SHAREemail sharing iconLinkedin sharing iconFacebook sharing iconTwitter sharing icon
Menu icon
VOLUME 21 | ISSUE 5
SUBSCRIBE
Menu icon
SUBSCRIBE
VOLUME 21 | ISSUE 6
What’s New
Down arrow
Up arrow
departments
Down arrow
Up arrow
Columns
Down arrow
Up arrow
ABOUT
SHAREemail sharing iconLinkedin sharing iconFacebook sharing iconTwitter sharing icon
SHARE
Industry & Markets
Down arrow
Up arrow
Lifestyle
Down arrow
Up arrow
industry & Markets
International Supply Chains & The One Percent Rule
Steven Elo—Portfolio Underwriter, Commercial Insurance, Unica
I
s your client involved in an international manufacturing or wholesale supply chain? We know that the local link in an international supply chain is the one most likely to be targeted with product liability claims. But did you know there’s additional risk if international parties are also named in the action?
Under Ontario’s Negligence Act, if at least two parties are found liable, they’re jointly and severely liable to the plaintiff. The One Percent Rule may allow a plaintiff to recover 100% of the damages from a defendant who’s only 1% responsible. In turn, the paying defendant must seek contribution from the other liable parties.
Thus, the defendant residing in the local jurisdiction is more likely to be hit with the One Percent Rule as it allows the plaintiff to be made whole to the full extent of injuries or damages. As the onus shifts to the indemnified defendant, it may be difficult for the paying defendant to recover from parties outside judicial jurisdiction. Even if recovery from international parties is possible, the delay between payment of damages and payment of restitution could prove financially intolerable.
It's possible an Ontario insured could end up on the hook for the judgment payments of a negligent international supply chain partner.
Consider these scenarios:
Scenario 1 The insured is a manufacturer who receives raw materials from overseas. A shipment of raw materials is flawed. The insured fails to detect the flaw and manufactures a defective product. As a result, a class-action suit is filed on behalf of thousands who purchased the defective product.
Scenario 2 The insured makes a component for a printing press that’s assembled overseas. A finished press is purchased by 123 Limited. A flaw in the press causes it to fail, resulting in major delays and financial loss for 123 Limited. They seek financial compensation.
Scenario 3 The insured is a wholesale distributor of forestry products manufactured overseas. Improper use of a product results in severe injury for an end-user. It’s found that an important warning label on the product was not in English.
Ask yourself: Which party is more likely to be named in a local lawsuit?
  • If the insured must pay 100% of damages under the One Percent Rule, could the Insured’s assets be exposed to satisfy a Court award that exceeds insurance policy limits?
  • How difficult would it be to seek contribution from an international party?
If your client’s part of an international supply chain, a Risk Control Expert or Commercial Underwriter is your best source for additional information on exposures or liability limits.
VOLUME 21 | ISSUE 6
ADVERTISING & SUBSCRIPTION INQUIRIES
Insurance Brokers Association of Ontario
1 Eglinton Avenue East, Suite 700
Toronto, ON M4P 3A1
416.488.7422 | 800.268.8845
Copyright © 2021 by Insurance Brokers Association of Ontario. All rights reserved. The contents of this publication may not be reproduced in whole or in part without prior written permission.