Perhaps a better question might be: when will the insurance industry be ready for driverless vehicle operation? Right now, there’s no question that motor vehicle insurers are nowhere close to addressing the coverage and liability issues that highly automated vehicles (HAV) are likely to present for both consumer and commercial drivers, owners and fleet operators. Moreover, contested vehicle accident claims involving HAV technology are very likely to involve product liability issues that today arise in relatively few accident cases. How will the insurance industry respond to the challenges and opportunities presented by driverless vehicle operation?
Over the last year or two, the discussion has generally focused on the impact of driverless technology on the vehicle insurance business model. If vehicle automation can significantly reduce the human errors that cause about 94 percent of motor vehicle accidents, then insurance premiums can be expected to drop as a function of reduced claims payouts. If accidents are eventually reduced by even 40 or 50 percent, then the car insurance industry is likely to experience considerable contraction.
In fact, three U.S. auto insurers even mentioned driverless vehicle operation in their 2015 SEC reports as a future business risk. So far, no American auto insurers appear to have addressed driverless operation in their liability insurance products. One British insurer, Adrian Flux Insurance Services, added coverage for highly automated vehicle operation in 2015. Last year, however, a survey of British auto insurers showed that 67 percent of respondents did not expect driverless operation to appear for at least 20 years. Not surprisingly, the British survey found that most insurers had not yet begun strategic planning for HAV insurance.
Even if HAV technology spreads quickly, it seems unlikely that the American car insurance industry will wither and disappear any time soon. Some drivers will adopt driverless technology more quickly than others, and highly automated vehicles can be expected to share the highways with older cars and trucks for another 20 or 30 years. As long as drivers are required to maintain liability coverage, we can expect the current range of insurance products to remain available.
Individual Driver Coverage Might Be Displaced by Products Liability Insurance
The emergence of HAV technology will certainly have a major effect on the way motor vehicle accident claims are presented, adjusted and resolved. Today, the legal resolution of accident claims depends very heavily on the behavior of the driver of each vehicle involved. Which driver was most at fault? Did either driver commit a moving violation? Was each driver properly licensed and insured? Was either driver distracted or intoxicated? Much of the evidence of liability that is assembled in a car accident case is intended to show that one of the drivers was negligent and therefore responsible for the resulting injuries and property damage.
In an accident involving an HAV vehicle, these questions will probably still need to be addressed, but additional issues can be expected to arise: did the software work properly? Did the owner apply patches and upgrades as directed by the manufacturer? Was there a breakdown in a satellite communications feed? Which HAV system failed, and which manufacturer or software engineer can be held responsible for the failure? Were there adequate warnings? Did the driver correctly engage a particular HAV system? Plaintiffs’ attorneys and the insurance defense bar alike will need to learn a new range of skills to prove the facts necessary for winning or defeating a liability claim in court.
Products Liability Cases Can Be Very Complicated
Products liability issues sometimes play an important role in motor vehicle accident cases, and there are many examples of design or manufacturing defect cases involving tires, airbags, seatbelts, child safety seats, and other components or safety systems. These cases are a small fraction of vehicle accident claims, however, and most personal injury lawyers are not able to meet the demands and expenses of highly complex product liability litigation against major corporations.
HAV accident cases are likely to involve a number of potential defendants, ranging from the vehicle manufacturer to a digital communications subcontractor, with other consultants, vendors and maintenance professionals dragged in along the way. If Volvo or Toyota is held liable for an accident, it will be able to pay damages in any amount, but what if a small software firm is found primarily liable? Will Volvo be somehow responsible for the damages anyway? Manufacturers and insurers both need to examine the potential lines of liability to make sure that accident victims are fairly compensated without bankrupting essential providers of HAV goods and services.
What Will State Insurance Regulators Do?
Another complication for drivers, manufacturers and insurers comes up in the form of state insurance regulation. Each state has its own rules and minimum coverage standards that require licensed drivers to maintain auto insurance, but as HAV technology becomes more widespread, insurance regulators might find that the current driver-focused insurance model no longer adequately protects the driving public.
Will the states require manufacturers, dealers, vendors and software service providers to maintain liability coverage in whatever amount? So far, no state legislature or insurance commission has announced plans for extending auto insurance requirements to cover products liability or software service issues. The political will necessary to do so will probably not exist before there is significant experience with HAV technology on the public roads.
Will Auto Insurers Start Offering HAV Product Liability Coverage?
It seems unlikely that auto insurers under the present driver-focused system will be able to switch easily into product liability insurance markets. Today, insurers have decades of experience assessing the accident risk of millions of individual drivers. Auto insurers have no experience assessing the performance risk of HAV systems produced by a few dozen vehicle manufacturers and their high-tech partners. It will be interesting to see how the insurance industry adjusts in the next few years to the demands of driverless vehicle technology.