Insurance
What is a manufacturer’s product liability responsibility?
Given the risk characteristics of specific medical devices, an empirical answer to the above question is not possible. Guidance is provided within the below long since implemented Product Liability Directive. In practice, insurance providers provide guidance balancing business risk-management considerations with potential liability exposure within the Member States.
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COUNCIL DIRECTIVE of 25 July 1985 on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products (85/374/EEC)
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
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HAS ADOPTED THIS DIRECTIVE:
Article 1
The producer shall be liable for damage caused by a defect in his product.
Article 2
For the purpose of this Directive ‘product’ means all movables, with the exception of primary agricultural products and game, even though incorporated into another movable or into an immovable. ‘Primary agricultural products’ means the products of the soil, of stock-farming and of fisheries, excluding products which have undergone initial processing. ‘Product’ includes electricity.
Article 3
1. ‘Producer’ means the manufacturer of a finished product, the producer of any raw material or the manufacturer of a component part and any person who, by putting his name, trade mark or other distinguishing feature on the product presents himself as its producer.
2. Without prejudice to the liability of the producer, any person who imports into the Community a product for sale, hire, leasing or any form of distribution in the course of his business shall be deemed to be a producer within the meaning of this Directive and shall be responsible as a producer.
3. Where the producer of the product cannot be identified, each supplier of the product shall be treated as its producer unless he informs the injured person, within a reasonable time, of the identity of the producer or of the person who supplied him with the product. The same shall apply, in the case of an imported product, if this product does not indicate the identity of the importer referred to in paragraph 2, even if the name of the producer is indicated.
Article 4
The injured person shall be required to prove the damage, the defect and the causal relationship between defect and damage.
Article 5
Where, as a result of the provisions of this Directive, two or more persons are liable for the same damage, they shall be liable jointly and severally, without prejudice to the provisions of national law concerning the rights of contribution or recourse.
Article 6
1. A product is defective when it does not provide the safety which a person is entitled to expect, taking all circumstances into account, including:
(a) the presentation of the product;
(b) the use to which it could reasonably be expected that the product would be put;
(c) the time when the product was put into circulation.
2. A product shall not be considered defective for the sole reason that a better product is subsequently put into circulation.
Article 7
The producer shall not be liable as a result of this Directive if he proves:
(a) that he did not put the product into circulation; or
(b) that, having regard to the circumstances, it is probable that the defect which caused the damage did not exist at the time when the product was put into circulation by him or that this defect came into being afterwards; or
(c) that the product was neither manufactured by him for sale or any form of distribution for economic purpose nor manufactured or distributed by him in the course of his business; or
(d) that the defect is due to compliance of the product with mandatory regulations issued by the public authorities; or
(e) that the state of scientific and technical knowledge at the time when he put the product into circulation was not such as to enable the existence of the defect to be discovered; or
(f) in the case of a manufacturer of a component, that the defect is attributable to the design of the product in which the component has been fitted or to the instructions given by the manufacturer of the product.
Article 8
1. Without prejudice to the provisions of national law concerning the right of contribution or recourse, the liability of the producer shall not be reduced when the damage is caused both by a defect in product and by the act or omission of a third party.
2. The liability of the producer may be reduced or disallowed when, having regard to all the circumstances, the damage is caused both by a defect in the product and by the fault of the injured person or any person for whom the injured person is responsible.
Article 9
For the purpose of Article 1, ‘damage’ means:
(a) damage caused by death or by personal injuries;
(b) damage to, or destruction of, any item of property other than the defective product itself, with a lower threshold of 500 ECU, provided that the item of property:
(i) is of a type ordinarily intended for private use or consumption, and
(ii) was used by the injured person mainly for his own private use or consumption.
This Article shall be without prejudice to national provisions relating to non-material damage.
Article 10
1. Member States shall provide in their legislation that a limitation period of three years shall apply to proceedings for the recovery of damages as provided for in this Directive. The limitation period shall begin to run from the day on which the plaintiff became aware, or should reasonably have become aware, of the damage, the defect and the identity of the producer.
2. The laws of Member States regulating suspension or interruption of the limitation period shall not be affected by this Directive.
Article 11
Member States shall provide in their legislation that the rights conferred upon the injured person pursuant to this Directive shall be extinguished upon the expiry of a period of 10 years from the date on which the producer put into circulation the actual product which caused the damage, unless the injured person has in the meantime instituted proceedings against the producer.
Article 12
The liability of the producer arising from this Directive may not, in relation to the injured person, be limited or excluded by a provision limiting his liability or exempting him from liability.
Article 13
This Directive shall not affect any rights which an injured person may have according to the rules of the law of contractual or non-contractual liability or a special liability system existing at the moment when this Directive is notified.
Article 14
This Directive shall not apply to injury or damage arising from nuclear accidents and covered by international conventions ratified by the Member States.
Article 15
1. Each Member State may:
(a) by way of derogation from Article 2, provide in its legislation that within the meaning of Article 1 of this Directive ‘product’ also means primary agricultural products and game;
(b) by way of derogation from Article 7 (e), maintain or, subject to the procedure set out in paragraph 2 of this Article, provide in this legislation that the producer shall be liable even if he proves that the state of scientific and technical knowledge at the time when he put the product into circulation was not such as to enable the existence of a defect to be discovered.
2. A Member State wishing to introduce the measure specified in paragraph 1 (b) shall communicate the text of the proposed measure to the Commission. The Commission shall inform the other Member States thereof.
The Member State concerned shall hold the proposed measure in abeyance for nine months after the Commission is informed and provided that in the meantime the Commission has not submitted to the Council a proposal amending this Directive on the relevant matter. However, if within three months of receiving the said information, the Commission does not advise the Member State concerned that it intends submitting such a proposal to the Council, the Member State may take the proposed measure immediately.
If the Commission does submit to the Council such a proposal amending this Directive within the aforementioned nine months, the Member State concerned shall hold the proposed measure in abeyance for a further period of 18 months from the date on which the proposal is submitted.
3. Ten years after the date of notification of this Directive, the Commission shall submit to the Council a report on the effect that rulings by the courts as to the application of Article 7 (e) and of paragraph 1 (b) of this Article have on consumer protection and the functioning of the common market. In the light of this report the Council, acting on a proposal from the Commission and pursuant to the terms of Article 100 of the Treaty, shall decide whether to repeal Article 7 (e).
Article 16
1. Any Member State may provide that a producer’s total liability for damage resulting from a death or personal injury and caused by identical items with the same defect shall be limited to an amount which may not be less than 70 million ECU.
2. Ten years after the date of notification of this Directive, the Commission shall submit to the Council a report on the effect on consumer protection and the functioning of the common market of the implementation of the financial limit on liability by those Member States which have used the option provided for in paragraph 1. In the light of this report the Council, acting on a proposal from the Commission and pursuant to the terms of Article 100 of the Treaty, shall decide whether to repeal paragraph 1.
Article 17
This Directive shall not apply to products put into circulation before the date on which the provisions referred to in Article 19 enter into force.
Article 18
1. For the purposes of this Directive, the ECU shall be that defined by Regulation (EEC) No 3180/78 (1), as amended by Regulation (EEC) No 2626/84 (2). The equivalent in national currency shall initially be calculated at the rate obtaining on the date of adoption of this Directive.
2. Every five years the Council, acting on a proposal from the Commission, shall examine and, if need be, revise the amounts in this Directive, in the light of economic and monetary trends in the Community.
Article 19
1. Member States shall bring into force, not later than three years from the date of notification of this Directive, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith inform the Commission thereof (1).
2. The procedure set out in Article 15 (2) shall apply from the date of notification of this Directive.
Article 20
Member States shall communicate to the Commission the texts of the main provisions of national law which they subsequently adopt in the field governed by this Directive.
Article 21
Every five years the Commission shall present a report to the Council on the application of this Directive and, if necessary, shall submit appropriate proposals to it.
Article 22
This Directive is addressed to the Member States.
Done at Brussels, 25 July 1985.
For the Council
The President
J. POOS
The second issue concerns the possibility left to Member States under Article 16 (1) of the Directive to fix a maximum ceiling for product liability in the case of damage to persons caused by identical items with the same defect. This ceiling is set at EUR 70 million. In 1985 lawmakers considered this limit as transitional and agreed that the Commission should assess the effect of using this option on consumer protection and the functioning of the internal market after a period of ten years (Article 16(2)). In the light of this assessment it should be decided whether this financial ceiling should be removed.
Three Member States (Germany, Spain and Portugal) have adopted financial ceilings.
In Germany, the setting-up of a financial ceiling of DM 160 million was explained by the fact that liability without fault needed to be limited. Under the specific regime for pharmaceutical products the financial ceiling is DM 200 million. There are no known cases in which the financial ceiling would not have been enough.
In Spain, the ceiling is PTS 10 500 million. So far, no cases are known were this limitation left injured persons without compensation.
In Portugal, legislation set a financial limit at ESC 10 000 million. No data on the application is available.
The little information seems to indicate that the financial ceilings which exist in three Member States are high enough in order to cover any claims for compensation. No data exists which would show that the use of the option under Article 16 (1) of the Directive by these Member States has any major impact on the functioning of the internal market.
9 February 2000