Ringing the changes

An imminent revamp of product liability law means consumers may only need to prove that a product was faulty, and are no longer obliged to prove fault in the case of an accident, as Stuart White reveals

In the past, UK product liability law was based almost solely on contract and tort. The European invasion began with the 1985 directive on Liability for Defective Products, which resulted in the Consumer Protection Act 1987. This was quickly followed by the General Product Safety Directive 1992, which gave rise in the UK to the General Product Safety Regulations 1994. Having got used to the present regime, we can contemplate what is yet to come: an imminent revamp of those regulations; possible changes to the CPA and a greater emphasis on consumer protection.

Purchasers of defective products had a simple remedy in contract under the Sale of Goods Act. There was no need to prove fault - just the contract, breach of the relevant provision and causation of loss, either physical or financial. Non-purchasers could only claim in tort and needed to prove physical injury or damage, causation and fault.

These native causes of action still form the backbone of most product liability actions. However, gradually more use is being made of the CPA, under which a consumer need not prove fault - only that the product is defective and that that defect caused injury or damage. Defective in this sense means unsafe, rather than it not working. Furthermore, consumers can sue manufacturers, processors, those who import unsafe products into the European Union and those who brand products as their own.

Self defence

As permitted by the 1985 directive, the UK allowed in the 'development risks defence'. That, and the working of the directive generally, is to be the subject of a report from the European Commission this year. Back in 1999, a Green Paper had canvassed several radical reforms, including removing the need to prove causation; abolishing the development risks defence; requiring producers to fund claimants' actions up front; lengthening limitation periods; and making insurance compulsory. After wide consultation these were not pursued. Looking at these issues afresh, there appears to be widespread support for maintaining the status quo, but we still await what the Commission will say.

There has already been greater change on the regulatory side. GPSR 1994 established a regime aimed at protecting consumers from potential harm.

It requires producers (mainly manufacturers) and distributors to place only safe products on the market. Safe, in this instance, means not presenting more than minimum risks in the context of protecting health and safety.

In addition, producers must provide information about the risks inherent in the product; and member states must enforce the regime through designated authorities. Examples of these enforcement methods include safety checks; suspension of products from the market; and organising withdrawal of a dangerous product.

In 2000, the Commission concluded that GPSD 1992 had had limited impact.

As a result, it has been replaced by GPSD 2001, and the UK was supposed to have implemented this by 15 January 2004 but the Department of Trade and Industry has only just published (21 December, 2004) its consultation document incorporating draft implementing regulations. Comments are sought from many institutions, including the Association of British Insurers, British Insurance Brokers' Association, International Underwriting Association and Lloyd's by 31 March, with the intention being that the regulations will come into force during the summer.

There is no doubt in the coming weeks there will be much comment on the balance struck by the draft regulations - but in the meantime it is worth examining some of the main changes made by GPSD 2001. These include the fact that products supplied in the course of a service are caught - such as exercise equipment in a gym, shopping trolleys, or a self-drive hire car, but not trains or buses nor a hired chauffeur-driven car; also, products that are foreseeably likely to be used by consumers, even if not intended for them such as hire tools, are caught.

Changing times

Additional changes include greater penalties; producers must recall unsafe products where necessary, which could increase the demand for recall cover; enforcement authorities may effect recalls; distributors must keep documents showing product origin; an export ban on dangerous products from the EU; an obligation on producers to notify dangerous products; greater co-operation between enforcement authorities and the Commission; and publicly available information about unsafe products.

Debate will continue about the inclusion of products supplied in the context of a service, and migrating products. The new recall provisions have apparently driven up the number of recalls in those countries who have implemented GPSD 2001, but suppliers in the UK are thought to be already responsible in organising recalls. The need, however, for distributors to keep documents (no time limit specified) to enable tracing a product's origin will be onerous.

Finally, the obligation to 'blow the whistle' when you become aware of unsafe products, coupled with public access to information about products (subject to limited exceptions, where justified by professional secrecy) may appear to amount to a claimant's charter.

In conclusion, while on the civil liability side the law seems unlikely to see any fundamental changes, there will be an imminent increase in safety regulation through the implementation of GPSD 2001. While in theory this might result in fewer unsafe products, whether GPSD 2001 will perform better than its predecessor remains to be seen.

In parallel, consumers and their lawyers will have far more information than previously. And that, coupled with increasingly stringent safety requirements, must make greater numbers of liability claims a possibility.

This seems to be consistent with European policy on greater consumer empowerment - the European Commissioner for Health and Consumer Protection recently said he was confident that "increasingly, consumer policy will indeed be at the very heart of EU policy-making".

This is a message that all in the supply chain, and their product liability and recall insurers, would do well to note.

- Stuart White is a partner and member of the product liability group at Reynolds Porter Chamberlain.

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