All legal aspects surrounding product liability. Prepared in association with Gorrissen Federspiel, a leading law firm in Denmark, this is an extract from The Pharma Legal Handbook: Denmark, available to purchase here for USD 99.
1. What types of liability are recognized in your jurisdiction?
Generally, a person or company may incur liability by way of (i) contractual liability or (ii) civil liability due to violations of statutory law and/or culpable behaviour. Depending on the wording of the contractual terms giving rise to a contractual liability, separate claims for the same incident may be raised based on contractual liability as well as non-contractual types of liability, primarily in this context statutory product liability law.
A party to an agreement may raise a claim for damages and/or penalties against a counterparty who is in breach of the agreement. A claimant may raise claims for breach of express terms or – to some extent – trade customs or general rules of law. Unless a specific penalty or liquidated damages are agreed between the parties, the actual damages shall be calculated according to applicable Danish law. Damages are limited to proven damages incurred by the claimant, i.e. punitive damages cannot be awarded under Danish law. To the extent that sales take place directly to consumers it should be kept in mind that consumers are protected by certain mandatory law.
Liability outside of claims following from a contract can arise from statutory law requirements or culpable behavior.
The Danish Product Liability Act (which implements the EU Product Liability Directive) covers injury to persons, loss of income/loss of capacity for work, loss of a financial provider and damage to goods intended and used for non-commercial purposes. Damage to the defective product itself is not covered by the Danish Product Liability Act but may be covered by the Danish Act on Sale of Goods, if applicable. The Danish Product Liability Act cannot be opted out of.
In addition to the statutory rules of the Danish Product Liability Act, case law has developed an additional aspect of product liability. As these extended rules generally only apply to damage to other products (i.e. not persons), they will rarely be relevant to manufacturers of medicines and devices.
Under the Danish Product Liability Act, manufacturers of products are liable based on strict liability for the above-mentioned types of damage. For the liability to be established, the loss, defect and causality must be proven. As a rule, a monetary deductible of DKK 4,000 applies to damages to goods caused by product defects.
Not only the actual manufacturer of the products is subject to the Danish Product Liability Act as also parties bringing the product to market in such parties’ own name as well as importers of non-EU products may be liable for defect products. If an end-user cannot identify the EU-based manufacturer or the importer of non-EU products, a claim may be raised against any seller or distributor of the product within the supply chain. Such seller or distributor may within reasonable time give the claimant notice of the identity of the importer or manufacturer within the EU in order to avoid the derived liability.
Sellers and Distributors
Subject to rigorous fault-based negligence standards, sellers and distributors may incur liability for damages to goods and persons caused by defective products sold or distributed by them, unless the seller or distributor is able to prove that the damages were not caused by fault or negligence of the seller or distributor. As a rule, the seller or distributor is liable towards a claimant for the fault and negligence of the manufacturer and previous sellers and distributors within the supply chain of the product. In case damages are paid, recourse may be sought from such manufacturer or previous distributor.
Consequently, sellers and distributors act as a form of guarantors towards purchasers for the obligations of prior links in the supply chain.
Under Danish law, a claimant may generally raise a claim for damages outside of contractual relationships and, if not already covered by statutory law, if the conditions for liability based on fault-based negligence standards are met. For liability to be incurred, the claimant must (i) have incurred a monetary loss and be able to prove the existence and size of such loss, (ii) prove that the defendant had acted negligently or with intent in causing the damages, and (iii) prove causation and foreseeability.
2. How do these types of liabilities apply to the manufacturers of medicines and devices?
A manufacturer of medicines and devices may be liable for breaches of agreements entered into with customers and suppliers. For example, any representations made in a contract of sale may lead to a liability claim if not upheld.
Non-contractual liability may arise from, for example, damage caused to persons or objects due to defects in the manufactured products under applicable product liability law as described above.
As a rule, manufacturers of medicines and devices are held to a very high standard and are subject to a number of specific regulations as described herein, which may affect the manufacturer’s liability. As described, the definition of “manufacturer” under applicable product liability law is quite wide.
3. Does potential liability extend to the manufacturer only or could claims extend to corporate executives, employees, and representatives?
Generally, corporate liability is limited to the legal entity that has caused the damage. In theory, individuals may also become liable based on their negligence or intentional acts or omissions. Further, if corporate executives or officers have negligently or intentionally caused the company, its creditors or public authorities to incur a loss, the executives or officers may potentially become personally liable for such losses, although this is rarely seen in practice.
In certain serious cases where a product defect has been concealed or where the defective products have been sold despite a person’s actual knowledge of the defect and bodily injury has been suffered as a consequence of such defect, criminal liability may be imposed on the involved persons.
4. How can a liability claim be brought?
Barring an agreement on arbitration, claims must be brought before the Danish courts of law. Generally, a case can be tried in two instances and certain cases may be escalated to the Supreme Court as a third instance.
If a group of claimants with similar claims, which are all subject to the jurisdiction of the courts of Denmark meet a number of criteria, a class action suit may be filed against the defendant.
Finally, patients may seek compensation at the Danish Patient Compensation Association which handles claims for damage from medicines. Decisions made by the Association can be brought before a higher administrative instance and ultimately before the courts.
5. What defenses are available?
Claims for product liability damages are generally time-barred 3 years after the cause of the damage occurred with certain extensions available. All claims against the manufacturer are time-barred 10 years after the defective product was placed on the market.
Outside of the Danish Product Liability Act, the default limitation period is 3 years. Certain claims, e.g. personal injury are time-barred 30 years after commencement of the limitation period.
Depending on the type of claim (i.e. contractual or civil), a defendant may resort to a number of defenses, see below.
If the claim is contractual, the defendant may argue, inter alia, that the terms of the contract have not been breached or – barring a fixed penalty – that the claimant has not suffered any losses due to the breach of the contract. Any limitations of liability agreed in the contract may also act as defenses.
In case of civil claims, the main defense will be (i) that the claimant is not able to document a loss and/or (ii) that the defendant has not acted negligently or intentionally.
For product liability claims under applicable Danish law, the defendant may, inter alia, argue that:
- the defect is caused by mandatory requirements from public authorities,
- that it was not possible for the manufacturer to discover the defect due to the scientific or technical knowledge available at the time the product was marketed,
- that the manufacturer did not put the product in question on the market,
- the defect was not present when the product was put on the market, or
- the claimant has itself acted negligently in the use of the product, thus reducing the liability of the manufacturer/distributor.