New EU Product Liability Directive: What Businesses Need to Know

This Directive introduces a harmonized approach to liability for defective products across the EU, addressing modern challenges such as:

• Artificial Intelligence and digital products
• Cybersecurity and software updates
• Circular economy and product modifications
• Extended liability chains including online platforms and fulfillment services

As a part of a wider EU regulatory program, the new Product Liability Directive (the Directive) broadens the scope of products and organizations covered by Product Liability Law.

The Directive expands the scope of liability to include embedded and standalone software, such as AI systems and digital manufacturing files. It broadens the definition of defectiveness by taking the requirement of product safety rules into an even greater account than previously, including cybersecurity and software updates. Connected to this, the definition of Damage now includes the destruction or corruption of data, such as digital files deleted from a hard drive, and medically recognized damage to psychological health.

It also removes existing maximum liability limits and deductibles.

The new Directive has been adapted to modern supply chains to ensure that there is an EU-based entity that can be held liable. The significance of this is whilst the manufacturer likely is the primary liable party, the importer or the manufacturer's authorized representative can be held liable if the manufacturer is not EU-based. In certain cases, fulfillment service providers, distributors, and even online platforms can be held liable. Also worth mentioning is that substantially modified products outside of the manufacturers control are to be considered as new, with the modifying company held strictly liable.

Shifting Burden of Proof

The Directive simplifies seeking redress by easing the burden of proof for consumers. The claimant must still demonstrate the existence of a defect, damage, as well as a causal link between the two. However, it introduces a new set of rebuttable presumptions.

A product will be presumptively defective where the defendant fails to disclosure relevant evidence, where the product does not comply with mandatory safety requirements or damage is caused by an obvious product malfunction. The causal link will be presumed where it is established that the product is defective and that the damage caused is of a kind typically consistent with the defect in question. The national courts must presume defectiveness, causation, or both if the claimant faces excessive difficulties due to technical or scientific complexity or where the claimant demonstrates that it is likely that the product is defective or that there is a causal link between the defectiveness of the product and the damage, or both.

Additionally, the expiry period for latent damage claims is extended from 10 to 25 years.

Consequences for Businesses and Insurance Implications

The Directive, along with other reforms, will have a significant impact on product liability and the litigation environment going forward.

Product Liability litigation in the EU will most likely increase in terms of both the number of cases as well as their cost and values. This is due to consumers receiving a wider number of grounds to sue, and they will find it easier to litigate and to do so collectively. From an insurance perspective, the increased Product Liability litigation risk is likely to affect both frequency and severity of claims and will thus have an impact on future premium rates, limits, and deductibles. Underwriters will closely monitor how businesses and in particular the courts will respond to the new Directive, focusing on their ability to defend claims.

Many products are already being reshaped by technology and climate change, and the environment is also challenged on a general level by social media and the sustainability expectations of consumers.

In addition to this, there are now more than 100 litigation funders operating in Europe which paves the way for an even greater litigation risk and exposure in the future.

Time to Take Action

Companies should use the time before the Directive is implemented to establish robust safety cultures and defense strategies, to better navigate stricter product liability laws and the increasingly litigious environment. It is imperative that companies understand and prepare for these changes to ensure compliance and mitigate risks, with a focus on enhanced product safety and document management.

Key steps include:

• Regulatory Compliance: Review and ensure robust systems are in place
• Risk Assessments: Conduct thorough product risk assessments and review lifecycles
• Supply Chain Management: Scrutinize the quality of the supply chain and ensure all operators meet safety standards
• Product Safety and Documentation: Establish strong safety cultures and maintain comprehensive documentation
• Consumer Communication: Provide clear, accessible information throughout the product lifecycle

The insurance industry can help businesses to prepare for these changes, despite the full effects still being uncertain across the different member states. At Zurich, our risk engineering and underwriting teams are supporting businesses in adapting safety controls and developing defense strategies to mitigate litigation impact.

For more information on how Zurich can help your company build resilience, please contact Antonia Kahlström, Underwriter Casualty.

Suggested EU Product Liability Directive 2024/2853 Checklist

1. Product Scope & Safety
   • Identify all products, including software, AI systems, and digital files, subject to the Directive.
   • Ensure all products meet mandatory safety requirements, including cybersecurity and update protocols.
   • Review and document product modifications—assess liability if products are substantially altered.
2. Supply Chain & Liability
   • Map your entire supply chain, including importers, distributors, and online platforms.
   • Confirm that an EU-based entity is designated for liability purposes.
   • Review contracts to clarify liability responsibilities across the supply chain.
3. Documentation & Evidence
   • Maintain comprehensive technical documentation for all products.
   • Implement systems to preserve evidence that may be needed in litigation.
   • Prepare for disclosure obligations—ensure transparency in case of claims.
4. Risk Management
   • Conduct product risk assessments and update them regularly.
   • Establish a product safety culture within the organization.
   • Monitor software updates, patches, and security vulnerabilities.
5. Legal & Insurance Readiness
   • Review and update product liability insurance coverage.
   • Assess potential impact on premiums, deductibles, and coverage limits.
   • Train legal and compliance teams on rebuttable presumptions and burden of proof changes.
6. Consumer Communication
   • Provide clear, accessible product information throughout the lifecycle.
   • Establish channels for consumer feedback and incident reporting.
7. Long-Term Planning

• Prepare for extended liability periods (up to 25 years for latent defects).
• Monitor litigation trends and court interpretations of the Directive.
• Engage with industry groups and regulators for guidance and updates.