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A Punitive Damages System May Triple BMW’s Damages to Korean BMW Owners
Korean Gov't Seeking to Expand Punitive Damages System
A Punitive Damages System May Triple BMW’s Damages to Korean BMW Owners
  • By Michael Herh
  • August 8, 2018, 11:07
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The Korean government is considering ways to strengthen the punitive damages system for all products sold in Korea in the wake of the BMW fire incident.

The Korean government has decided to consider introducing a punitive damages system for all products sold in Korea in the wake of the BMW fire incident. If punitive damages are applied to the BMW fire cases, the German carmaker is expected to pay more than three times the amount of compensatory damages.

According to the Korean Ministry of Land, Infrastructure and Transport on August 7, the government is considering ways to strengthen the punitive damages system specified in the current Product Liability Act. Under the current law, a manufacturer is required to pay up to three times the amount of damages if it was aware of the defect in its product and did not take necessary measures, thereby seriously damaging the life or body of a consumer.

However, BMW will not be subject to this punitive damanges clause as all of the 31 fire cases involving BMW cars did not directly cause personal injury or a loss of lives, but only destroyed the vehicles.

For this reason, the Korean Ministry of Land, Infrastructure and Transport will expand the coverage of the punitive damages system under the Product Liability Act in consultation with the Fair Trade Commission.

"We feel a strong need to expand the coverage of the punitive damages system as many people deem it necessary," a senior ministry official said. "The current law restricts the application of punitive damages to cases which cause personal injury or a loss of lives. But the scope needs to be widened and the amount of punitive damages, which is currently three times the amount of compensatory damages, should be considerably increased.”

"Many people do not accept a belated apology from BMW on August 6. BMW blamed fires on BMW cars on defective EGRs in repeated announcements. But few people believe in the announcements," Prime Minister Lee Nak-yeon said in a cabinet meeting held at the Seoul Government Building on August 7. "The Ministry of Land, Infrastructure and Transport should do everything it can, even if there are some legal restrictions. At the same time, we have to make an improvement to relevant laws."

As Prime Minister Lee virtually called for complementing the nation’s automobile recall system, some experts say that the Consumer Policy Committee scheduled for coming December may discuss the issue. "If consumer policies need discussing, the prime minister may add the issue to agendas for the December meeting," said an official of the Fair Trade Commission. “If the Consumer Policy Committee discusses the issue, the Fair Trade Commission can revise relevant acts."

The political circles are also keeping an eye on the BMW incident. "The people are more and more concerned about fires on BMW cars," Minjoo Party floor leader Hong Young-pyo stressed. “We ought to toughen the punitive damages system a great deal.”

"I will consider a plan to make a manufacturer to pay for punitive damages if the manufacturer inflicts damages on consumers if the manufacturer does not promptly identify the defects of a vehicle and does not take a follow-up measure,” said Park Soon-ja, a lawmaker of the Liberty Korea Party and the chairwoman of the Land and Transportation Committee of the National Assembly, while laying out a plan to introduce a new system on August 6.

However, the manufacturing industry is being worried about the growing burden of recalls. "The introduction of the punitive damages system for all products will bring more burdens to the manufacturing industry already having difficulties these days," a manufacturing industry official said.

The Ministry of Land, Infrastructure and Transport plans to prepare grounds that will authorize performance testers such as the Korea Transportation Safety Authority to investigate manufacturing defects at accident sites including automobile fires and secure vehicles involved in accidents. The ministry will also prepare grounds for expanding a regulation which imposes 1% of sales as a penalty for a late recall on carmakers so that the regulation can apply to cover-ups and reductions of defects, too.