The Product Liability Directive – what constitutes a defective product?

The Product Liability Directive – what constitutes a defective product?

The recent decision of the ECJ in the case of Boston Scientific Medizintechnik (Case C-503/13, 5 March 2015) has led some commentators to argue that the concept of what constitutes a ‘defective’ product under the Product Liability Directive (85/374/EEC) has been widened. This article considers the effect of the decision and whether its application is limited purely to the medical sector.

The preliminary ruling in Boston

The Bundesgerichtshof in Germany referred two questions to the ECJ. The producers of pacemakers and implantable cardiac defibrillators had identified, through quality control systems a potentially defective component in each device which meant that the possibility of the devices failing was 17 to 20 times greater than normal. The producers undertook to replace the devices free of charge, but the issue was who should pay for the cost of inpatient and outpatient treatment for replacement surgery. The insurers of the individuals concerned took Court action against the producers for those costs. 

The questions referred to the ECJ (and as interpreted in the opinion of the Advocate General) were as follows.

  1. Whether, in essence, an active implantable medical device must be regarded as defective where it belongs to a group for which the risk of failure is significantly higher than normal, or where a defect has already occurred in a significant number of products of the same model; and
  2. Whether “damage caused by death or personal injuries” is included in the definition of “damage” set out at Article 1 of the Directive, for which there is strict liability.

It is the ECJ’s answer to question (1) above that has sparked particular interest outside the healthcare sector.

In summary, the ECJ found that where products belonging to the same group or forming part of the same production series have a potential defect, it is possible to classify as defective all the products in the group or series, without there being any need to show that the product in question is itself defective.

Pursuant to Article 6(1) of the Directive, “A product is defective when it does not provide the safety which a person is entitled to expect, taking all circumstances into account.” In reaching its conclusion, the ECJ considered that the “safety which the public at large is entitled to expect”, for the purposes of Article 6(1) must be assessed by taking into account the intended purpose, the objective characteristics and properties of the product and the specific requirements of the group of users for whom the product is intended.

The concept of safety must be assessed in the context of any abnormal potential for damage that a product could cause to the person or to the property of its user. Where a product falls into this high risk category, and where it is found that products belonging to the same production series or group have a potential defect, then it is possible to classify all the products in that group or series as defective, without there being any need to show that the product in question was actually defective.

As the Advocate General noted:

“Making proof of a lack of safety subject to the actual occurrence of damage would disregard the preventative function assigned to EU legislation on the safety of products offered on the market…”

While a product may be classed as defective under Article 6(1), it is still necessary for a claimant to prove a causal relationship between the defect and the damage the claimant has suffered, under Article 4, in order to be awarded compensation. In Boston, the ECJ stated that in order to assess whether the damage suffered by patients resulting from surgery to remove and replace the devices had the requisite causal connection, it was necessary for national Courts to consider whether the operations were necessary and proportionate. In other words, to be compensated the claimants had to demonstrate that the operations were likely to avert the risk of the failure in question and there was no less damaging alternative.

The impact of the Boston decision

The Boston decision is, undoubtedly, highly fact specific. It relates to a class of products in which a user is particularly vulnerable to potentially catastrophic damage if the product fails. Similarly, the remedy in order to rectify a potential defect is an operation, which is risky, painful and may cause lasting damage to a patient. The damage suffered by the patients in Boston (in having the potential defect remedied through another operation) occurred even though the potential defect had not yet materialised. 

It is therefore questionable whether the Boston decision has an application outside the healthcare sector. Some commentators have, however, suggested that other scenarios exist where the criteria in Boston could come into play and potentially defective products within the same class could be deemed ‘defective’ under Article 6(1) due to their abnormal potential to cause damage to a user if potentially defective. This could include products used by children, vehicles or safety equipment, for example. The case could have an application in a scenario where installed fire safety equipment in a person’s home is found to be potentially defective. It may then be necessary to cause damage to the fabric of the building in order to remedy the potential defect. The defect would not yet have materialised, but the home owner would have suffered loss as a result of the steps necessary to protect against the defect occurring.

The terms of the Product Liability Directive are incorporated into English law by the Consumer Protection Act 1987 (the “CPA”). The CPA mirrors the requirements of the Directive as to what constitutes a ‘defect’. We have yet to see whether the English Courts follow the approach in Boston and widen the scope of what can be categorised as a defective product. However, some recent decisions have demonstrated a willingness on the English Courts’ part (when determining whether a defect has caused the loss suffered) to find that a defective product has caused the loss, even where a claimant has not been able to identify the specific defect that has occurred.1 This could indicate that the English Courts are open to giving the principles set out in Boston a wider application outside the sector of medical implantable devices.

In the specific context of healthcare, it appears that the decision in Boston will be significant. It is not yet clear how the Court’s ruling will impact on product liability insurance policies taken out by manufacturers of medical devices. Given the potential for an increase in claims, however, it seems likely that premiums for many manufacturers will rise. Manufacturers will also need to check whether their insurance covers the costs of product replacement surgery which, following the ruling in Boston, manufacturers may now have to bear. Consumers could also potentially be affected by increased prices charged by manufacturers in order to absorb the additional costs of insurance, increased monitoring of the manufacturing process and the implementation of more rigorous internal procedures. This would be an unfortunate side effect for consumers, given that it is likely to be health insurance companies, not the patients themselves, who will bring product liability claims against producers.

1 Hufford v Samsung Electronics Limited [2014], which considered the Judgment of the Court of Appeal in Ide v ATB Sales Ltd, Lexus Financial Services (t/a Toyota Financial Services (UK) Plc) v Russell [2008]