Articles & Media

Towards Automated Automobiles: Shifting Liability Exposure in the Insurance Industry


By David Nicol and Cynthia Aoki

Imagine a world where there are no drivers, only passengers riding in self-driving vehicles. Although this world has not yet arrived, current trends and technological advancements have allowed for more automated features in vehicles.

How can the insurance industry adequately adapt to these changes and developments?

Since the 1970s, the number of injuries resulting from automobile collisions has fallen by over 30% and the number of fatalities has fallen by 40%. The reason for this decline is that safety features that only existed in luxury vehicles 20 years ago, like anti-lock brakes and traction control, are now available as standard features on most vehicles. Airbags became widespread in the early 1990s, and have advanced from driver-side airbags to passenger, rear, and side deployment airbags.

Despite these decreases in injuries, the amount of money spent by Canadians on insurance premiums has been increasing over the past 40 years. This inverse relationship is due to the significant increases in the amount of damages awarded in automobile collision claims.

Towards a More Automated Automobile
Future developments, allowing for more automation in safety features, will likely continue to reduce the number of accidents each year. Presently, only a small number of luxury vehicles include features such as forward-collision avoidance, lane departure warnings, “autopilot” systems, automated parking, and adaptive cruise control. However, in the next five to ten years, these automated features will likely become widespread and standard in most vehicles.

According to the Insurance Institute for Highway Safety (“IIHS”), more than 20% of 2014 models now offer a front crash prevention system with automatic-braking capabilities. More importantly, the IIHS has found that if all passenger vehicles were equipped with forward collision and lane departure warning features, blind spot detection, and adaptive headlights, one in three fatalities and one in five injuries could be prevented or mitigated.

Potential Decrease in Rear-End Collisions
The automated forward-collision-avoidance system uses elaborate cameras or radars, which can measure the speed of the vehicle in front of it and determine whether there is a risk of a collision. Some systems will only alert the driver of the danger, but other systems, such as Automatic Emergency Braking (“AEB”), will automatically apply the brakes in emergency situations.

Given that one in four automobile accidents are rear-end collisions, the adoption of forward-collision avoidance systems and AEBs could help to significantly decrease these types of accidents.

On September 11, 2015, the National Highway Traffic Safety Administration and the IIHS announced that 10 major vehicle manufacturers, representing 57% of light duty vehicle sales in 2014, have committed to making AEBs a standard feature on all new vehicles. The widespread introduction of this feature will have a massive effect on the number of accidents and injuries from automobile collisions.

The adoption of these automated features will impact the insurance industry and the personal injury bar in the years to come. As such, insurers and lawyers will need to creatively respond to these changes in order to stay competitive.

Shifting Liabilities
As long as there is still a driver in the vehicle, that driver will likely remain liable for an at-fault collision, even in the event that automated safety features fail. However, with an element of automation in the operation of the vehicle, there is now the potential for manufacturers to incur liability.

Product liability will extend to manufacturers, design engineers, and retailers who make defective products available to the public. These parties can be held liable for injuries caused by those products. In introducing new safety features, automobile manufacturers have extended their duty of care and have potentially exposed themselves to liability when these systems fail.

Similar to a situation where a braking system fails or an airbag does not deploy, automobile manufacturers will face liability exposure when an automated avoidance system fails to react in time to prevent a collision. The driver who is sued after such an at-fault accident may have the ability to bring a Third Party Claim against the manufacturer of their vehicle. Alternatively, an injured party faced with an underinsured defendant, may choose to add the vehicle manufacturer as a co-defendant for an allegedly defective automated avoidance system.

There have not yet been any cases before the Canadian or American courts addressing the shifting of liability with respect to automated automobiles.

However, as we move forward, the Courts will likely grapple with the following questions:

  • How much will an at-fault driver be expected to rely on these automated safety features?
  • Will there be new expectations in terms of distracted driving?
  • How will these automated safety features fare in Canadian weather?
  • Who will bear the liability in cases of unavoidable accidents?

What Changes are Ahead for Insurers?
In the face of dramatically lower accident rates and increased competition for shrinking premiums, insurers will need to be aware of the impact these automated safety features have on a driver’s risk profile.

Some insurers now offer discounts on their premiums to individuals who own vehicles containing features such as passive immobilizers, which help to reduce theft claims. 

Similarly, insurers with clients who own vehicles with automated safety features will likely see a decrease in pay-outs for injury claims. As such, insurers will want to act quickly and creatively to capture market shares of these individuals. This will allow insurers to further reduce insurance rates and attract clients in a competitive marketplace.

Fully Automated Cars
In the background of all these automated safety features is the inevitable introduction of fully autonomous cars.

Google has been working on its self-driving car project since 2009 with the intention of releasing its car to the public in 2020. In September 2015, Google unveiled an automatic self-driving vehicle with no steering or braking systems. Instead, passengers simply entered the vehicle, input a destination, and the Google car was able to drive itself.

To compete with Google, Apple has tripled the number of engineers working on its self-driving car project. Reports indicate that Apple is aggressively planning a targeted “ship date” of 2019 to release their fully automated vehicles.

On October 13, 2015, the Ontario government announced that they will be launching a pilot project to allow the testing of automated vehicles on its roads.

Realistically, it will likely be a couple of decades before fully autonomous vehicles constitute the majority of vehicles on Canadian roads. However, we have already begun, and will continue, to see some of the legal effects of partially automated vehicles.

Both the insurance industry and the personal injury bar will need to be cognizant of these trends and will need to prepare for a future of increased competition and leaner budgets. A dramatic reduction in accidents will likely force counsel to be creative in finding ways to shift liability towards the manufacturers of these automated vehicles.

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