How will the new Product Liability Directive (EU) 2024/2853 impact businesses?

The EU’s new Product Liability Directive (EU) 2024/2853 (the “New PLD”) introduces a significant update to the EU product liability regime, with member states required to transpose it into national law by 9 December 2026. It will replace Council Directive 85/374/EEC (the “Existing PLD”), which was introduced before many of today’s digital products, connected devices, software and AI systems existed. The Existing PLD regime continues to apply to products placed on the market or put into service before 9 December 2026, even after national implementing laws come into effect.

The New PLD will apply to businesses operating in the EU, as well as those placing products on the EU market. It will not apply to companies selling products solely on the UK market, where the strict liability regime continues to be governed by the Consumer Protection Act 1987. However, UK businesses exporting to the EU should assess now how the new rules may affect their product governance, supply chains, documentation, and insurance arrangements.

What are the aims of the New PLD?

The New PLD is a major overhaul of the product liability framework in the EU, to reflect the emergence of digital technology, cybersecurity challenges, new supply models (in particular, online marketplaces enabling the easy purchase of products from outside the EU), global supply chains, and the demand for sustainable goods.

The overhaul has been necessitated for a number of reasons: the Existing PLD was not designed to deal with intangible digital products, their dependence on data, their complexity, and their connectivity; there has been a lack of clarity as to who is liable for defects resulting from changes in products after they have been put into circulation (for example, when updates are made remotely); and it has been difficult for consumers to prove defectiveness in the case of products that are highly complex technologically or scientifically.

The New PLD therefore seeks to modernise product liability laws by updating the current legal framework to address the challenges of new and emerging technologies and innovations, digital products, software, and AI systems. It also seeks to provide robust protection mechanisms for consumers robust protection mechanisms, enabling them to claim compensation for damage caused by defective products, including those integrated with digital components. Further, it seeks to harmonise laws across member states, to ensure a consistent and uniform approach to product liability throughout the different jurisdictions of the EU.

The New PLD retains the principle of strict liability for damage caused to a natural person by a defective product. The test for determining whether a product is defective is whether the product provides the safety which a person is entitled to expect or that is required by EU or national law. A consumer only has to prove that the product was defective, that a person suffered damage, and that there was a causal link between the defect and the damage; they do not have to prove negligence.

How does the New PLD meet its aims?

• The New PLD broadens the definition of ‘product’ so as to include digital products such as software and AI systems. This means that developers and providers of software, including AI applications, can be held liable for damages caused by defects in their products.
• In order to meet its objective of ensuring that there is always an EU-based entity liable for defective products bought from manufacturers outside the EU (because an EU consumer buying online may not always know that the product is being supplied from outside the EU), the New PLD extends liability to include online platforms and fulfilment service providers if they are deemed to have significant influence over a product’s sale or present themselves as the manufacturer. This means that where the manufacturer of the defective product or component is established outside the EU, the importer or manufacturer’s authorised representative may be liable where the product causes damage.
• The New PLD makes any entity that substantially modifies a product be deemed to be the manufacturer and therefore bear liability for the safety of the modified product.
• The New PLD makes it easier for victims of defective products to bring a claim by: (i) allowing courts (subject to certain conditions being met) to presume that a product was defective or that the defect caused the damage, particularly where the product is technically or scientifically complex; (ii) empowering national courts to order manufacturers to disclose “relevant evidence” where the claimant can establish a prima facie case; and (iii) allowing consumers to claim compensation for non-material damages (if such claim is available under national law) including damages for harm to psychological health, and destruction or corruption of data.
• The New PLD extends the long-stop period to 25 years where damage is slow to become apparent (latent damage). The general three-year time limit for bringing a claim remains unchanged, and an economic operator will be liable for a defective product for a ten-year period after placing the product on the market (with time running from the date that substantial modifications were made to the product and so potentially much later).

What can businesses do now to prepare?

Businesses should proactively assess and adjust their practices to comply with the new framework, ensuring they meet their obligations and mitigate potential liabilities. This will include taking the following steps:

• Conduct comprehensive risk assessments to thoroughly evaluate their products, especially those incorporating digital elements, to identify and mitigate potential defects.
• Carry out supply chain due diligence to ensure that all partners, including software developers and fulfilment service providers, comply with the New PLD’s standards, in order to minimise liability exposure.
• Maintain documentation and compliance, to include detailed records of product design, testing, and quality control processes, so that they will be able to demonstrate compliance and defend against potential claims. Records should be kept for such periods as may be relevant given the potential limitation periods.

For insurers and insureds, the New PLD is likely to affect how product liability risks are assessed, priced, and handled. The broadened definition of “product” (which will include software and AI systems), the extension of liability across potentially liable parties (including importers, authorised representatives, online platforms, and fulfilment providers), and presumptions easing claimant proof may influence coverage triggers, underwriting appetite and pricing, claims handling strategies, and litigation exposure. Insurance programmes should be reviewed for gaps and overlaps across product liability, cyber and recall covers, with particular attention to digital components, remote updates, latent damage horizons, and supply chain interfaces, and with subrogation strategies recalibrated to reflect new routes to recovery against EU‑based economic operators.

If you have any questions or concerns about insurance and product liability, please contact Mirjam Schorr.