Product Liability: Importers, Suppliers and Exclusion of Liability

Importer

In accordance with § 4 of the Product Liability Act, the EU importer of the product shall also be liable. The product must be imported into the European Economic Area in the course of the importer’s business activity for commercial purposes (e.g. sale, hire, lease). This regulation is intended to protect the consumer from having to conduct a product liability case with a producer in a third country outside Europe.

For example, if electronic monitoring relays are imported from China and a defect causes a fire, the injured party does not have to conduct a product liability action against the Chinese producer but can turn to the EU importer of the relays as the liable party. By contrast, if the monitoring relays hailed from Italy (i.e. an EU country), the injured party would be expected to initiate proceedings against the Italian producer. Even an action such as this may involve considerable legal and factual difficulties. The court of jurisdiction, in other words the location of the action and the applicable law (Italian or German law) are questions that need to be clarified in advance.

Supplier

The liability of the supplier (agent) in lieu of the producer is limited by the Product Liability Act to those cases in which the producer of the product cannot be identified. If the product user has been harmed by an anonymous product, he can turn to the supplier, which in practice is the seller. However, the supplier shall only be liable in lieu and can discharge himself completely by naming the actual producer or his own supplier within a certain time period.

Exclusion of Liability

No liability for subsequent product improvement:

Any subsequent product improvement will not work retrospectively and render the previous product line defective. In other words, any technical advance in issues of safety shall not retrospectively render the previous model unsafe and therefore defective in the legal sense. However, if fundamental improvements are made to safety, in each individual case each trader must ask himself whether they need to be introduced as soon as possible into his own product segment, in order to comply with the new, modified safety standards. Social acceptance and social safety expectation plays an important role in assessing safety. Product improvements spread quickly, become standards and then become part of the general safety expectation.

An injured party cannot rely solely on the assumption that the product was defective because it was modified by the producer. If the modification is due to the ongoing technical development of the product, the previous model will not be deemed defective. However, if the claimant manages to show and prove that the product was modified purely in order to rectify a fault from a prior existing safety defect, it will be concluded that the defect dates back to the time that the previous product was put into circulation.

No liability for development defect:

From a legal perspective, a development defect is a defect that could not have been detected at the time the product was put into circulation in accordance with the state of scientific and technical knowledge at that time and therefore could not have been avoided. Objectively, a development defect is unavoidable if the  potential hazard from the product could not have been discovered by anyone – either in the relevant industry or at national/international level – because the knowledge was not available at the time the product was put into circulation. The burden of proof is with the producer. As a result, there is barely a case in law in which a producer has really been able to discharge his liability due to the presence of a development defect.

Note: Lawyers and engineers understand something quite different by the term “development defect”: When lawyers talk about a development defect, in the legal sense this corresponds more to a design defect. Caution: Product liability laws in other European states (currently Finland and Luxembourg) also provide for liability for development defects.

Exemption from liability when mandatory regulations are applied:

The producer’s liability to pay compensation is excluded if the defect is due to the product’s compliance with regulations that were mandatory at the time the product was put into circulation. This exemption from liability is fairly insignificant in practice because mandatory regulations for product design are rare in the Federal Republic of Germany. In particular, technical regulations, standards and recommendations (such as DIN regulations, VDE/ ETSI standards or VDE guidelines, VDE recommendations or VCI regulations) are neither statutory nor mandatory. Compliance with technical standards is always voluntary and, what’s more, they are not mandatory laws under the terms of liability exclusion, as this only refers to one binding paragraph in the Product Liability Act.