Product liability

In this chapter of our Annual Insurance Review 2021, we look at the main developments in 2020 and expected issues in 2021 for product liability.

Key developments in 2020

In 2020, a final judgment was at last handed down in the long running Seroxat litigation. The litigation began in 2007. The claimants alleged that Seroxat, an anti-depressant manufactured by GSK, was defective.

Whilst the Seroxat litigation rumbled on, two of the most important product liability judgments in recent years were handed down: Wilkes v DePuy [2016] and Gee v DePuy [2018]. In both cases, the Court departed from previous judgments and stated that a flexible, holistic, approach should be used in determining whether products are defective under the Consumer Protection Act 1987. This allows defendant manufacturers to argue that the benefits of a product should be considered alongside the risks. 

In the Seroxat litigation, GSK cited DePuy to argue that the claims were legally untenable.

In her 3 July 2020 judgment in GSK's favour (Bailey and others v GlaxoSmithKline [2020]), Lambert J stated that the decision in DePuy should have made it clear to the claimants in 2018 that their case would not succeed. Lambert J's judgment echoed a Court of Appeal decision on an earlier case management point in the Seroxat litigation, where the Court had also endorsed the approach in DePuy.

This trio of judgments (the Seroxat litigation, DePuy and Wilkes) provide Insurers and manufacturers with grounds to deploy a risk/benefit analysis when defending allegations that products are defective. Accordingly, the Court will assess whether a risk of injury is outweighed by the benefits of a product. This can lead to a judgment in the favour of manufacturers, even where side-effects are caused by the product. 

Insurers have welcomed this latest decision as an important development in reducing the legal risk of insuring consumer products, particularly medical devices and pharmaceuticals.

What to look out for in 2021

2021 will be the year in which the Brexit transition period is finally over and attention can switch to whether, and how, the UK's lawmakers adapt the product safety regime. 

Up until now, the principal UK laws that deal with product safety have been underpinned by EU Directives, including the Product Liability Directive (85/374/EEC), the General Product Safety Directive (2001/95/EC) and sector-specific EU directives, such as those relating to food and drink, toys, medicinal products, medical devices and cosmetics. 

EU law will continue to apply in UK law only insofar as they are not modified or revoked under the European Union (Withdrawal) Act 2018. 

Government guidance issued towards the end of 2020 dealt with how companies must place goods on the market from 1 January 2020. Certain categories of product will need to bear a new UK Conformity Assessment (UKCA) mark. This paves the way for standards in the UK and EU to diverge.

Insurers will want to see in which direction the UK goes during 2021 and beyond. The Government could avoid reforming the law relating to product safety, so as to reduce the risk of creating friction in its future trading relationship with the EU. Alternatively, the Government may see an advantage in loosening regulations in order to boost innovation and reduce the cost of manufacturing. This approach may seem appealing to support the economy following a year in which COVID-19 pushed the economy into recession. If the latter approach is adopted, Insurers may want to consider scrutinising products in more detail, before offering insurance, or else finding comfort in insuring products that are also compliant with the EU regime.
Authored by Peter Rudd-Clarke.

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