Product Liability for Manufacturers

Product liability refers to the legal obligation of manufacturers, importers, and retailers to compensate for damages caused by defective products. In Germany and the European Union, product liability is a matter of strict liability: anyone who places a defective product on the market is liable—regardless of whether they acted negligently.

For manufacturing companies, product liability is not an abstract legal concept. It becomes reality the moment a product causes personal injury or property damage, a recall is triggered, or a customer demands compensation. In such cases, the decisive question is almost always: What can you prove?

Legal Framework: ProdHaftG, BGB, and the New EU Directive

In Germany, the Product Liability Act (ProdHaftG) implements the original 1985 EU Directive. It establishes strict liability for manufacturers, with a liability limit for property damage set at €85 million per event, while personal injury liability is unlimited.

Additionally, tortious liability under § 823 BGB (German Civil Code) applies: anyone causing damage through negligence is liable. While the burden of proof usually lies with the injured party, courts often factually reverse the burden of proof if the manufacturer cannot present sufficient documentation.

The 2024 EU Update: A new EU Product Liability Directive was adopted in 2024, replacing the 1985 version. Key changes include:

• Digital products and software are now explicitly included.
• The burden of proof is eased for injured parties.
• Manufacturers are required to disclose relevant evidence upon request.
• Member states must transpose this into national law by the end of 2026.

Defining a "Defective Product"

A product is considered defective if it does not provide the safety that a consumer is reasonably entitled to expect. The law distinguishes between three types of defects:

1. Design Defects: The product is inherently unsafe due to its design, affecting every unit produced.
2. Manufacturing Defects: Individual units deviate from the intended design due to quality issues, machine variances, or material flaws. This is the classic "production error" where documentation is vital.
3. Instructional Defects: Result from inadequate warnings, user manuals, or safety instructions.

For manufacturers, the manufacturing defect is the most common risk. Here, the quality of production documentation determines whether a liability claim can be successfully dismissed.

What Must Be Proven in Case of a Claim?

To defend itself, a manufacturer must be able to prove when, how, and under what conditions a product was made:

• Which batch was produced and when?
• Which machines, parameters, and tools were used?
• What quality inspections were performed, and what were the results?
• Which materials from which suppliers were integrated?
• Who authorized the final releases?

Gaps in this record are often interpreted by courts as an indication of a lack of due diligence, significantly weakening the manufacturer's position.

Retention Periods: How Long to Store Production Data

Retention requirements stem from various legal sources. While the ProdHaftG sets a 10-year limitation period from the date the product was marketed, industry-specific requirements (e.g., Automotive or MedTech) can extend to 15 or 30 years.

Rule of Thumb: Store production data, quality records, and release protocols for at least 10 to 15 years. Relying on paper archives creates a "retrieval bottleneck"—in a liability case, hours matter, not weeks of searching.

Documentation as Active Risk Mitigation

The best liability strategy is preventive: clean processes, seamless documentation, and fast traceability.

An MES (Manufacturing Execution System) that records batch data, machine states, and quality results in real-time is more than a compliance tool—it is an instrument for active liability minimization. If a defect is reported, the manufacturer can identify the affected batch in minutes, determine if other products are at risk, and limit a recall to a specific subset rather than pulling an entire production series.

The New EU General Product Safety Regulation (GPSR)

Since December 2024, the GPSR has replaced the old safety directive. It tightens market surveillance and reporting obligations. Manufacturers must notify authorities of product risks immediately, which requires knowing exactly who received which product—making end-to-end traceability essential.

FAQ

Is a supplier liable if their component is in a defective finished product? Yes. The ProdHaftG covers manufacturers of components if that component caused the defect. The end-manufacturer may seek recourse (regress) against the supplier, making documentation vital for Tier-1/2 suppliers as well.

What is the difference between product liability and product safety? Product safety is the preventive duty (designing and making safe products). Product liability is the reactive consequence (legal fallout when damage occurs). Fulfilling safety duties significantly improves your liability defense.

Does liability insurance provide full protection? Insurance covers financial losses up to the agreed limit, but it does not replace the need for documentation. Insurers will investigate if the policyholder met their duty of care. Failure to provide records can lead to a reduction or denial of coverage.

How long can a claim be made under the ProdHaftG? Claims expire three years after the damage and the manufacturer become known. However, there is an absolute cutoff of 10 years after the manufacturer placed the product on the market. After this decade, the claim is permanently extinguished.