In general, a functioning liability and insurance framework should ensure an adequate level of third party claimant protection and a reasonable and adequate final allocation of liability costs for the involved parties. This research examines whether the liability and insurance framework resulting from the amendment to German Road Traffic Act meets these two central objectives. The article shows that a reasonable and adequate allocation of liability costs is inhibited because of several barriers that hinder the shift of liability costs from the owner of the vehicle to the manufacturer. In particular, it is highly dependent on the practical application of subrogation claims. The ability and the motivation of motor insurers to conduct subrogation claims could be negatively affected because of a lack of required technical and engineering know-how and because a market-wide conduction of subrogation claims would erode the business model of motor insurance. This article proposes changes to the current framework particularly by removing specific exclusions of product liability and by easing the burden of proof of a product defect.
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