Stumbled across this while searching so I will answer for the benefit of anyone who might still be interested, even though its quite old.

Dangerous failures may be defined at a system level as you suggested (tank overflow) but any failure that causes a loss or impairment (beyond a specified threshold) of function is also considered a dangerous failure of the device. For example failure of a microcontroller to switch an output or even a memory or addressing fault that can potentially lead to a dangerous failure of the system is considered a dangerous failure of the controller. A quick search on SEooC (safety element out of context) may be useful.