Self-driving car liability

Autonomous car liability (or liability of driverless cars, self-driving cars, or robotic cars) is a developing area of law and policy that will determine who is liable when an autonomous car causes harm to persons or property. As autonomous cars shift the responsibility of driving from humans to autonomous car technology, there is a need for existing liability laws to evolve in order to fairly identify the appropriate remedies for damage and injury. Increases in the use of autonomous car technologies (e.g. advanced driver-assistance systems) is not only causing incremental shifts in this responsibility of driving but also reducing the frequency of on the road accidents. As higher levels of autonomy are commercially introduced (level 3&4), the insurance industry stands to see greater proportions of commercial and product liability lines, while personal automobile insurance shrinks.

Current liability frameworks

Existing tort liability for drivers and insurers and product liability for manufacturer provide the current basis for governing crashes.

Tort liability

There are three basic theories of tort liability: traditional negligence, no-fault liability and strict liability.

Traditional negligence	Driver is held liable for harms caused when reasonable care was not taken while in operation of the vehicle
No-fault	Crash victims are not permitted to sue the driver of the vehicle, unless the injuries resulting from the crash are of a certain severity. Victims are compensated through their own insurance
Strict liability	Applies for abnormally dangerous or “ultrahazardous” activities. The actors involved consequently bear the associated costs regardless of whether they are legally at fault

According to a National Motor Vehicle Crash Causation Survey, over 90% of the crashes (representing an estimated 2 million crashes nationwide) involved the driver as the critical reason of the crash. Meanwhile, research from the Insurance Institute for Highway Safety (IIHS) shows that Advanced Driver-Assistance Systems, which are seen as stepping stones to get to Level 3 and 4 autonomy, have helped reduce accidents by employing forward collision warnings and automatic braking. Given these trends, increased use of autonomous vehicle technology could reduce the number of accidents and prevent crash-related deaths. Consequently, it is likely that cases of traditional negligence will fall and this will in turn reduce automobile-insurance costs.

With the onset of fully autonomous cars, it is possible that the need for specialized automobile insurance disappears and that health insurance and homeowner’s liability insurance instead cover automobile crashes, much in the same way that it covers bicycle accidents. Moreover, as cases of traditional negligence decrease, no-fault insurance systems appear attractive given its benefits. It would provide compensation to victims relatively quickly and the compensation would not depend on the identification of a party at-fault. In such systems, individual drivers would be well protected and would encourage the adoption of autonomous cars for its safety and cost-related benefits.

Product liability

Product liability governs the liability of manufacturers in terms of negligence and strict liability.

Negligence	Manufacturers must exercise reasonable care in designing their products to be safe under potential use cases
Strict liability	Manufacturer is held strictly liable for damages even when the manufacturer has exercised all possible care to remove defects

In such cases, autonomous car manufacturers are compelled to reduce the danger of their products as much as they can within a reasonable cost structure. Yet, strict liability covers an expansive range of potential harms that manufacturers may find difficult to protect against. Manufacturers may then find themselves incentivized to pass on potential costs of liability to consumers through higher prices.

Furthermore, product liability cases distinguish among various types of defects.

Manufacturing defects	When the product does not meet the manufacturer’s specifications and standards
Design defects	When foreseeable risks of harm could have been reduced by use of an alternative design
Failure to warn	When manufacturer fails in its duty to provide instruction about how the product can be safely used and does not provide adequate warning of its risks

Under manufacturing defects, a plaintiff needs to show that the autonomous car failed to work as specified by the manufacturer. In the case of autonomous cars, however, this presents a major hurdle because no court has applied manufacturing defects to software, which is not something tangible that is manufactured. If a crash stems from a software error, then the traditional product liability law on manufacturing defects may not suffice. A greater understanding of how software will be treated under this liability law, particularly when a software error causes physical parts to malfunction, needs to be explored.

Historically, courts have used two tests for defectiveness of design: consumer-expectations and cost-benefit.

Consumer-expectations: "A product is defective in design or formulation when it is more dangerous than an ordinary consumer would expect when used in an intended or reasonably foreseeable manner. Moreover, the question of what an ordinary consumer expects in terms of the risks posed by the product is generally one for the trier of fact." Given the broad nature of what consumers may expect out of autonomous cars, the consumer-expectation may result in substantial liability for manufacturers.

On the other hand, the cost-benefit test weighs the benefits against the costs of a product in determining whether a design is defective. With autonomous cars, the plaintiff could make the argument that a different design, whether in the physical features of the vehicle or in the software that controls the movements of the vehicle, could have made the vehicle safer. For plaintiffs, this creates a high burden of proof and also makes it difficult to find qualified experts.

Imposing liability

In asking "who do I sue," a plaintiff in a traditional car crash would assign blame to the driver or the car manufacturer, depending on the cause of the crash. In a crash involving an autonomous car, a plaintiff may have four options to pursue.

1) Operator of the vehicle: in Florida and Nevada, an operator is defined as a person who causes the autonomous technology to engage, regardless of whether the person is physically in the vehicle. California, on the other hand, specifies that an operator as “the person who is seated in the driver’s seat, or, if there is no person in the driver’s seat, causes the autonomous technology to engage.”

The viability of a claim against the operator will determine on the level of autonomy. For instance, if the autonomous technology allows the passenger to cede full control to the vehicle, then the passenger will likely not be found to be at fault for a crash caused by the technology.

2) Car manufacturer: with this option, a plaintiff will need to determine whether the manufacturer had a part in installing autonomous technology into the vehicle. States such as Florida, however, are providing protection by liming product liability for manufacturers.

3) Company that created the finished autonomous car: Volvo is an example of a manufacturer who has pledged to take full responsibility for accidents caused by its self-driving technology.

4) Company that created the autonomous car technology: Companies under this option could include those developing the software behind the autonomous car and those manufacturing the sensor systems that allow a vehicle to detect its surrounding.

Possible defenses

In defense of such liabilities, autonomous vehicle manufacturers could make the argument of comparative negligence, product misuse and state of the art. With comparative negligence, the driver or passenger interference is seen as a part of the cause of harm and injury. With product misuse, the driver or passenger may be at fault for disregarding directions or altering the vehicle in a way to affect the proper performance of the vehicle. With state of the art, manufacturers could make the argument that there were not safe alternative designs at the time of manufacturing.

Cyber liability

As cars become more interconnected and autonomous, the potential for hacking a car system to acquire data and cause harm poses a serious risk. For manufacturers and developers of autonomous technology, liability exposures arise from the collection and storage of data and personal information in the vehicle and in the cloud. Currently, manufacturers require indemnification from vendors and subcontractors (dealerships, repair/installation facilities, etc.) and this practice will likely be extended to autonomous technology developers.

Policy considerations

Manufacturers overbearing the costs

As argued in the article “The Coming Collision Between Autonomous Vehicles and the Liability System” by Gary Marchant and Rachel Lindor, it is impossible for a manufacturer to anticipate all possible scenarios that an autonomous car will encounter. While the manufacturer will design the system to minimize risks of situations that it does anticipate, the accidents that are most damaging and costly will be those that the manufacturer fails to anticipate. This leaves the manufacturer highly vulnerable to design defects, in particular the cost-benefit test.

In light of this, Marchant and Lindor argues that “the technology is potentially doomed...because the liability burden on the manufacturer may be prohibitive of further development. Thus, even though an autonomous vehicle may be safer overall than a conventional vehicle, it will shift the responsibility for accidents, and hence liability, from drivers to manufacturers. The shift will push the manufacturer away from the socially-optimal outcome—to develop the autonomous vehicle.”

Consequently, policymakers need to be mindful of manufacturer overbearing the liability costs and the potential consequences that may result, such as higher consumer costs and delays in introducing autonomous car technology. In the report “Autonomous Vehicle Technology” by the Rand Corporation, the authors recommend that policymakers consider approaches such as tort preemption, a federal insurance backstop and long-term cost-benefit analysis of the legal standard for reasonableness. These approaches attempt to align the private and public costs of the autonomous car technology such that adoption is not unnecessarily delayed and one party does not overly-bear the costs.

Federal level legislation

Defining a clear role for the federal government as it relates to autonomous cars has been difficult but research groups have suggested potential options. In a report titled "Products Liability and Driverless Cars: Issues and Guiding Principles for Legislation," the Brookings Institution argues that the federal government should establish a nationally consistent set of safety regulations. The standards set at the federal level would provide state courts metrics and viewpoints that they can adopt in liability cases. Given the strong incentives for manufacturers to provide safe autonomous technology, the report further makes the point that a lack of specific minimum safety standards should not be a reason to put the autonomous car industry on hold.

Moreover, the report argues that congressional preemption of state tort remedies with respect to autonomous vehicle liability should not be undertaken. State courts have historically applied state tort remedies and that should be the case going forward with autonomous cars. While state court remedies may sometimes be inconsistent, the federal government should not put itself in the position of trying to formulate and impose a certain set of liability standards on the states.

NHTSA guidelines

On September 2016, the National Highway Traffic Safety Administration released a policy report to accelerate the adoption of autonomous car technology (or HAVs, highly automated vehicles) and provide guidelines for an initial regulatory framework. Summary of key points is provided below:

• States are responsible for determining liability rules for HAVs. States should consider how to allocate liability among HAV owners, operators, passengers, manufacturers, and others when a crash occurs.

• Determination of who or what is the “driver” of an HAV in a given circumstance does not necessarily determine liability for crashes involving that HAV.

• Rules and laws allocating tort liability could have a significant effect on both consumer acceptance of HAVs and their rate of deployment. Such rules also could have a substantial effect on the level and incidence of automobile liability insurance costs in jurisdictions in which HAVs operate.

• In the future, the States may identify additional liability issues and seek to develop consistent solutions. It may be desirable to create a commission to study liability and insurance issues and make recommendations to the States.

State level legislation

According to the NHTSA, states retain their responsibility for motor vehicle insurance and liability regimes, among other traditional responsibilities such as vehicle licensing and registration and traffic laws and enforcement. Several states, such as Michigan and Nevada, and Washington D.C. have explicitly written provisions for how liability will be treated.

Enacted autonomous vehicle legislation

State	Bill Number	Relevant Provisions	Effective Date
Michigan	SB 663 (2013)	Limits liability of vehicle manufacturer or upfitter for damages in a product liability suit resulting from modifications made by a third party to an automated vehicle or automated vehicle technology under certain circumstances; relates to automated mode conversions	Enacted and chaptered on Dec. 26, 2013
Nevada	SB 313 (2013)	Provides that the manufacturer of a vehicle that has been converted to be an autonomous vehicle by a third party is immune from liability for certain injuries	Enacted and chaptered on June 2, 2013
Washington D.C.	2012 DC B 19-0931	Restricts conversion to recent vehicles, and addresses liability of the original manufacturer of a converted vehicle	Enacted and effective from April 23, 2013.

Shift in auto insurance marketplace

In a white paper titled “Marketplace of Change: Automobile Insurance in the Era of Autonomous Vehicles,” KPMG estimated that personal auto accounted for 87% of loss insurance, while commercial auto accounted for 13% in 2013. By 2040, personal auto is projected to fall to 58%, while commercial auto rises to 28% and products liability gains 14%. This reflects the view that personal liability will fall as the responsibility of driving shifts to the vehicle and that mobility on demand will take greater hold. In addition, with the view that the overall pie representing losses covered by liability policies will shrink as autonomous cars cause fewer accidents.

Although KPMG cautions that this elimination of excess capacity will bring about significant changes to the insurance industry, 32% of insurance firm leaders expect that driverless vehicles will have no material impact on the insurance industry over the next 10 years. Inaction by the large players has opened up opportunities for new entrants. For example, Metromile, an insurance provider start-up founded in 2011, has started to offer usage-based insurance for low-mileage drivers and designed a policy to complement the commercial coverage of Uber drivers.

Public statements from car manufacturers

In 2015, Volvo issued a press release claiming that Volvo would accept full liability whenever its cars in autonomous mode. President and Chief Executive of Volvo Cars Håkan Samuelsson went further urging "regulators to work closely with car makers to solve controversial outstanding issues such as questions over legal liability in the event that a self-driving car is involved in a crash or hacked by a criminal third party."

In an IEEE article, the senior technical leader for safety and driver support technologies at Volvo echoed a similar sentiment saying, “if we made a mistake in designing the brakes or writing the software, it is not reasonable to put the liability on the customer...we say to the customer, you can spend time on something else, we take responsibility.”

See also

• History of autonomous cars