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The Cookie Jar

Insuring Driverless Cars

Chris Holder, Vikram Khurana, Ralph Giles, Robert Fett

The Government recently held a consultation on proposals to support Advanced Driver Assistance Systems (“ADAS”) and Automated Vehicles (“AV”) and has since published its response, in which it addresses the issue of insuring AVs and ADAS technologies.
 
As vehicles become increasingly automated, the issue of liability for accidents raises some interesting issues, as discussed previously. But once blame has been allocated, the victim will require compensating. Unlike some jurisdictions (such as the USA), motor insurance in the UK is based on compulsory motor insurance of the driver (under Part VI of the Road Traffic Act 1988) rather than the vehicle.
 
ADAS require drivers to monitor the vehicle and remain alert throughout the journey, meaning that the driver is ultimately responsible for controlling the vehicle and therefore the current UK insurance framework is transferrable to these types of technology. However, the Government predicts that fully automated vehicles will be available within five to ten years. When an AV’s Automated Driving Function (ADF) is engaged, the human relinquishes control and effectively becomes a passenger rather than a driver, creating a gap in the UK motor insurance framework.
 
Under the current framework, victims (or their insurers) would need to bring actions against the vehicle manufacturer or software provider to claim compensation, relying on the existing principles of consumer protection law and/or common law negligence to apportion damages between those responsible for the loss or harm, which would prove time consuming and costly. Insurance providers would also need to price the risk of such malfunctions and accidents into their policies with little practical knowledge of the actual likelihood of such incidents, due to a lack of “real-world” data, which will likely have the effect of large insurance premiums for early adopters of the technology.
 
The feedback to the Government’s consultation identified critical flaws in relying on existing legislation and negligence to protect victims of accidents involving AVs, such as the optional nature of product liability insurance for manufacturers and the fact that: (i) claims can only be made against a product liability policy during the first ten years of a product’s lifespan; and (ii) the law underpinning product liability does not generally cover damage to the product which is caused by the product itself.
 
As a result of the feedback, the Government intends to publish legislation in the coming weeks in the form of the Vehicle Technology and Aviation Bill, creating a new insurance framework which covers the use of AVs by establishing a “Single Insurer Model”, where the policy must cover both the driver’s use of the vehicle and the AV’s technology. This means that innocent victims (both inside and outside the vehicle) would be able to claim under the insurance for loss/harm resulting from human error, and the insurer would also have to pay out to injured parties if the automated system was active at the time of the accident.
 
The Government has suggested that the insurer will only be able to exclude its liability to the injured motorist if the crash resulted from the motorist: (i) having made unauthorised modifications to their vehicle’s operating system; or (ii) failing to install required updates to the software for the vehicle’s operating system. In addition, because the new statutory liability will be otherwise unconditional, the insurer will not be able to exclude payment of compensation to a victim if the AV caused the crash as a result of it being hacked. Where the manufacturer is found to be liable, the insurer will be able to recover against the manufacturer under existing common law and product liability laws and it will be in the commercial interest of both industries to develop processes to resolve the majority of recovery claims quickly and easily.
 
It is essential that the Government meets its commitment in response to this consultation of creating a safe environment for all road users, now and in the future, and facilitates the safe introduction of new vehicle technologies by being responsive to the inevitable application of this emerging technology and regulating its use appropriately.