Selling Products Into the EU? Check Your Product Liability Insurance

From software updates and smart devices to AI-powered products, the products businesses design, manufacture and sell have changed dramatically over the last 40 years.

The law is changing too.

The European Union has introduced a new Product Liability Directive, updating rules first introduced in 1985.

According to the UK Government, the revised Directive is intended to modernise product liability rules for a digital age and a circular economy. It recognises developments such as software, artificial intelligence and connected technologies.

For many UK businesses trading only within Great Britain, the changes will not have an immediate impact. However, businesses selling products into the EU or placing products on the Northern Ireland market may wish to understand what has changed and whether their product liability insurance still reflects their activities.

Why has the law changed?

When the original Product Liability Directive was introduced in 1985, products were largely physical.

Today’s products are very different.

Many now rely on:

• software;
• artificial intelligence;
• cloud-based services;
• connected technologies; and
• regular digital updates.

The UK Government says the revised Directive introduces new provisions addressing liability for products such as software, including AI systems, and digital services that affect how products work.

The aim is to modernise product liability rules while continuing to provide a route to compensation where defective products cause harm.

What are the key changes?

The updated rules introduce several important developments.

Software is now treated as a product

The revised Directive updates the definition of a product to include software, including AI systems. This recognises that faults in digital products may cause harm in much the same way as faults in physical products.

More businesses could be liable

In certain circumstances, liability may extend beyond manufacturers to other businesses within the supply chain, including importers, suppliers and some online marketplaces.

Some claims may become easier to bring

The Government explains that the new rules are intended to ease the burden of proof in complex cases.

For example, courts may require businesses to disclose relevant technical information. A product may also be presumed defective in certain circumstances, such as when it fails to comply with relevant product safety legislation or clearly malfunctions.

These presumptions may be challenged by the business concerned.

Longer time limits

Where an injury takes many years to become apparent, the long-stop period for bringing certain claims will increase from 10 years to 25 years.

What does this mean for Northern Ireland?

One reason this matters to UK businesses is the Windsor Framework.

The UK Government explains that Northern Ireland applies a subset of EU rules relating to product regulation, including product liability. This supports its access to both the UK Internal Market and the EU Single Market.

As a result, the revised Product Liability Directive will apply to relevant products placed on the Northern Ireland market or put into service there after 9 December 2026.

Businesses can read more in the Government’s updated product safety advice for businesses.

If your business places products on the Northern Ireland market or sells goods into the EU, these changes could therefore be relevant.

Could Great Britain follow?

Although the revised Directive will apply in Northern Ireland, the UK Government has also indicated that product liability legislation in England, Wales and Scotland may need to be modernised.

“The Government is considering the product liability legislation as it applies in England, Wales and Scotland…”

The memorandum explains that the Government believes an update is necessary to reflect recent technological developments.

At the time of writing, equivalent legislation has not been introduced for Great Britain. However, product liability rules in England and Wales are under review, so businesses should continue to monitor developments.

Is it time to review your insurance?

These changes do not automatically mean your business needs different insurance.

Nor do they necessarily mean your premium will increase.

However, they provide a useful reminder to check that your insurance reflects both the products you supply and the countries in which you trade.

Consider asking:

• Do we have appropriate product liability insurance?
• Does the policy include every country where we sell our products?
• Are its territorial limits and legal jurisdictions appropriate?
• Have we told our insurer that we export goods?
• Does the description of our business accurately explain what we manufacture, import, supply or sell?
• Does our cover reflect products involving software, AI or connected technology?

Product liability insurance generally covers certain claims involving injury or property damage caused by products a business has manufactured, sold or supplied. However, the scope of cover will depend on the policy wording.

Read our introduction to liability insurance for a straightforward explanation of the difference between public, product and employers’ liability cover.

A simple review today could prevent problems tomorrow

If your business manufactures, imports or sells products into the EU or Northern Ireland, reviewing your product liability insurance before your next renewal could help ensure that your cover still reflects your business activities.

In particular, businesses may wish to check whether their policy covers the correct territories, jurisdictions, products and activities.

If you’re unsure what your current policy covers, speak to FSB Insurance Service on 020 3883 7976.

A short conversation today could help you identify gaps or restrictions before they become a problem.

This content is for general information only and is not intended to provide legal or insurance advice or a personal recommendation. Laws and regulations may change. Insurance cover is subject to the terms, conditions, limits and exclusions of the policy. Always consider your individual circumstances and seek appropriate professional advice. External websites are not under our control, and we are not responsible for their content.