Consumer protection standards in the European Union (EU) are adjusting to keep up with the times after remaining relatively unchanged since the original EU Product Liability Directive was passed four decades ago. As digital health products, software and even artificial intelligence (AI) expand, companies with ties to products placed in EU markets will be subject to stricter standards for damage caused by defective products.

Directive (EU) 2024/2853, passed in 2024, adopts stricter liability standards, expands the definition of products and broadens the range of potential liable parties. Because of these shifts, the Directive has a real potential to expose U.S. life science and biotech companies to increased product liability claims and litigation.

If it does play out as anticipated, the insurance industry will see some increased frequency and a potential rise in severity and volatility. In light of these changes, carriers should be working closely with their life science customers to make sure they appreciate the impact of the changes and that they make necessary compliance shifts.

What Is the EU Product Liability Directive?

Beginning Dec. 9, 2026, the new EU Product Liability Directive brings EU member states’ legislation up to date with advancements in software and digital technology. It continues to be based on two main principles established in the 1985 product liability directive, while significantly changing how these principles will be applied:

1. The victim must prove the product’s defectiveness, the damage that was caused and establish that this defectiveness was the cause of the damage.
2. The manufacturer must compensate for the damage caused by their defective product.

Experts widely agree that the upcoming EU Product Liability Directive significantly lowers the barriers for individuals filing and wins product liability claims. For life science companies, this means greater exposure across a broader range of products and technologies. The directive shifts the burden of proof for both product defectiveness and causation to the company being sued. This means that if a claimant alleges harm, the business must prove the product was not defective and did not cause damage.

The directive also expands who can bring claims and who can be held liable, including distributors, importers and digital service providers. As with the previous directive, claimants are not required to prove fault or negligence, making robust risk prevention and documentation strategies essential.

The new directive’s guidelines will require manufacturers and distributors in the life science sector, both inside and outside of the EU, to be prepared.

There are so many components that have the potential to shift the litigation environment to be something much more akin to what we’re used to in the United States, and that makes the landscape quite volatile. Companies working in the EU have not historically experienced the same litigious environment.

Potential Impacts on Life Science and Biotech Companies

Here in the United States, where life science companies don’t have direct representation through a business arm or subsidiary operating in the EU, they may still face claims in the EU under the expanded directive. U.S.-based companies will need to carefully manage supply chains and review contracts and agreements with all parties involved in the production, distribution or updating of products or services, to ensure adherence to the new EU standards and that they are protected with appropriate risk transfer and indemnity provisions.

The new directive extends the liability period from the standard ten years to 25 years, a significant amount of time between when a product goes to market and someone claims an injury. Insurance policies may need to be adjusted for this potential longer-tail effect. Those companies that have continuity of coverage may be in a better position, however new companies or those changing terms could see a difference.

Additionally, increased volume and severity of litigation that make insurance payouts more frequent is expected. This could, in time, result in higher premiums as well as lower limits as insurers adjust to heightened risks.

It ultimately impacts everybody from an insurance standpoint, because even if companies don’t have losses, they potentially end up paying for losses that others have experienced. That could also mean higher deductibles or increases in self-insured retention amounts.

Beyond Insurance

Having a solid insurance policy to mitigate these risks is crucial. And yet, litigation can impact a business far beyond the courtroom.

What insurance doesn’t reimburse you for is the time, energy and distraction that litigation can take from a customer. It can really cause them to focus their attention on this litigation rather than running their business.

Common sense preparation for a change like the EU Directive can mitigate some of the potential direct insurance impacts and can keep business leaders centered on daily operations and sustained growth.

Expanded Potential for Liability

Perhaps the most impactful change of the new directive is the expanded definition of a product to include software:

• Irrespective of the mode of its supply or usage.
• Whether or not it is stored on a device.
• Accessed through a communication network or cloud.
• Supplied through a software as a service model.

By way of example, medical devices like pacemakers function with remote digital monitoring. If a software update for a pacemaker fails to load properly and causes damage, under the new directive, the software failure constitutes a product defect.

The inclusion of software updates, digital applications and other evolving and wearable technologies will complicate the landscape and may drastically change the way consumers see their options for recourse for failed products.

Since the 1985 directive was passed, and especially over the last few years, there has been rapid product innovation. The result is a marketplace filled with numerous and highly complex, digital products.

Not only does the new directive expand the scope of products, but it also introduces significant changes to how defectiveness is assessed. For example, under the old directive, the standard was that the defect had to exist when the product entered the market. Under the new directive, in certain circumstances, liability can attach to defects that develop over time and arise after the product is first placed in the market. That’s obviously going to be truer in that digital space.

The Solutions

Advancements in life sciences pave the way for new and life-changing products in the market worldwide. The inherent risk, however, is that these products don’t always work as intended, leading to liability claims and litigation. Here are four ways companies can help mitigate their risk:

1. Review and Revise Contracts

Analyzing and possibly amending business partner contracts is a key step. This should be done in conjunction with reassessing supply chains and revising compliance standards, both internally and externally.

In many instances, EU courts may not be able to easily assert jurisdiction over U.S. companies. But if they are a U.S. company that’s making a product that finds its way into the EU market, the company will want to be very aware of what’s happening. If a claim is filed under the directive related to that product, that could certainly have an impact somewhere in the company’s financials.

As companies partner with authorized representatives or importers in the EU member states, they should pay close attention to contractual obligations with indemnity provisions or contracts on the back end. There may be a need for contract changes, especially if those entities are making any kind of modification or repackaging that could expose a sterile product to contamination or increase the likelihood of other defects.

Now they need to be much more vigilant. They need to share the accountability in terms of who has responsibility for any potential claims.

 2. Improve Record-Keeping Strategies

Litigation begins with discovery, collecting evidence and information that either supports or defends a case. The documentation a business keeps during development and launch of a product plays a large role in the result of a claims case.

Before a company even gets to an indemnity question, they’re spending potentially millions of dollars from a defense perspective in discovery alone.

Compounding this issue is the fact that the new directive provides for additional disclosure obligations on defendants.

Companies should review record-keeping policies and have a robust database system of document tracking and tracing. They should also form relationships with vendors that can conduct document scanning and optical character recognition to be able to search for key terms. It’s essential to have a legal hold policy that prevents people from deleting documents, given the expanded timeframe of sunset periods the directive allows.

3. Clarify Instructions

Failure to warn of potential harm or misuse is an oft-used argument in product liability cases. Manufacturers should ensure their product literature is clear and understandable. It’s good practice to account for foreseeable misuse and potential side effects and share these with the consumer.

4. Track Customer Experience

Getting ahead of potential claims can be as easy as listening to customer feedback from the community. Companies should be monitoring social media posts, comments and reviews and any concerns from sales or customer service representatives. Adequately responding to customer complaints may help head off litigation.

Life science companies look to insurance to provide peace of mind as they forge the future. As technology becomes more ingrained in the tools we use every day, adhering to new product liability standards and fortifying against risk with policy coverage will be essential to navigating the new EU product liability directives. &