Civil liability for defective products: between consumer protection and risk management

November 11 , 2025 // Conferences, seminars and courses : Consumer Rights: consumers and users defense

Published in Clyde & Co

Product Liability coverage continues to generate debate due to its complexity. At Product Liability Day, current challenges, the new European Directive, confusion surrounding Union and Mixture, and the exclusion of "intended end" coverage were analyzed. The need to adapt policies and clarify market terminology was highlighted.

Product Liability coverage, despite its established track record, remains one of the most controversial guarantees in the insurance market. Its complexity lies in the delicate balance between consumer protection and business risk management.

This premise formed the basis of much of the discussion shared during Product Liability Day, held on October 2nd in Madrid. The event brought together industry experts to analyze the current challenges of Product Liability and the implications of the new European Directive on liability for defective products.

One of the central points was the confusion between Product Liability and Union and Mixture guarantees, especially when policyholders manufacture or supply components intended for final products manufactured by third parties. The key lies in determining whether material or bodily damage has occurred to an asset other than the final product. Although it seems a simple matter, in practice it generates intense debate, especially because the limits contracted for Union and Mixture coverage are usually considerably lower than those of Product Liability coverage.

The difference between the Anglo-Saxon and American markets was also addressed, where it is common to contract different layers or tiers of insurance for Product Liability, but not for the entire policy.

The definition of "material damage" was central to part of the debate. Cases in which a product causes financial loss by failing to meet the contracted specifications or the regulations of the country in which it will be marketed, but without causing physical harm, illustrate the difficulty of distinguishing between material damage and pure financial loss.

In this context, the need to adapt policies to cover new types of damages recognized as compensable by the new European Directive on Product Liability was raised, such as data loss or corruption and psychological damage.

Another point of interest was the exclusion of "intended purpose." Experts agreed that its purpose is to avoid covering business risk, as otherwise insurers would become guarantors of product quality or suitability, a role that belongs to the insured.

Finally, the lack of uniformity in market terminology regarding coverage for Pure Property Damage, and even its possible exclusion under Product Liability, was highlighted.

The session concluded with a shared conclusion: the need to continue exploring these issues and to closely monitor the evolution of the terminology used for these guarantees.