer, that makes the premium for the USA so high. The premium is 2 to 3 times as high and the deductible usually is too.
The minimum premium for the FHI-mantel is €2,000 (normally this is €5,000). The more FHI companies are insured, the sharper the premium can be.

Some tips to keep the risk manageable

For Dutch companies, probably the best way to do business with the USA is through a Vendor. This is an American company that takes care of the import in the USA. This company takes care of further distribution, but also of the sales and marketing. The advantage for the FHI company is that they only do business with one American company.
The Vendor insures itself in the USA against possible liability claims, including claims from private individuals (who, just like in the Netherlands, are best protected).
The FHI company supplies its products under Dutch law and not under the law of the state where the Vendor is established. This is not guaranteed to be watertight, but it does offer a more manageable risk.

Danger from an unexpected angle

Many FHI companies buy products from originally American companies, which also have branches in Europe. When the FHI company buys its products from, for example, a German branch, it is expected that delivery will be based on German law. This is often not the case. American companies also deliver from their European branches under American law.

Good preparation is half the battle

All in all, these are matters that need to be looked at carefully.
Each agreement is recorded with the terms of delivery. Make sure that these are good and do not include risks that are not insured, such as unlimited liability. Also take into account installation and removal costs, supervision risks and recall.

If you have any questions, please contact your intermediary or Klap Insurance Broker BV

Ruud Rooker, account manager
T: 020-261 0605
W: www.klap.com