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Insuring Driverless Vehicles - The Automated and Electric Vehicles Bill

  • United Kingdom
  • Insurance and reinsurance
  • Automotive
  • Technology, Media and Telecoms

20-10-2017

In the Queen’s Speech on 21 June 2017 the Government promised a new bill on automated and electric vehicles (the “Bill”).  On 18 October 2017 the Bill was duly published. In this update we consider the provisions of the Bill relating to the insurance of driverless cars.

In our view, the Bill achieves a sensible balance between the interests of accident victims, vehicle owners, insurers and other interested parties, such as vehicle manufacturers and component suppliers.

Which vehicles are caught?

“Automated vehicles” are those which are or might be used on roads or other public places in Great Britain and which, in the Secretary of State’s opinion, are designed to be capable, in at least some circumstances or situations, of safely driving themselves.  Section 1 of the Bill obliges the Secretary of State to prepare and keep up to date a register of all such vehicles.

Who is primarily liable for accidents caused by automated vehicles in driverless mode?

In short:

  • where an accident is caused by an automated vehicle when it is being driven by a driver rather than driving itself, the current rules apply and the driver is liable but can be indemnified by his insurer;
  • where an accident is caused by an automated vehicle when driving itself, the insurer of the vehicle is liable;
  • should the injured party be partly to blame, the Law Reform (Contributory Negligence) Act 1945 applies as it does currently;
  • if, at the time of the accident, the person in charge of the vehicle negligently allowed the car to drive itself, the insurer of the vehicle is not liable to that person for any loss or injury they suffer. However, the insurer will still be liable to any third party victim of the accident;
  • The vehicle owner will be liable where the vehicle is not insured due to an applicable exemption of the Road Traffic Act 1988.

The Bill therefore advocates the single insurer model, whereby the same insurance policy would cover accidents caused by the driver’s operation of a vehicle and the automated operation of the vehicle.  This model is designed to avoid confusion on the part of the victim over who it should pursue for its losses, bearing in mind that there are arguments in favour of imposing liability on the manufacturer, owner and even highway authority depending on the circumstances.

Can insurers’ liability be limited by policy terms?

Only to a limited extent.  Whilst the Bill does expressly permit reduction of damages to reflect contributory negligence, it significantly restricts the ability of insurers to exclude or limit liability by express terms.  Such exclusions can only apply to liability for damage suffered by insured persons, not victims, and then only where the damage arises from an accident occurring as a direct result of either:

  • alterations to a vehicle’s software made by that insured person (or with his knowledge) which are prohibited by the policy; or
  • failures to install “safety-critical” software updates that the insured person knows, or ought reasonably to know, are “safety-critical”. The Bill provides that updates are “safety-critical” where the vehicle would be unsafe to use without them.  This language was not included in the Bill’s predecessor, but for obvious reasons it represents a welcome change. 

Exclusions or limitations relating to prohibited software alterations can only be enforced against an insured person who is not the policyholder if that person knew that the policy prohibited them at the time.

Not surprisingly, where the insurer is liable to an uninsured person for damage caused by these situations, it has a right of recovery against the insured person who made the prohibited software alteration or failed to install the safety-critical update.

Is there a right of recovery against joint tortfeasors?

Yes. Once the insurer liability to the victim has been established by judgment, award or enforceable agreement, they will then have a right of recovery from others liable for the same loss e.g. the manufacturer of the automated vehicle or a component supplier.  However, manufacturers and others may have a separate defence, such as the “state of the art” product liability defence, in which case insurers and vehicle owners will be left bearing the loss.

Whilst subrogation actions may become more common under the new regime, its predicted that the overall number of accidents will reduce.

Are similar proposals being considered in other jurisdictions?

The UK is not alone in considering legislation appropriate to cover the introduction of automated vehicles on the road.  On 6 September 2017, the US House of Representatives passed the “Self Drive Act”, although it has left laws regarding insurance issues for the State legislatures.  The German Federal Ministry of Transport and Digital Infrastructure is also considering passing law on the subject. 

For more information contact

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