Insurance of driverless cars: Automated and Electric Vehicles Act receives royal assent

On 19 July 2018, the Automated and Electric Vehicles Act 2018 received royal assent.

The interest in automated vehicles continues to accelerate; proponents argue that their arrival could lower costs, carbon emissions and, most significantly, the number of accidents on the road (an estimated 80-90% of which are currently attributable to human error). Eager to seize the opportunity, the government has repeatedly stated its desire for the UK to become a world leader in automated vehicles and last year invested £51m in research aimed at getting driverless cars on the roads.

Before all of this can become a reality, however, the UK regulatory and legal framework needs to catch up with the automated technology. One of the key concerns that the Act seeks to remedy is the potential lacuna in UK motor insurance.

Current UK motor insurance framework

Unlike some jurisdictions, such as America and Portugal, motor insurance in the UK must be taken out on the driver (and not the vehicle). Governed by Part VI of the Road Traffic Act 1988, the current law makes insurance compulsory for third-party liabilities; significantly, this means that the at-fault driver of the vehicle is not entitled to compensation under the Act.

Whilst this approach has worked well for the traditional means of transport, it appears to be on a collision course with automated vehicles. The Act does not account for “disengaged drivers”, who have passed control of the vehicle onto the automated control system. These “drivers” would similarly not be entitled to compensation under their insurance – even where the automated vehicle, and not their own driving, was at fault for the accident.

Rather, they would be forced to seek alternative means of recovery; for example, by claiming against the vehicle manufacturer for product liability.

Changes under the Act

With this in mind, the intention behind Part 1 of the Act is to keep the individual’s compensation route within the motor insurance framework - by extending compulsory motor insurance to the automated vehicle as well as the driver.

As such, where an accident is caused by an automated vehicle, insurers would be liable for “death or personal injury” or any other damage (apart from damage to the vehicle itself) arising from the collision. Importantly, this would cover not only third parties and other drivers involved in the accident, but also the insured owner of the vehicle in question. Insurers would then be able to claim against the party responsible for the crash, such as the manufacturer or other driver.

The Act does, however, provide caveats for the liability of insurers. It maintains the principles of contributory negligence - and specifically excludes insurers’ liability where the accident was wholly due to the insured driver’s “negligence in allowing the vehicle to begin driving itself when it was not appropriate to do so”. The language here begs the question of what will constitute “appropriate” circumstances; for example, would it be inappropriate for the driver to hand over control in adverse weather conditions?

Insurers can similarly exclude liability if the accident directly results from the insured installing software beyond that permitted under the policy – or failing to update software that he or she knew or “ought reasonably” to have known was safety-critical. Cyber security is also likely to be a key issue in this area.

An important step will be to identify which vehicles will fall under this new regime. To achieve this, the Act requires the Secretary of State to prepare, and keep updated, a list of all vehicles that are either designed, or can be adapted, to be “capable of safely driving themselves”. Producing and maintaining such a list will require significant resources - and it is not yet clear who will be burdened with this expense.

Finally, section 22 of the Act makes clear that this Part 1 will apply only to Great Britain (and not Northern Ireland).

Comment

The passing of the new legislation will be of interest to any insurer involved in the UK motor insurance industry. Whilst the Act is to be welcomed in clarifying the apportionment of insurance liability for accidents involving automated vehicles, there remain potential difficulties in its application; for example, in apportioning blame where the vehicle is only partly automated, or when the accident occurs during a ‘handover’ of control between driver and vehicle.

These and other hot topics that sit at the crossroads of automotive technology and artificial intelligence were recently discussed at a roundtable event hosted by CMS in London in June 2018, attended by a selection of automotive industry experts and key members of the CMS Autotech Group. Our report on the event, capturing the predictions for the industry and key obstacles that will need to be overcome, can be accessed here.