I know of one aircraft that was running on condition with no problems. Due to grumbling of the LAME and the notices on the MR, the owner replaced the engine. Within a short time, the new engine had metal in the filter. It was replaced under warranty, but I believe they also had problems with the second new engine.
When LAMEs talk about liability, I think they need to look carefully at what actions actually create the most liability for them. My understanding is that most liability comes where the owner relies on your advice and expertise, and for work that you do.
If an owner says that they want to run on condition and there is no problem with the engine that would prevent that, the LAME might be held responsible if they advise against it. If the new engine fails and an accident occurs all it takes is some expert to come in and say "It has been known for 50 years that failures are more likely after maintenance and particularly in the early period of an engine's life. The TBO is only a recommendation based on a conservative guess at the engine's life. An engine that has been running for years without problems is less likely to fail than a brand new engine. If it wasn't for Mr X's advice to replace the engine, it is likely that the deceased would still be alive today" and the whole thing ends up on the LAME's plate.
If the owner makes the decision to run on condition and an accident occurs, the LAME can say "He knew it was past TBO, but made the decision to operate on condition. When we inspected the engine it met all the parameters for continued operation." In that case the responsibility is squarely on the owner/operator.
Mandatory replacement at TBO would be good and bad for the LAME. It removes their responsibility for the advice to replace the engine. (For the purposes of the regulations, CASA can probably assume that engine manufacturers and LAMEs are perfect and infant mortality doesn't exist.)
However, if the concept of infant mortality holds true, it probably increases the overall risk of engine failure. Those failures are then blamed on either the installer (LAME) or manufacturer. It can't be the owner because the engine is new, right? So you have more engine failures, with LAMEs fighting with the engine manufacturer over liability...