From Defect to Recovery: The CPA Advantage for Insurers

The Consumer Protection Act 1987 (CPA) continues to play a pivotal role in helping insurers recover losses caused by defective consumer products, offering a powerful alternative to traditional negligence claims in subrogated recoveries.

In claims involving fire or water damage caused by consumer goods, the CPA offers a route to recovery that is often more straightforward and cost‑effective than reliance on the common law alone.

While both routes can, and often are, regularly pursued concurrently, the CPA offers the key benefit that it imposes strict liability on manufacturers of defective products. This means that the claimant does not need to prove fault or negligence on the part of the manufacturer or producer, but only that the product was defective, and that there was a causal link between the defective product and the damage.

This aims to ensure that consumers are entitled to a certain degree of safety in the products they use, and importantly, that insurers can also recover their outlay when they pay to repair damage caused by products which do not meet the relevant safety standards.  

What constitutes a defective product?

In order to successfully pursue a claim under the CPA, a claimant is required to prove that the product was defective. Section 3(1) of the CPA defines a defective product as one whose safety falls below what ‘persons generally are entitled to expect’, taking all circumstances into account. Section 3(2) lists relevant circumstances, including marketing and presentation, instructions and warnings, and foreseeable uses and misuses. The UK Supreme Court emphasized in Hastings v Finsbury Orthopaedics Ltd that the test is not about what the claimant in fact expected, but what was reasonable for them to expect, with regard to the factors listed above. 

There is no single test for proving causation under the CPA. However a notable piece of case law was Ide v ATB Sales Ltd [2008] EWCA Civ 424, which confirmed that the claimant is not required to identify the precise mechanism of failure. This may make CPA claims attractive where a recovery is being pursued against the manufacturer or producer of a complex product.

Reducing cost and evidential burden

Removing the requirement for claimants to prove fault or negligence is helpful as it avoids the need for a detailed enquiry into the manufacturer’s conduct and design choices – information which is not readily available or easily understood by claimants. Typically, a claimant would have to push the defendant to disclose this information which may not be forthcoming without issuing proceedings or applying for pre-action disclosure. 

They may also need to obtain more extensive expert evidence to determine whether any conduct or design choices were negligent. In the insurance context, the CPA is therefore especially useful, as it enables insurers to pursue recoveries against manufacturers with reduced risk of incurring extensive costs on disclosure or expert evidence, at a time when the insurer has often already incurred significant repair outlays.

SLS Recent Success 

Sedgwick Legal Services, acting for numerous insurer clients is well acquainted with this context. In a recent success for the firm, Jamie Gardner (associate) was able to secure a recovery on a property damage claim for a major insurer on a claim in which they had paid an outlay of £320,000 due to damage caused by a defective consumer unit. 

This was an example of the benefits of the Consumer Protection Act (CPA) for claimants. 

Part II of the CPA allows the Secretary of State to introduce safety regulations with which manufacturers must comply. A breach of these regulations constitutes a regulatory offence and may carry criminal consequences, typically enforced by government authorities.

However, section 41 of the CPA also allows consumers to bring a civil claim against manufacturers where a breach of these regulations has caused loss. This is particularly advantageous for insurers pursuing recovery under the CPA. It may be easier to establish that a manufacturer breached specific safety regulations, which often set more specific standards or guidelines, rather than satisfying the broader “general expectation of safety” test.

As illustrated in this case, section 41 enables insurers to recover any outlay incurred where a product malfunction results from the manufacturer’s failure to comply with those regulatory requirements. 

A complementary role alongside negligence

The Consumer Protection Act plays a vital role in holding manufacturers to account for the safety of the products they place on the market. In the context of subrogated recoveries, its value is particularly clear. By enabling claims to be brought on a strict liability basis, the Act helps ensure that insurers, and ultimately their policyholders, are not left to absorb the financial consequences of damage caused by defective products.

That said, the common law of negligence continues to have an important place alongside the CPA. It may provide a useful additional cause of action against manufacturers, or the primary route where the CPA does not apply. This can include cases where the loss falls below £275, where damage is suffered by business property, or where responsibility is more readily established against a service provider than through proving a product defect. In practice, insurers frequently pursue both routes in parallel. A clear understanding of the distinctions between the CPA and negligence is therefore essential, particularly when considering which approach is likely to lead to a faster and more cost‑effective resolution.

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