Guarantees, warranties and changes to Australian Consumer Law – what dentists need to consider

The GIL Dentists Liabilities Insurance Policy states in General Exclusions:

  1. This Policy does not Cover and We will not be liable for any loss, damage or liability whatsoever, or cost or expense of whatsoever nature, directly or indirectly occasioned by, happening through, arising out of, resulting from, in consequence of, in connection with: ….

Performance Representations, Warranties or Guarantees….any Claim which is based, in whole or in part, upon allegations of breach of written representations as to warranties or guarantees made by You as to the anticipated outcome of dental treatment provided by You.

However the Policy does Cover:

Goods Sold and Advice on Goods Sold…arising from Bodily injury or damage to property resulting from:

  • The nature, condition or quality of any Goods sold or supplied by You; or
  • Faulty or inadequate advice given by You in the course of a sale or supply of Goods by You in the conduct of Your Dental Practice.

An example of this is provision of a home bleaching kit.

Although patients may ask questions and be answered at the time, the suggestion of a guarantee being given verbally and used as a basis for complaint later, also exposes a dental practitioner to liability. Many dental practitioners are faced with patients asking for a “guarantee” for any work they provide. It is a difficult concept for patients to grasp that health care and services are not always straight forward and many variables contribute to the outcome of treatment, which can range from success to less than expected satisfaction, complications or misadventures. Often a patient perceives dental care as a service or a “fix’ and expects it to be covered like any other goods, with a guaranteed outcome.

The best way for dental practitioners to minimise their exposure to risk of complaint is by ensuring patients have full informed consent, and professional standards of record keeping are maintained. However, the common questions of “how long the crown can be guaranteed?” or “how likely is this treatment to work?” are often posed and need to be realistically addressed.

If a practitioner is delivering evidence based treatment then they have some basis on which to advise a patient of the likelihood of certain complications occurring. But a practitioner who gives a patient a guarantee that a treatment will have a positive outcome or last for a designated length of time is opening themselves up to potential liability in a number of ways which in the end may be borne at great personal expense.

Providing general information about risks etc based on published data is acceptable, but practitioners should never offer warranties or guarantees on their clinical work.

With respect to provision or sale of goods, on 1 January 2012 a new law came into force regulating consumer product warranties. This replaced the definition of warranties in consumer contracts under the old Trade Practices Act.

Are your warranties compliant?

From 1 January 2012 giving a consumer any document containing a warranty against defects in connection with the supply of goods or services has been prohibited if the warranty does not comply with regulation 90 of the Competition and Consumer Regulations 2010 (Commonwealth). It is also prohibited to represent to a consumer that a warranty against defects applies to goods or services unless that warranty complies with regulation 90.

This means that all businesses issuing any documents that include warranties against defects must act now to ensure that they don’t sell goods containing any non-complying warranties from 1 January 2012.

What is a warranty against defects?

A warranty against defects is defined as:

“A ‘warranty against defects’ in connection with the supply of goods or services, at or about the time of supply, which suggests to a consumer that a person will:

  1. repair or replace the goods or part of them; or
  2. provide again or rectify the services or part of them; or
  3. wholly or partly recompense the consumer;

If the goods or services or part of them are defective, and includes any document by which such a representation is evidenced.”

If a supplier or manufacturer gives a warranty referring to the quality or fitness of their goods such as ‘Lifetime warranty’ or ‘1 year warranty’, the supplier or manufacturer usually undertakes to repair or replace the goods, supply defective services again or otherwise recompense the end purchaser. These warranty statements will need to comply with the new requirements from 1 January 2012.

By law, warranties for goods supplied must now include word for word the following:

“Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure.”

If as a dental practitioner you supply goods then you will need to consider the following:

  • Amend your consumer product warranty documents to include the above statement and to comply with a number of other specific requirements.
  • If your trading terms still refer to the Trade Practices Act, they need to be updated.
  • In certain circumstances, it is possible to cap your liability for a failure to meet a consumer guarantee by limiting the remedy available to “repair or replace”.

What is a “consumer”

These requirements only apply where a warranty against defects is provided to a consumer. A person or a company will be considered a ‘consumer’ if they purchase:

  1. goods or services that cost less than $40,000 (no matter for what purpose); or
  2. goods or services that cost more than $40,000 but are of a kind ordinarily acquired for domestic, household or personal use or consumption; or
  3. A vehicle or trailer primarily used to transport goods on public roads.

Penalties

Any supplier or manufacturer found to be supplying goods that have non-complying warranty statements after 1 January 2012 will have no defence for breaching these requirements.

Failure to comply with the requirements from 1 January 2012 may result in penalties up to $50,000 per offence for corporations and $10,000 per offence for individuals.

Transitional arrangements

The ACL regulators have indicated they are unlikely to take enforcement action until September 2012 against retailers, manufacturers, suppliers for any stock in the supply chain manufactured and packaged prior to 1 November 2011.

In summary, a dentist is covered under the GIL Policy with respect to warranties or guarantees, for Goods Sold, but not for treatment provided. Advice from the ADAVB Community Relations team is

  • that a dentist should never give a guarantee for dental treatment because the patient may then have a basis to mount a large claim against the dentist, which will incur legal fees and possible statutory investigations which are not covered under an indemnity policy. In the end it costs the practitioner time and money to try to defend such a case, with a probable outcome going against the dentist.
  • Amend any documents you may provide with goods supplied as stated above.

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