Driverless Vehicles and Product Liability – navigating the road ahead

Automated and electric vehicle technology is developing rapidly, and it is only a matter of time before fully automated vehicles are widely on our roads. Vehicle manufacturers are jostling to be at the forefront of the market for these vehicles. 

Automated and electric vehicles (“AEVs”) present new opportunities, but also introduce new risks, such as liability for:

• Failure/defect of cameras, radars, and LIDAR (light detection and ranging) systems
• Software error
• Failure to introduce, or to download, safety-critical software updates
• Inadequate/misleading marketing or instructions
• Failure/defect of electric batteries
• Failure/defect of charging points and charging equipment
• Cyber attack
• Data protection breaches

In this paper we cover:

1. A re-cap of the current legislative framework applicable to AEVs
2. The future for AEVs
3. What this means for product liability

1. Current Legislative framework

The Automated and Electric Vehicles Act 2018 (AVEA 2018)

The government has been keen for the UK to be a leader in the AEV industry. It has recognised the challenges this new technology brings, along with the opportunities, and has introduced the AEVA 2018 to address some of these challenges and support the expansion of the industry.

Key provisions of the AEVA

Part 1 of the AEVA relates to automated vehicles and liability of insurers. Part 2 relates to the provision of electric vehicles and charging points. We concentrate here on Part 1.

Part 1: Automated vehicles: liability of insurers

• Section 1: The Secretary of State is to prepare and maintain a list of all vehicles that are designed or adapted to be capable of safely driving themselves and can be lawfully used on the roads when in self-driving mode.
• Section 2:  The insurer of a self-driving vehicle will be liable to anyone suffering injury or damage by the vehicle while in driverless mode. This includes the ‘driver’ of the vehicle, but damage to the vehicle itself is excluded. 

This makes insurers primarily and directly liable rather than the manufacturer of the vehicle.

The insurer will in turn be able to claim against any party responsible for the collision, such as the manufacturer, software provider, or other driver. See sections 3 and 5 below.

• Section 3: Contributory negligence will still apply, so that where an insurer of an AEV is strictly liable under s2, but the incident or damage was caused or contributed to by the injured party, the amount of compensation payable will be reduced accordingly. Further, the insurer or owner of the AEV will not be liable under s2 where the cause of the collision was the ‘driver’/user-in-charge negligently allowing the vehicle to drive itself when it was not appropriate for it to do so.

No guidance is given on when it would be inappropriate for a vehicle to be allowed to self-drive, and this is likely to be the subject of dispute.

• Section 4: Insurers may exclude their liability under the policy where the collision is the result of the insured driver making unauthorised alterations to the vehicle’s software or failing to install software that it should have known was safety critical.
•  Section 5: Although the insurer of the vehicle is primarily and directly liable to compensate the injured party, once it has settled the injured party’s claim (by agreement or judgment) it can then recover the amount paid to the injured party from the party actually responsible for the collision. 

It has two years from the date of settlement in which to do so (per the new s10A Limitation Act 1980 “Special time limit for actions by insurers etc in respect of automated vehicles”.)

These provisions raise questions around practical solutions which will be required for both consumer (AV owner) and insurer confidence, such as:

• AV owners will want the assurance of own-damage cover irrespective of whether the self-driving mechanism may have been at fault – they will not want to have to prove a defect before getting their vehicle repaired. What add-on covers may be introduced?
• Insurers and AV owners will want to be satisfied that where a self-driving system fault or defect may have caused an incident, there will be a prompt, seamless and comprehensive mechanism for obtaining and interpreting the necessary data/information from the manufacturer to establish facts and associated responsibility. What will that mechanism look like?

2. Automated Vehicles – The Future

On 26 January 2022 the Law Commission published its Report on Automated Vehicles.

This follows the publication of three consultation papers, in November 2018, October 2020, and December 2020.

It is anticipated that most of these recommendations will be included in the new Transport Bill, which was announced in the Queen’s Speech 2022, the introduction of which has been delayed and is now due to be laid before parliament after May 2023.

Summary of the main recommendations:

• “Automated vehicles” should be defined as vehicles that are capable of driving themselves without being controlled or monitored by an individual for at least part of a journey (distinct from driver assisted vehicles).
• A human driver can no longer be the principal focus of accountability for road safety.
• A new system of safety assurance and legal liability is required.
• There needs to be a “clear bright line” between automated driving systems that require driver attention and those which do not, to avoid confusion as to the role, obligations, and liabilities of the ‘driver’ or ‘user-in-charge’ (UIC) of a vehicle.
• Once a system that is properly regarded as “self-driving” is engaged, the human in the driving seat will merely be a UIC and will not be liable for a range of offences (such as speeding, jumping a red light, careless driving).
• A UIC would still be responsible for such things as ensuring the vehicle is insured, and checking loads are secure etc.
• The UIC may also be required to take over driving in response to a ‘transition demand’ by the vehicle itself if the vehicle encounters a problem, it cannot handle which needs human input.
• Responsibility for problems that occur during self-driving will fall to an Authorised Self-Driving Entity (ASDE) – usually the manufacturer.
• A new Automated Vehicle Act should set out the criteria which a vehicle must meet before it can be authorised as having an ADS (automated self-driving) feature.  The authorising authority must be satisfied that it can control the vehicle so as to drive safely and legally even if an individual is not monitoring the driving environment, the vehicle, or the way it drives.
• A User-in-Charge should be allowed to use a screen for non-driving activity – so they can watch TV, or play video games, for example - But they should not be allowed to sleep.
• Marketing must not be misleading and must be very clear as to whether a vehicle or a driving system is simply driver assisted or properly self-driving.  Any misleading marketing shall be subject to criminal sanctions.
• Vehicles should record and store data necessary to be able to ascertain if Automatic Self Drive was engaged at the time of collision, to assess the cause of the problem, and improve safety.
• The data must be made available to insurers and others.
• Continuous regulatory oversight throughout the life of the vehicle.
• Civil Liability -

  -  There should be a new Automated Vehicle Act, but the AEVA 2018 “is good enough for now”.

  - This includes that the insurer of the AEV is obliged to pay compensation for any damage caused by a vehicle while it is driving itself.

  - Insurers may bring a secondary claim against anyone else who may be liable to the injured party.

  - They could bring a claim against the vehicle manufacturer under the Consumer Protection Act 1987.

  - Product liability law is likely to play only a limited role in the regulation of self-driving vehicles.

According to a recent survey on self-driving vehicles, 52% of UK drivers believe (wrongly!) that fully self-driving cars are available to buy today – that figure increases to 72% in the United States. The number of serious accidents (primarily in the United States) involving drivers making assumptions that their vehicle was fully capable of self-driving is an indicator that an extensive and comprehensive education programme will be essential for drivers as self-driving systems are introduced in the UK.

3.  Product liability

• The Law Commission’s recommendations are likely to be of particular interest to insurers, manufacturers, and software developers of automated vehicles. The revolution in road transport that automated vehicles is bringing presents great opportunities but requires a step-change in thinking and approach on regulation and liability.
• The premise of the AEVA and Law Commission’s proposals is that the driver should not be liable for incidents that occur whilst the vehicle is in full self-drive mode. The focus for liability will continue to shift from driver error to the manufacturer and/or software developer.
• The suggestion that product liability law is likely to play only a limited role in the regulation of self-driving vehicles is open to doubt.  As we have already seen, although primary liability for incidents that occur during self-driving mode may have shifted to insurers, insurers’ liability is excluded and limited in certain circumstances, making claims likely in respect of the excluded liabilities; and when insurers have paid compensation to the injured party they are likely to look to recover their outlay if they can.
• Where the AEV owner/insured has suffered injury and/or damage, the insurer may seek to bring a subrogated claim:

  -  against the party that sold/supplied the AEV (in contract)

  - against the manufacturer of the AEV (or of the defective component/software) (in negligence)

  - against the manufacturer, producer (or party who holds itself out as such), own-brander, or importer into the UK (under the Consumer Protection Act (CPA). 

• Given that under the AEVA 2018 an insurer’s liability for the (expensive) AEV itself is excluded, the AEV owner is likely to seek to recover the cost:

  - from its supplier in contract, for breach of the implied terms as to satisfactory quality and fitness for purpose (under s5(2) CPA there is no recovery for damage to the product itself, and no claim would lie in negligence as this would be pure economic loss).

• Where injury and/or damage is suffered by a third party, in the right circumstances the insurer may be able to bring recovery claims against the supplier, in contract; and/or against the manufacturer/producer/importer etc of the product or component, in negligence or under the CPA, using the Contribution Act.
• Such claims may not be confined to instances of fault or defect with the vehicle or vehicle’s systems, but may extend to inadequate user instructions, manuals, warnings etc issued with the vehicle.
• If the Law Commission’s recommendations are adopted, the emphasis for liability will shift to the manufacturer. Volvo has already come out and said it will accept liability where loss is caused as a result of faults with automated technology in its vehicles; and Mercedes has said the same in relation to its ALKS (Automated Lane Keeping System) capable vehicles.   However, in our view there will remain ample scope for product liability disputes and litigation.
• If an incident is caused by a fault with one of the AEV’s very many components, manufacturers, and their insurers, will no doubt look to the designer or supplier of that component for reimbursement of any outlay. This could, for example, be a software developer, or supplier of one of the vehicle’s technological components, such as its sensors.
• We can also see scope for disputes about whether the actions of a third party have caused or contributed to an incident; where, for example, a dealer or garage has carried out work on the vehicle or its systems (be it servicing, repair work, or routine updating of safety-critical vehicle software); or where the owner or User-in-Charge has itself failed properly to upload software updates, ensure the vehicle is properly maintained and serviced, or otherwise failed to comply with user instructions. The need for an open and comprehensive sharing of relevant data and information will be paramount if a workable set of practices are to be achieved.
• There is also the addition of cyber risk, not previously associated with vehicles. There has already been an instance in the USA of hackers taking control of an automated vehicle and deliberately crashing it. Vehicles will therefore have to be protected against this risk, and liability will lie where reasonable protection against cyber-attack has not been provided.
• Insurers are already busy reviewing their standard motor policy wordings to understand the potential exposures and implications introduced by self-driving and connected vehicles.
• AEVs collate a huge amount of data about the vehicle and those driving the vehicle. This gives rise to data protection issues, and liability risks for data breaches.
• The underlying cause of an incident will still need to be established, and in many cases, this is likely to require the input of specialist experts in automotive technology and software.
• It should be noted that product liability law is under review, both in the EU and the UK. The European Commission has proposed a revised Product Liability Directive. The proposed revisions include the recognition of software as a product and extending the definition of defect to encompass a product’s ability to connect with other products and systems, and to continue to learn and update after it is put into circulation. The UK’s Office for Product Safety and Standards (OPSS) is carrying out a similar review, and it is perhaps likely that it will adopt a similar approach for UK products law.

Commentary

• Manufacturers, insurers, and all those in the supply chains, will need to think carefully about this shift in risk, and ensure appropriate cover is in place to meet these new challenges.
• It is to be hoped, and expected, that the move towards fully automated vehicles will reduce the number of incidents, injuries, and deaths on our roads, but where such incidents do occur, we expect the emphasis will be less on traditional motor law and insurance, and increasingly on product liability law and cover.
• This is likely to involve new or hybrid insurance cover and take into account the cyber risks identified above. Insurers and brokers are already developing policies adapted to the new and developing world of automated vehicles.
• It will be more imperative than ever for manufacturers to maintain detailed records to enable the identification and tracing of the products, components, and software involved.
• Government will also need to ensure that a robust framework is in place regarding prescribed sharing of necessary information and data relating to accidents and disputed circumstances.
• Whilst there remain uncertainties around this fast-developing technology, and the road ahead could initially be a little bumpy, with a little careful thought, government, manufacturers, parties in the supply chain, and insurers, can take advantage of the huge opportunities it brings.