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        Automated and Electric Vehicles Bill 2017

        Head of Automotive Caroline Coates reviews the Automated and Electric Vehicles Bill 2017 and asks if it provides what the insurance industry is looking for. 

        Date: 20/10/2017

        At last, after some considerable months wondering what was happening, the Automated and Electric Vehicles Bill is here and about to start its journey through Parliament. The Bill is the son of the Vehicle Technology and Aviation Bill and grandson of the Modern Transport Bill. With such august parentage, does it provide what the insurance industry is looking for?

        The provisions that I outlined in an earlier article concerning the Vehicle Technology Bill have survived, essentially providing that the insurer will cover the automated vehicle when it is driving itself and providing at Section 5, the basis for a claim for contribution or indemnity from whoever else might have been at fault. This clearly has in view the vehicle manufacturer as a target for recovery or contribution – the rationale remaining that for the "innocent" injured person whether the driver, passenger or third party, compensation must be readily available and the need to apportion blame as to the actual cause of the eg malfunction is something that can be resolved later. Provisions in the Bill include setting out the limitation periods for bringing these claims, essentially 2 years from the date of settlement or judgement of the main action.

        Another new feature onto the statute books that has also survived from the previous draft bill, is that any first party injury claim will also be covered ie compensation for the insured person. That has to be right where the car, rather than its owner/driver was at fault, but it is a bold step and it will be interesting to see whether this impacts on insurance premiums.

        Caution however, there are some new twists in the tale.

        Firstly, the insurer of the automated vehicle is not liable where the accident was caused by the negligence of the person in charge of the car, in allowing the vehicle to begin to drive itself when it was not appropriate to do so. That is a fairly wide caveat. Does this mean that, for example, adverse weather conditions make it inappropriate to operate autonomously? Or traffic conditions? One can envisage some disputes in the courts over this.

        Moreover, the exclusions that were originally drafted, that the policyholder would not be covered if they had modified or altered the software or failed to install a safety critical update, have themselves been modified. This now states that the alterations must be prohibited by the policy for the exclusion to apply. With regard to the failure to update the software, this relates to safety critical features (rather than say performance enhancements) and that the insured person knew, or ought reasonably to have known, that they are safety critical. Again, the magic phrase "knows, or ought reasonably to know" is something that has kept litigation lawyers busy over the years. This is particularly likely to be in dispute where the clause provides a right of recovery by the insurer from their policyholder for these failings.

        In addition, the exclusion - and the right to pursue a recovery from - the user of the vehicle (ie not the policyholder, perhaps in the real world, the husband or daughter of the policyholder who owns the car) only applies where there is an alteration to the software which, at the time, they knew was prohibited under the terms of the insurance policy. The provisions regarding the failure to install safety critical updates - and recovery for these failings – do not apply to the user of the vehicle who is not the insured. That seems sensible where the user might not have an opportunity to learn about updates let alone whether they have been installed or not, when compared to the position of the policyholder.

        The need to read the documents for the policyholder and the other users of the car becomes more critical. Will the manufacturers be as clear in their instructions to the vehicle owners? Will insurers explain the position carefully to their customers when selling policies?

        We will have to wait and see the effects of the passage of the Bill through the parliamentary process. This comes at an exciting time for the introduction of connected and autonomous vehicles in the UK as we learnt today of the £51million investment in research unveiled by the Department for Business, Energy and Industrial Strategy and the projects to get "driverless" vehicles on the roads of Britain.

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        Caroline Coates

        • Partner // Head of Insurance