I would assume that liability is avoided when someone has done a reasonable effort to secure the device. The user needs to make sure they've secured their router from unauthorized access by using proper passwords. The ISP needs to make sure the router is delivered with the latest firmware and is pre-configured to be secure.

The last few routers I've had from an ISP are totally turnkey. There's no configuration, no passwords set (maybe the local Wifi password), any config is done with an app that talks to the ISP, who then updates the router settings remotely. There isn't even an admin interface you can access from the local network side.