Product Safety, Liability and Recall

The development of new products with increasingly sophisticated software or AI capabilities will challenge the efficacy of the UK’s existing product liability regime. The recent consultation on reforming product safety in the UK highlighted succinctly that existing definitions such as ‘product’ and ‘defect’ in the context of product liability are not adequate for consumer connected products with or without AI. Manufacturers, importers and distributors have been provided with guidance on security requirements for connected products via upcoming regulations pursuant to the Product Security and Telecommunications Infrastructure Act. However, UK businesses lack clarity on liability triggers in the event that AI or software integrated into a product fails, causing injury and/or damage. The proposed EU Product Liability Directive will extend the definition of product to include software. Manufacturers of components, which can include those integrated or interconnected with products, would also be liable for defects caused by those components. This may serve as a backdrop against which UK legislative change is made.

The impact of the Representative Actions Directive means that manufacturers and distributors of products, as well as their insurers, will have to contend with an increase in class actions for defective or unsafe products in the coming years. At the heart of this expected increase is legislative change in relation to consumer protection in Europe. Consumer protection is nothing new but product safety is currently the focus of widespread reforms aimed at updating and enforcing standards and facilitating access to justice. The new General Product Safety Regulations will introduce new requirements on the reporting of accidents caused by products, labelling and the advertising of product recalls. In parallel, the new Product Liability Directive (PLD) is a legislative proposal intended to update the product liability framework in Europe. The PLD is intended to replace the existing 40-year old Directive, bringing software and certain digital services into the scope of EU product liability, raising the prospect of mass claims following incidents such as defective software updates.

The prospect of detailed legislative proposals to reform the UK’s product liability regime in the next 12 months are slim in our view. The recent wide-ranging consultation on the UK’s product safety framework concluding in October 2023 did seek responses commenting on the defects of the current liability regime and did highlight concerns raised within the Call for Evidence 2021. Specific problems around the existing regime were identified but overall the consultation was light on detail and proposed changes. The UK lags behind the EU, with the Product Liability Directive being updated to cover connected products and software. We have no doubt there is an appetite to ensure that UK legislation covers recent technological advances, but any discussions around responsibility for non-physical elements of products will be complex. Against this backdrop, lengthy legislative timetables and a General Election to occur sometime in 2024, product liability reform is likely to fall within the remit of the next government, irrespective of political leaning.

Insureds and, by extension, product liability/recall insurers will need to ensure that robust procedures are in place across the entire food supply chain to protect against potential acts of sabotage and terrorism. The risk of spill over from geopolitical events is significant. Reactions of those watching events unfold in the Middle East and Ukraine are often visceral, especially in the social media age. With this comes the increased risk of radicalisation of individuals thousands of miles from the epicentre of events; the acts of these radicalised individuals are, regrettably, often unpredictable. The risk of terrorist action is not limited to direct attacks on individuals or property – history has shown that it is necessary to be wary of the indiscriminate targeting of civilians through the deliberate introduction of contaminates into the food chain.

The Medicines and Healthcare Products Regulatory Agency (MHRA) has announced a new licensing route for medicines which started operation on 1 January 2024. Companies that have already received a marketing authorisation for the same medicine can apply under the new International Recognition Procedure for expedited access to the Great Britain market based upon the regulatory decisions of one of the MHRA’s specified Reference Regulators. These trusted competent authorities are Australia, Canada, Switzerland, Singapore, Japan, the United States Food and Drug Administration and the European Medicines Agency. The MHRA retains the power to conduct a full assessment where considered necessary. With companies needing to make decisions on which markets to prioritise, this is a welcome move. It also demonstrates the regulatory flexibility which the MHRA, as a sovereign regulator, can now use for the benefit of patients.

Clinical trials are a key element of healthcare innovation but the UK has experienced a sharp decline in clinical trial activity in recent years. Recognising that clinical trials regulation should be flexible and proportionate to the risks, the Medicines and Healthcare products Regulatory Agency (MHRA) has announced a new streamlined notification scheme for the lowest-risk Phase 3 and 4 clinical trials. The scheme will see applications processed by the MHRA in half the current time, with about 20% of UK applications expected to be eligible. The scheme is based on that outlined in the MHRA’s Clinical Trial consultation. Its goals were to enhance the UK’s attractiveness as a home for clinical research as well as giving UK patients quicker access to potentially life-saving medicines. This initiative is just part of the biggest overhaul in UK clinical trials regulation in over 20 years, with this boost for clinical trials presenting an opportunity for insurers who offer coverage for clinical trial risk to write additional policies.

The recent policy paper and consultation published by the UK government on tackling the rise in youth vaping is a precursor to legislative change aimed at enabling vape use by adult smokers to help with cessation, but limiting uptake by young people. Existing legislation has not prevented widespread use by young people, and recently announced curbs in Australia to be underpinned by legislation may serve as a template for measures in the UK. For example, in Australia, vapes containing nicotine will only be available with a prescription from pharmacies, and other restrictions include limits on flavours, colouring and other ingredients. As mentioned in the King’s Speech, the UK government already intends to take tougher measures to restrict the sale of disposable vapes, restricting the marketing of vapes and strengthening enforcement activity. It is possible that additional attempts to limit risks to public health caused by counterfeit or unregulated products in supply chains may form part of other measures proposed following the conclusion of the consultation. Insurers may choose to exercise restraint when writing liability risks covering both vaping devices and liquids in the face of further regulation.