Autonomous vehicles are evolving, as are their tort liability risks

The popular growth of autonomous vehicles in the US has the potential to improve road safety, decreasing the opportunity for individual driver negligence and shifting to a product defect analysis. This could forever change the risks faced by the insurance industry. However, these innovations come with a broad range of legal issues.

So far, the United States government has refrained from implementing comprehensive regulations, leaving states to implement their own approaches. In California, the ‘Autonomous Vehicles branch’ of California’s Department of Motor Vehicles (DMV), has implemented regulations that govern not only the testing, but also the “safety, insurance and vehicle requirements” that must be met by manufacturers for the deployment of autonomous vehicles on the state’s public roads.

As of June 2023, the DMV website provides that four entities have been issued with deployment permits allowing for the fully autonomous operation of vehicles. Three of those four permits relate to commercial passenger services. For example, Cruise LLC was granted “permission to use a fleet of light-duty autonomous vehicles for commercial services on surface streets within designated parts of San Francisco” in September, 2021. Such approval was limited to “between 10 p.m. and 6 a.m., at a maximum speed limit of 30 miles per hour.” The most recently granted permit was issued to Mercedes-Benz USA, LLC, enabling the company to “offer its DRIVE PILOT automated driving system” on designated highways in the State “without the active control of a human driver under certain conditions, though the driver must remain behind the wheel when prompted.”

While it is clear the technology is moving at a quick pace, the safety, design, and performance of motor vehicles has traditionally been regulated by the National Highway Traffic Safety Administration (NHTSA). The NHTSA has highlighted current limitations in the context of consumer vehicles, specifically emphasizing that presently “even the highest level of driving automation available to consumers requires the full engagement and undivided attention of drivers.”

While state and federal governments continue to grapple with how to implement a standard approach to regulating fully autonomous vehicles, those in the insurance industry should be proactive in ascertaining how traditional civil liability rules will be applied to fully autonomous vehicles once implemented. Traditionally, drivers are responsible for accidents under a negligence theory. However, depending on the level of automation, negligence of the driver will likely be less of an issue. That will give way to a broader product liability analysis based on defective manufacturing, design, or warnings. Such analysis shifts liability and ultimate cost from the individual driver to the manufacturer, component suppliers and sellers under strict product liability theories, even when they are exercising reasonable care.

In California, as in the majority of states, a product is defective if it: “(a) contains a manufacturing defect when the product departs from its intended design even though all possible care was exercised in the preparation and marketing of the product; (b) is defective in design when the foreseeable risks of harm posed by the product could have been reduced or avoided by the adoption of a reasonable alternative design by the seller or other distributor, or a predecessor in the commercial chain of distribution, and the omission of the alternative design renders the product not reasonably safe; (c) is defective because of inadequate instructions or warnings when the foreseeable risks of harm posed by the product could have been reduced or avoided by the provision of reasonable instructions or warnings by the seller or other distributor, or a predecessor in the commercial chain of distribution, and the omission of the instructions or warnings renders the product not reasonably safe.’” Brady v. Calsol, Inc., 241 Cal.App.4th 1212, 1218-1219 (2015).

In determining whether the benefit of the product design outweighs the risks of the design, courts look at (1) the gravity of the potential harm resulting from the use of the product, (2) the likelihood that this harm would occur, (3) the feasibility of an alternative safer design at the time of manufacture, (4) the cost of an alternative design, (5) the disadvantages of an alternative design and (5) other relevant factors. Saller v. Crown Cork & Seal Co., Inc., 187 Cal. App.4th 1220, 1233 (2010). Thus, liability for accidents involving fully autonomous vehicles should turn on the reasonableness of the design choice compared with alternative technology. In making such a determination, courts will likely look to safety study comparisons between human-driver and autonomous vehicles in determining risk-utility. Therefore, it is critical for manufacturers to engage in further testing of both autonomous vehicle and human-driver models and compare each as it pertains to the increased burden placed on them in the implementation of fully autonomous vehicles.

In reality, few lawsuits currently involve fully autonomous vehicles. The traditional negligence analysis remains at play for even semi-autonomous vehicles. But exploration of how traditional tort rules will be applied in liability determinations of autonomous vehicles is critical to evaluate future risk to companies and their insurers. Drivers will have less and less control over how their vehicle operates and, thus, less opportunity for negligence. The decrease in potential driver negligence will reduce the risk to carriers insuring traditional vehicle risks, and ultimately the cost of liability insurance to end users. Despite this, even progressive states like California are leery of the unknown potential liabilities fully autonomous vehicles may bring in a new frontier. Currently, the California DMV still requires all fully autonomous vehicles to have a minimum of $5 million in liability insurance or a surety bond to cover any potential damage. Carriers and manufacturers need to be proactive in monitoring the development of state and federal liability laws and continue to obtain comprehensive insurance coverage for foreseeable risks. As this new form of transportation evolves, so too will the risks.