The transportation world was permanently altered with the introduction of the autonomous vehicle. They represent one of the most significant technological advancements in transportation of our time. Proponents tout the potential of AVs to transform the way we travel while reducing human error and improving road safety. However, as the technology evolves, the insurance industry faces novel challenges in assessing liability for accidents involving these vehicles. Age old auto insurance models, which focus primarily on human driver error, are being disrupted as the field of liability has expanded to include manufacturers, software developers, and other stakeholders involved in AV technology.
For insurance carriers, navigating this quickly changing landscape requires an understanding of how AVs operate, the regulatory framework surrounding them, and the emerging risks and liabilities. This article explores AV-related liability, the changing insurance market, and strategic considerations for carriers as they adapt to new demands in the world of AVs.
Shifting Liability Considerations
Autonomous vehicles operate through sophisticated algorithms, sensors, and artificial intelligence (AI) systems that allow them to navigate and make decisions without direct human intervention. The Society of Automotive Engineers has identified six levels of automated driving, from "full control of a vehicle by a physical driver, assisted by advanced safety technology, to a vehicle that can operate without any onboard human input."1 While these advancements offer immense potential, they also introduce new risks and uncertainties for manufacturers, developers and insurers alike. Traditional liability frameworks were designed for vehicles controlled by human drivers, but AVs blur the lines between human error and technological malfunction.
Regulation of AVs
Although slightly over half of the fifty states have enacted some form of legislation regulating AVs, the regulatory landscape nationwide remains volatile and uncertain for insurance carriers dealing with claims across jurisdictions. Some states require a human driver to be physically inside the vehicle during operation and have the ability to take control of the car if the driving system fails.ii
For example in New York, the law states that, "A natural person holding a valid license for the operation of the motor vehicle must be present within such vehicle for the duration of the time that it is operated on public highways."iii On the other end of the spectrum, Nevada "allows the testing and operation of a fully autonomous vehicle, but only if it is capable of achieving a minimal risk condition upon failure of its automated driving system."iv Nevada also defines a driver as, "the owner of a fully autonomous vehicle and the person who causes the automated driving system of any other autonomous vehicle to engage."v Texas views the "owner to be the operator of the vehicle for purposes of assessing compliance with applicable traffic or motor vehicle laws, even if the owner is not physically present in the vehicle and considers the automated driving system to be licensed to operate the vehicle."vi
No legislation has been passed on the federal level to date. However, the National Highway Traffic Safety Administration (NHTSA) has provided four annual reports regarding AVs. These policies have mainly emphasized the potential safety implications AVs have to reduce accidents as well as allowing AV businesses freedom to further explore the technology.vii
Liability Theories in AV Litigation
New questions of liability pose challenges to insurers attempting to assess liability or potential risk. Traditional motor vehicle accident cases relied primarily on negligence principles, where the fault is typically found with the driver. However, in accidents involving AVs, the analysis changes. Questions arise as to whether liability should rest with the vehicle manufacturer, software developer, owner, or even the AV itself. Theories of liability in AV cases generally fall into three categories: products liability, negligence, and vicarious liability.viii
Products Liability: AV manufacturers and software developers may be liable under product liability claims if the vehicle's hardware or software is found to be defective. Plaintiffs may allege that a design flaw, manufacturing defect, or failure to warn caused the accident. In product liability cases, the focus shifts from the driver's actions to the performance and functionality of the AV and its components.ix This analysis may require adjustments in the underwriting and policy designs if they did not currently account for the possibility of an AV. The scope of coverage should consider the possibility of a software malfunction or defect rather than purely driver error in its framework.
Negligence: Negligence claims are most likely to be brought when an AV's operator or owner fails to intervene in a situation where human intervention was required. Although AVs are designed to operate without human intervention, most AVs on the road today require drivers to be engaged and ready to act if needed. In fact, several states such as California, Florida, and Texas require that drivers be able to take full control of the vehicle in an emergency.x Negligence claims arise when drivers fail to meet this duty by failing to intervene or misusing the vehicle's technology. Defense strategies in negligence cases often involve demonstrating that the operator adhered to the vehicle's operating guidelines and that any failure to intervene was reasonable under the circumstances. For insurers, maintaining coverage options that address both the possibility of human error as well as system failure is paramount in assessing responsibility.
Vicarious Liability: In some cases, an employer or owner of an AV may be held vicariously liable for accidents that occur while the vehicle is being used in the course of employment or on behalf of third parties.xi Insurers may need to offer specialized coverage for businesses that deploy AV fleets, as well as consider how liability is distributed between the owner and the vehicle's autonomous systems. For defense counsel, it is critical to establish clear lines between the employer's actions and the vehicle's operation, demonstrating that the accident was not caused by any act of negligence on the part of the defendant.
Emerging Legal and Regulatory Issues
As autonomous vehicle technology continues to develop, the legal and regulatory framework struggles to keep up with new advancements. It is critical that insurance carriers and their legal counsel stay informed about the evolving laws and regulations governing AVs, which may vary significantly across states and jurisdictions. Some of the key emerging issues are detailed below.
Data Privacy and Cybersecurity
AVs generate and utilize vast amounts of data, including driving patterns, sensor readings, and the decisions made by the vehicle's AI as well as any human driver intervention. This data is essential for assessing liability in the event of an accident, but it also raises significant privacy and cybersecurity concerns. Insurers may face claims related to data breaches or failures to adequately secure sensitive information.xii As AVs become more prevalent, carriers will need to ensure their policies cover these unique risks while also staying ahead of regulatory changes in data protection and cybersecurity.
Shared Liability
AV manufacturers will be held responsible for accidents caused by defects in the technology, but there is growing concern that they will also be on the hook when AV systems were not directly at fault. This stems from the perception that AVs are more capable than human drivers to avoid mishaps on the road. With this mindset, potentially any accident could be blamed on the manufacturer. Plaintiffs will argue that the AV should have detected and prevented the crash, regardless of other factors involved in the case.
While the overall number of vehicle accidents is expected to decrease with widespread AV adoption, the proportion of the claims- and potentially the total financial exposure faced by AV manufacturers could increase. This is due to the heightened expectations placed on AVs to avoid accidents in situations where a human driver may not have been able to do so.xiii
Moreover, jury dynamics add another layer of complexity. Jurors may exhibit bias against AVs, especially those using sophisticated artificial intelligence, holding them to a higher standard than human drivers.xiv Even in situations where the AV was clearly not to blame, the use of cutting-edge technology may provoke skepticism or fear, leading to juries imposing harsher judgments. This psychological tendency could result in more frequent punitive damages claims, and in some cases, larger damage awards than those seen in traditional vehicle product liability cases. Thus, despite the safety AV technology promises to consumers, manufacturers may be vulnerable to an increased risk of liability and financial repercussions.
Strategic Considerations for Insurance Carriers
The popularity of autonomous vehicles presents both challenges and opportunities for insurance carriers. To stay abreast of the quickly developing situation, insurers should consider the following strategies:
- Adapt policy structures and diversify offerings: As liability shifts from human drivers to vehicle systems, traditional auto insurance products may need to be restructured. Insurance carriers should consider offering specialized policies for AV manufacturers, software developers and companies deploying AV fleets. Additionally, the policies may need to account for different levels of vehicle autonomy, with varying coverage options for human-operated, semi-autonomous, and fully autonomous systems.
- Underwriting and Risk Assessment: Underwriting AV-related risks will require a new approach to assessing liability. Instead of focusing primarily on driver behavior, underwriters will need to evaluate the reliability and safety of AV systems, including their software, hardware, and cybersecurity measures.
- Collaboration with Legal and Technical Experts: Given the technical complexity of AVs and the evolving legal framework surrounding them, insurers will need to collaborate with experts in law, engineering, and AI to accurately assess liability. Building relationships with qualified experts will be critical in successfully managing claims and mitigating risks.
- Proactive Claims Management: In AV-related claims, gathering and analyzing data from the vehicle's systems will be essential in determining fault. Insurers should invest in tools and technologies that allow for real-time access to AV data, enabling quicker and re accurate claims processing. Carriers should also develop protocols for handling disputes related to data privacy and cybersecurity, which are likely to become more common as AVs generate more data.
- Monitoring Regulatory Change: The legal and regulatory landscape for AVs is still developing, with state and federal governments introducing new laws and guidelines for testing, deployment, and liability. Insurers must closely monitor these developments to ensure their policies remain compliant and adequately cover potential risks. This includes staying infirmed about changes to cybersecurity standards, privacy regulations, and AV-specific liability rules.
Conclusion
Autonomous vehicles are taking the transportation world by storm, but they also present unique challenges for insurance carriers. As liability shifts from human driver error to issues with vehicle systems and manufacturers, insurers will need to adapt their products, underwriting analyses, and claims management strategies to address these new considerations. In a world with autonomous vehicles, insurance carriers must keep abreast of innovation, collaborate with experts, and stay up to date on the latest regulatory and technological developments.
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i Garsten, Ed. What Are Self-Driving Cars? The Technology Explained. Forbes (January 23, 2024). https://www.forbes.com/sites/technology/article/self-driving-cars.
ii Marchant, Gary and Bazzi, Rida. Autonomous Vehicles and Liability: What Will Juries Do? Boston University. https://www.by.edu/jost/files/20202/04/3-Marchant.
iii A.B. 9508, Part H §1 (N.Y. 2018).
iv A.B. 69 § 9(2)(b), 79th Sess. (Nev. 2017).
v Id. §11.5.
vi S.B. 2205 § 545.453, (Tex. 2017).
vii National Science & Tech. Council. Emerging American Leadership in Automated Vehicle Technologies Automated Vehicles. Automated Vehicles 4.0, 8, 8-9 (2020). https://www.transportation.gov/sites/dot.gov/files/docs/policy-initiatives/automated-vehicles/360956/ensuringamericanleadershipv4/pdf.
viii Villasenor, John. Products Liability & Driverless Cars: Issues and Guiding Principles for Legislation. Brookings. (April 24, 2014) https://www.brookings.edu/articles/products-liability-and-driverless-cars-issues-and-guiding-principles-for-legislation/.
ix Id.
x Automated Vehicles for Safety. National Highway Traffic Administration. https://www.nhtsa.gov/vehicle-safety/automated-vehicles-safety.
xi Id.
xii Kubica, Maria Lubomira. Autonomous Vehicles and Liability Law. The American Journal of Comparative Law, Volume 70, Issue Supplement_1, October. (August 4, 2022).
xiii Marchant, Gary and Bazzi, Rida. Autonomous Vehicles and Liability: What Will Juries Do? Boston University. https://www.by.edu/jost/files/20202/04/3-Marchant.
xiv Id.