Changes to Product liability law – what you need to know

Changes are coming to product liability law in the UK and in the EU to bring it up to date and make it fit for purpose in light of new technologies and new marketplaces.

Developments in technology have given rise to new types of products, including products containing software, artificial intelligence (AI), automated vehicles, products connected and run over the internet, and other digital products.

Products are also now sold and supplied differently, often downloaded or purchased via online platforms.

These types of products and methods of sale and supply throw up new challenges, so far as protection of the consumer is concerned, including:

• Issues of causation and evidence. For example, how to establish if the cause of an incident was a defect with the product itself, or with software downloaded separately. This may require access to intangible evidence, such as data, which is likely to be in the hands of a third party.
• Identifying the correct defendant. This is relatively easy with a physical product, but not so easy with a digital product downloaded over the internet.
• Vulnerability of digital products to cyberattack.

Both the EU and the UK have recognised the need to update their strict product liability regimes.

UK

The UK Government carried out a UK Product Safety Review, and published a Consultation Paper in August 2023, setting out some proposals for change. It is fair to say that the proposals are lacking in specifics. The main points can be summarised as follows:

Product liability regime

It is proposed to: “Review the civil product liability regime in light of technological developments”. 

It is noted that it is “unclear whether the definition of ‘product’ includes intangible products such as AI and software, or whether the definition of ‘producer’ includes Online Marketplaces. As such, the current strict liability regime is no longer thought to be fit for purpose.”

However, the proposal does not then go on to suggest any specific changes to the regime.

There is a separate proposal dealing with online supply chains.

Online supply chains

It is proposed that businesses which are effectively an ‘online marketplace’ will be subject to specific duties. The duties proposed include:

• Collecting (and taking reasonable steps to verify) information about third-party sellers for high-risk products.
• Consulting sources, such as the UK Government Product Recalls and Alerts page, monitoring  their marketplaces for products which reasonably look identical or very similar product, and taking appropriate action.
• Gathering information about products and sellers which could indicate a product is unsafe (for example, analysing customer reviews or product return data) and using this to regularly assess which products warrant greater due diligence.

Another proposal is to increase the warnings and information available to consumers online, particularly for higher risk products.

The proposals contained within the Consultation Paper are extremely light on detail, and it remains to be seen what specific changes emerge from this, and when. The consultation closed in October 2023, and it is currently being reviewed.

EU

The EU is more advanced in the changes it is making to the EU product liability regime.

On 12 March 2024, the EU Parliament approved a new Product Liability Directive (PLD). Member States have until mid-2026 by which to transpose the new PLD into national law.

The new PLD very much builds on the existing PLD (85/374/EEC) but is updated to take account of new products and technologies, and new marketplaces and supply chains.

The main changes introduced by the new PLD are as follows:

Article 4(1) – Expanded definition of “product” to specifically include intangible products such as software and digital files, including 3D printing files and AI.

Article 6(1) – Expanded definition of “defect”:  A product is still defective where its safety is not such as persons are reasonably entitled to expect, taking into account how the product is presented and its use – but the new PLD introduces further factors to take into account when assessing whether a product is defective, including:

• Any effect on the product of changes brought about by updates or ‘learning’ such as AI systems.
• Any effect of the product from interconnection with other products (e.g. internet of things (IoT) products).
• The product’s own safety systems, such as protection from cyberattack.

Article 6 – Expanded category of recoverable “damage” to include:

• Loss of or corruption of data; and
• Medically recognised psychological harm.

Article 7 – Expansion of the category of potential defendant, to include:

• ‘Fulfilment Service Providers’ – parties that offer at least two of the following services: warehousing, packaging, addressing, and dispatching of a product; and
• Online platforms – (this would include, for example, online marketplaces such as Etsy, Not On The High Street, Amazon, etc.).
• But these defendants will only be liable where it is not possible to identify one of the usual defendants within the EU, such as a manufacturer, importer, or distributor.

Article 8 & 9 – Evidence and burden of proof:

• There is a rebuttable presumption of defect where the defendant fails to disclose relevant evidence.
• There is a presumption of defect where damage was caused by an “obvious malfunction” during normal use.
• The court can in certain circumstances assume both defect and causation where it considers the consumer faces excessive difficulties in proving defect or causation due to technical or scientific complexity (providing there is at least some evidence suggesting defect and causation of damage).

Article 10 & 14 – Software updates:

• A product which is not defective when placed on the market can subsequently be rendered defective by a later software update; and
• Consequently, the 10-year-long stop under the PLD is extended in those situations to start from the date a product is “substantially modified” by an update.

Unsurprisingly, the EU proposals are clearly very much balanced in favour of protecting the consumer.

What this means for UK insureds and insurers

While of course, the UK is no longer in the EU, the new PLD will still have a significant impact on UK product manufacturers and suppliers and their insurers:

• Any UK-based producer or exporter of products will need to be aware of any changes to the PLD if they intend to sell products in the EU.
• The very consumer friendly new PLD is likely to lead to an increase in product liability litigation against manufacturers, producers, software suppliers and developers, and online platform businesses.
• There will be a consequent increase in contribution and recovery claims.
• When the UK Government and Office for Product Safety and Standards finally introduce changes to the Consumer Protection Act they are likely to more or less closely follow the EU’s proposals, but just how closely remains to be seen.
• Businesses and insurers will do well to take this into account when assessing the risks and challenges the changes will bring.

If you would like to know more about this topic, please get in touch.

Michael Harvey, Partner and Product Liability Special Interest Group lead

Property Risks & Coverage

Email: mharvey@keoghs.co.uk

Ilir Begaj, Assistant Lawyer and Product Liability Special Interest Group member

Property Risks & Coverage

Email: ibegaj@keoghs.co.uk