Insights
Publications

Navigating the Autonomous-Vehicle Liability Waters

5/8/2018 Articles

While experts debate how quickly autonomous vehicles (AVs) will take over our roads, there is little doubt they will be a fixture in the next decade. Fully self-driving vehicles are predicted to substantially reduce the accident rate, given the dominant role of human error in most crashes today.

But there still will be accidents. And where there are accidents, there are plaintiffs’ lawyers. But who will these lawyers sue, and how will the defendants insure their liabilities?

The removal of human culpability in AV accidents necessarily will mean fault for those accidents that do happen shifts to auto manufacturers. As one commentator succinctly stated, “(M)anufacturers are likely to have a bigger slice of what is likely to be a smaller pie” of crash liability. Auto manufacturers such as Volvo and Mercedes already have agreed to accept liability to varying degrees if their AVs cause accidents.

But the buck will not stop with the auto manufacturer. A complex network of mechanical and electronic systems already makes vehicles complicated, and AVs will be even more complex. All their computer-based and electronic components and systems, from sensors and lidar technology to software designed to empower split-second decision making, ultimately will play roles in AV crashes.

While all these parts and systems will make it hard to determine the cause of an AV crash, AVs will have telematic tools that produce, record and transmit in real time an unprecedented amount of data that will help reconstruct why any particular crash occurred.

Designers and suppliers of those parts and systems should proactively and deliberately consider their liability exposure. In some cases, certain traditional component parts suppliers probably can rely to a large degree on their existing product-liability insurance. But they should be talking with their insurance broker about what changes or enhancements to their existing programs are necessary to protect them from AV crash liability.

The insurance programs of designers and suppliers of innovative and nontraditional car parts or systems, including software, will require special attention. For example, this may be a software developer’s first foray into auto design and manufacturing. That developer likely has some form of technology errors and omissions liability (E&O) insurance to cover claims arising out of its negligent design or implementation of a software product. But that E&O policy likely is not designed to cover the types of damages normally associated with car accidents – property damage and bodily injury.

The software developer also may have commercial general liability (CGL) that covers property damage and bodily injury liability, but the CGL policy might broadly exclude liabilities arising out of car accidents. Without carefully matching its insurance coverage to its likely liability exposure in light of the integral role its product is playing in AVs, the software developer could find itself with massive uninsured liability exposure.

On top of that, AV cybersecurity risks are sure to be big. Not only will AVs be targets for hackers to commandeer or shutdown, AVs also will record large amounts of their owners’ and passengers’ personal information and other location information. Societal privacy expectations and standards certainly will adapt to these new developments, but what the law and AV owners and passengers will view as acceptable is sure to change in unexpected ways.

One need not look further than the recent Cambridge Analytica scandal and the fury directed toward Facebook to realize new technologies and their unexpected applications can quickly put companies in the middle of a debate about how an individual’s information should and should not be collected and used. Just like Facebook and other internet companies today, AV manufacturers and suppliers will be confronted by the temptation to monetize the incredible profusion of user data they will have access to.

Cyber-insurance policies are adapting to these risks, but not quickly enough in some instances. And many of the risks are unknown. Accenture recently estimated insurers will collect $12 billion in cyber-liability insurance premiums for AVs in 2025, five times the amount for product liability. Companies will need to pay very close to attention to developments in both the law and the insurance industry relating to cybersecurity and privacy risks, and carefully negotiate their cyber-insurance policies each year in light of those developments.

AVs stand to bring about many positive changes to our society. Players in AV development, manufacturing and operations must plan for the reality that the law governing, and the insurance protecting, them will be changing too.

Firm Highlights

Event

Perspectives on Virtual Proceedings: ADR & Claims Resolution in a COVID World

Erica Villanueva will be speaking at the 2021 Virtual Insurance Coverage Litigation Committee CLE Seminar on "Perspectives on Virtual Proceedings: ADR & Claims Resolution in a COVID World."

Read More
Publication

Insurance Dispute Resolution

Farella's Real Estate Webinar Series features Amy Briggs discussing "Insurance Dispute Resolution." Businesses have filed claims seeking recovery help under their insurance policies due to various governmental closure orders arising from the COVID-19 pandemic. Losses related...

Read More
Publication

Maximizing Business Insurance Coverage Benefits After a Fire

Unfortunately, we again write while wildfire is devouring homes and businesses in Napa and Sonoma, and threatening many more. We’ve previously posted tips about first steps that you should take in the event your...

Read More
News

Lawyers Advising California’s Wineries Navigate a Pandemic and Wildfires

Partners Tyler Gerking and Matt Lewis were interviewed in the Daily Journal article "Lawyers advising California’s wineries navigate a pandemic and wildfires."

Read More
News

Benchmark Litigation 2021 Ranks Farella Among Top Litigation Firms in California

SAN FRANCISCO, October 12, 2020: Farella Braun + Martel continues to be ranked among the top litigation firms in California in the  Benchmark Litigation  2021 guide. Farella was ranked “Highly Recommended” for Dispute Resolution...

Read More
Publication

“Unfair Trade Practices” Exclusion Does Not Extend to Consumer Protection Claims

Two phrases combined in a single exclusion—“alleging, arising out of, based upon or attributable to any violation of any law…” and “as respects… unfair trade practices” could inspire carriers to make trouble for policyholders...

Read More
Publication

Maximizing Insurance Coverage: What Cannabis Businesses Need to Know

Farella's Cannabis Industry Education Series features Tyler Gerking discussing "Maximizing Insurance Coverage: What Cannabis Businesses Need to Know." The cannabis industry has flourished, along with it the cannabis insurance market has grown. As more carriers...

Read More
Publication

What Nonprofits Need to Know About Landlord-Tenants Relationships and Insurance

Amy Briggs and Tony Schoenberg discuss "What Nonprofits Need to Know About Landlord-Tenants Relationships and Insurance." Real estate is one of the most significant costs for an exempt organization. Furthermore, the laws governing landlord-tenant...

Read More
News

Farella Braun + Martel Ranked Among “Best Law Firms” by U.S. News & World Report and Best Lawyers

SAN FRANCISCO, November 5, 2020: Farella Braun + Martel earned national and regional rankings across a number of practice areas in the U.S. News & World Report and Best Lawyers® release of the “Best...

Read More
Publication

D&O Professionals Series: Tyler Gerking Discusses D&O Coverage and Litigation

Insurance Recovery partner Tyler Gerking explores current trends and observations on D&O coverage and litigation on Willis Towers Watson's "D&O Professionals Series." Read the full article,  here .

Read More