Product Liability: When Manufacturers Are Liable Without Fault

Anyone who manufactures, imports, or places products on the market under their own name is liable for damages under German law even when they themselves are not at fault.

In brief: the Product Liability Act (Produkthaftungsgesetz, ProdHaftG) obliges manufacturers and those placing products on the market to answer for personal injury and property damage caused by defective products, regardless of whether they are at fault for the defect. This affects every company that manufactures, imports, or distributes products under its own name. Without suitable insurance, claims for damages can quickly threaten a company's existence.

Who is affected by product liability?

Every company that manufactures a product, imports it into the EU, or distributes it under its own brand is affected, even if the actual manufacturing has been outsourced to a third party. Anyone who presents themselves as the manufacturer by placing a name, brand, or other mark on the product is also legally considered a manufacturer within the meaning of the ProdHaftG. Suppliers of individual components can also be liable if a defective part causes damage, as can retailers if the actual manufacturer cannot be identified. In practice, this affects craft businesses just as much as mid-sized manufacturers, online retailers with private labels, or companies that assemble components into a new end product.

What does no-fault liability mean in practice?

No-fault means that an injured party does not need to prove negligence or intent: it is enough that a product defect caused the damage. Unlike in classic tort law, it therefore does not matter whether the company worked carefully or complied with all internal controls. A single design, manufacturing, or instruction defect is enough to trigger liability for personal injury and property damage, for example when a faulty instruction manual leads to an accident. For companies, this means that organizational diligence alone does not protect against claims, making a financial safety net all the more important. A tool like Company Audit shows which of these obligations specifically apply to your company.

What specifically do you need to do?

To realistically assess and cover your own liability risk, the following steps make sense:

1. Identify product and liability risks (which products, which possible personal injury or property damage).
2. Check whether existing general liability insurance includes product liability risks.
3. Set the coverage amount based on the largest realistic damage scenario.
4. Take out product liability coverage or extend an existing policy.
5. Ensure traceability and documentation of products for the event of a liability claim.

The last point in particular is often underestimated: batch numbers, supplier records, and inspection reports help, in a real case, to trace the damage to a specific production batch and to factually limit one's own liability.

Is product liability insurance legally required?

No, product liability insurance is not legally required in Germany, but the liability itself exists regardless of whether insurance is in place. Because claims for damages in cases of personal injury can quickly reach amounts that threaten a company's existence, taking out corresponding coverage is, in practice, strongly recommended. Many general liability insurance policies cover product liability risks only to a limited extent or not at all, which is why a separate review of the existing policy is necessary before assuming a false sense of security.

What does the new EU Directive 2024/2853 change?

EU Directive 2024/2853 will in the future extend product liability to, among other things, software and artificial intelligence, and must be transposed into national law by December 9, 2026. Companies that develop or distribute software, AI components, or connected products should already check now whether their existing insurance coverage covers these new liability scenarios. Anyone who waits for the transposition risks a coverage gap at exactly the moment the new rules take effect, and would then have to renegotiate at short notice.

What are the risks without adequate insurance coverage?

Without adequate coverage, claims for damages must be paid out of a company's own funds, which can quickly threaten its existence, especially in cases of personal injury. Good documentation and traceability of products also noticeably reduce one's own liability in the event of a claim, because the causes of defects and the affected batches can be narrowed down more clearly and claims can be reviewed more precisely, instead of putting the entire product range in question across the board. Besides the direct damages amounts, a real case often brings additional costs for recalls, legal advice, and expert opinions, which a company without insurance coverage would likewise have to bear alone.

Frequently asked questions

Who is liable for a defective supplied part?

Both the manufacturer of the end product and the supplier of the defective component can be liable under the ProdHaftG if the component caused the damage.

Is standard general liability insurance enough?

Not necessarily: many general liability insurance policies include product liability risks only partially, which is why a targeted review and, where necessary, separate product liability coverage is required.

Does liability also apply to imported products?

Yes, anyone who imports a product from a third country into the EU is legally considered a manufacturer within the meaning of the ProdHaftG and is liable accordingly.

Does EU Directive 2024/2853 also affect pure software providers?

Yes, the directive explicitly extends product liability to software and AI components and must be transposed by December 9, 2026.

From what point is separate product liability insurance worthwhile?

As soon as products are passed on to third parties, there is in principle a liability risk: the specific coverage amount should be based on the largest realistically conceivable damage scenario.

Source: ProdHaftG · EU Directive 2024/2853. This article is general information and does not replace legal advice for individual cases. Status: July 2026.