In a two-part series, IP Harbour explores the Automated and Electric Vehicles Act 2018 which received Royal Assent in July.  The Act is a marked step in furthering the UK in its ambition to tackle climate change by improving electric charging infrastructure across the country and modernising insurance rules to cover self-driving vehicles. Jesse Norman, Roads Minister, describes the Act as ensuring “that the UK’s infrastructure and insurance system is ready for the biggest transport revolution in a century”. This Part 1 looks at the liability of insurers in relation to automated vehicles (AVs).

AVs do not have to be electronic vehicles and can be defined as a vehicle that wholly or partly able to be controlled without monitoring or human intervention.

A frequent question asked in relation to AVs is who is responsible if an accident occurs? The Act intends to clarify this and provide clarity to insurers.  The general rule is if an accident is caused by an AV and damage is suffered as a result then the insurers are liable.  If the vehicle is not insured due to exemption (i.e. NHS vehicles) then the owner is liable.  “Damage” (for the purpose of the Act) means personal injury or death and damages to property, excluding the AV itself.

The Act provides for circumstances where insurers can limit liability.  If the person in charge of the vehicle is negligent in allowing an AV to drive itself when it is not appropriate, then the insurer is not liable to them (neither is the owner unless the person is also the owner). Nevertheless, the insurer will still be liable to any third-party victim. Then, who decides whether allowing an AV to drive itself is appropriate? The appropriateness of allowing a vehicle driving itself is not detailed in the Act so hopefully further regulation will offer guidance on this.

With regards to AV software, liability can be limited if the insured person made or was aware of software alterations not permitted by the insurance policy or if the insured person failed to install safety-critical software.  Once again, being able to show that a person was aware that a critical software update was needed or that software alterations were prohibited could prove difficult and will need to be specified in insurance policies very carefully. No one likes updating software as the update typically strikes at the most inconvenient time. Imagine being liable for skipping the update if things go wrong? As consumers, we hope that manufacturers will ensure critical software updates are mandatory and where not applied, the AV is prevented from operating.

The Act further provides that insurers will have a claim for contributory negligence against anyone liable to the injured party.  This could be the AV manufacturer or software provider. Again, this could be challenging to prove with the availability of the “state of the art” product liability defence. If it can be shown that the manufacturer/software provider could not have known about the dangers or fault at that time with all the available specialist knowledge, then they may not be liable and as such the insurers/vehicle owners will be burdened with the loss.

The Act is certainly heading in the right direction, having clarified that compensation for accidents concerning AVs will still be processed within the insurance framework rather than direct product liability of manufacturers.  However, there are clearly many challenging areas to be covered by further regulations before the full impact of the Act can be assessed. The courts will no doubt face many challenges on the Act which will build a body of case law to assist in the future.