Product Liability

According to the Product Liability Act, compensation for damage is payable for such damage which results from the fact that the product was not as safe as could have reasonably been expected considering the time when the product became available to customers, the intended use of the product, the marketing and instructions of use of as well as other circumstances,. Product liability concerns only damage which has been caused by tangible goods to a person or  property which is primarily used for private use and consumption. Therefore, property used for business or for  public use falls outside the application of the Product Liability Act. The Act is expected to be amended due to the new product liability directive currently in preparation.

Product liability is so called strict liability meaning that the liability for damages is not dependent on negligence or an omission of the responsible entity. A causal link between the product and the damage is enough. The Act does not apply to damage caused to the product itself. The aim of the Act is to prevent damage being caused and to compensate the damage caused.

Products for the purposes of the Act include all tangible goods and all parts and materials used in the manufacturing of the product and included in the product. The Act applies also to electricity although damages caused by electricity are compensated also in accordance with the Electrical Safety Act.

A producer, and any person who, by putting his name, trademark or other distinguishing feature  on the product presents himself as its producer as well as any person who imports the product to the European Economic Area are primarily liable for  damage caused by a product. If the identity of the producer or importer cannot be identified, then each seller of the product is liable for the damage unless the seller informs the injured person, within a reasonable time, of the identity of the  producer, importer or the person who supplied the product to him. 

If risks are related to the use of the product, it is important to pay attention to such risks in marketing and especially user manuals. Also, foreseeable misuse must be considered. The consumer is expected to familiarize himself/herself with the instructions. It is, however, not possible to correct a manufacturing or design defect through information included in marketing or a warning included in the instructions. On the other hand, an entirely faultless product may raise liability for damages if e.g. the marketing of the product has provided wrongful, insufficient or misleading information.

The compensation to be paid to the consumer may be based on the Product Liability Act or the Consumer Protection Act. The consumer may in certain circumstances choose whether to claim damages under the Consumer Protection Act or the Product Liability Act.  it is not possible to demand multiple compensation  for the same damage.

Personal injury giving rise to compensation is damage to health. Reimbursable expenses are medical costs, loss of income and support and other costs resulting from the injury.  Also, compensation for pain and suffering may be payable. Compensation for material damage may be payable for damage and destruction of property, which in practice means compensation for repair costs, reduction of the value of the property or for the value of the destroyed property. The starting point is that personal injury and material damage resulting from the safety flawed products must be compensated in full. Material damage which does not exceed the deductible amount specified in the Product Liability Act is not eligible for compensation under the Product Liability Act. According to the Consumer Protection Act the seller of the product is responsible for the material damage when the damage is caused to property that has direct interrelation with the sold product and the act does not include a corresponding limitation. The provisions in respect of damages in the Acts are therefore somewhat overlapping. A company cannot agree with a consumer about the exclusion or limitation of statutory product liability.

Companies may obtain product liability insurances to cover expenses resulting from potential product liability. Compensation amounts for damages based on product liability has increased considerably in the last couple of years, consequently increasing the price of insurance policies. It is important to consider carefully the terms and conditions of an insurance policy and its coverage and e.g. costs incurred due to recall. Insurance should geographically cover those countries that the company sells its products. In management of product liability related risks essential element is to have sufficient insurance coverage. Insurance ensures that the injured person is compensated, and that the liability is not too burdensome on the company. Where the market situation allows, the insurance costs may be partly be channeled to be borne by the consumers in pricing of the products.