THE ROAD AHEAD: COULD UK INSURERS’ CLAIMS AGAINST AUTOMATED VEHICLE MANUFACTURERS BENEFIT FROM A REGIME AKIN TO THE NEW EU PRODUCT LIABILITY DIRECTIVE?
Guest contributor Daniel West (Partner and Head of Product Liability at HF) considers how the European Commission’s revised Product Liability Directive could change how insurers approach claims against automated vehicle manufacturers if we were to adopt similar provisions in the UK.
In 2022 the most significant development in the field of product liability was perhaps the adoption by the European Commission (EC) of a revised Product Liability Directive (“PLD”), the legislative framework from which the UK’s own Consumer Protection Act 1987 is derived.
The EC’s proposals would provide sweeping and dramatic changes to product liability as we know it (at least in the EU), including much-needed amendments to address the types of mischief caused by emerging technologies, like smart devices, the internet of things and of course automated vehicles (“AVs”).
Of course, post-Brexit, the revised PLD would have no direct application in the UK (save for in Northern Ireland) and so far the government has been tight-lipped in its response to the revised directive (see the Explanatory Memorandum on the repeal of EU directive 85/374) saying only that “The UK will continue to make decisions that benefit the UK interest … in accordance with expert groups, to determine what is best for the UK”. In the background we know the Office for Public Safety and Standards (OPSS) is undertaking its own review of the UK’s product liability framework.
As a product liability practitioner with a healthy interest in AVs, I cannot help but wonder how the revised PLD would impact on product liability claims brought by insurers against manufacturers of AVs – particularly given the possibility the OPSS and UK may well end up copying some of the EC’s homework when it comes to addressing product liability and changing technologies.
Product liability and automated vehicles in the UK
In my previous post, I considered the interplay between product liability and the legislative regime introduced (so far) for AVs, i.e., the Automated and Electric Vehicles Act 2018 (the AEVA).
1. Section 2(1) of the AEVA introduces a new cause of action, consisting of a form of strict liability on the insurer of an AV for any ‘damage’ resulting from a collision caused by an AV driving itself.
2. Section 5(1) of the AEVA would then allow that insurer, once they have settled the injured party’s claim under Section 2(1) (whether by judgment or agreement), to bring a separate product liability claim against any party the injured party could have sued directly.
The insurer’s product liability claim could be brought against not only AV manufacturers but also dealerships and vehicle importers, based on their liability in tort, for breach of contract and under the Consumer Protection Act 1987.
I also noted several potential hurdles insurers might encounter when grappling with the UK’s current product liability regime, particularly given the recognition (including by the OPSS) that the regime is not best equipped to deal with emerging technologies, particularly the introduction of products with increasing integration of software and connectivity. By way of example:
1. In some circumstances, the insurer may want to consider a claim against the producer of the software (or AI) which was “driving” the AV rather than the AV manufacturer; but may not be able to do so because traditionally the UK courts have been slow to recognise that software on its own constitutes a product (see St Albans City and District Council v International Computers Ltd  4 All ER 481) – so the supplier of software (on its own) may not be subject to the same requirements as a supplier of tangible products.
2. Traditionally in a product liability claim the safety of a product is assessed at the point it is placed on the market. If it was safe when it was first supplied, then the claim will fail. But AVs and other modern, connected products can change over time, including via frequent (sometimes safety critical) software updates or through AI machine learning. If an AV is safe at the date of supply but becomes unsafe later then this may hinder a claim against its manufacturer.
3. Manufacturers will have control of a large amount of data arising from an AV collision relating not only to what was recorded during the accident but also to the decision making of the AV’s software. And we know from experience that manufacturers can be reluctant to disclose such data (or assist in its recovery) unless forced to do so and this is only likely to be exacerbated where disclosure would reveal trade secrets, particularly those relating to the workings of its own proprietary software.
4. Even where insurers have access to data (perhaps by downloading it directly from the AV), it may be difficult for insurers to usefully rely on it, particularly where (for example):
a) The data can only be interpreted by the manufacturer.
b) The decision making undertaken by the software or AI can only be explained by its developer.
c) The decision making undertaken by the software or AI cannot be explained at all, because of its opaque nature or because it has effectively programmed itself.
5. In circumstances where an update to the software in an AV introduces a flaw which causes an accident, it’s not clear whether limitation would run from the date the vehicle and its software were first supplied or from the date of the software update. The Consumer Rights Act 2015 suggests it is the earlier date, but that would bar claims where a defective update is made after the expiry of a limitation period.
The revised PLD and how this would impact on AV claims, if adopted in the UK
With the above in mind, it’s hard not to see the significant impact the EC’s revised PLD could have on AV claims and the potential benefits to insurers.
I have set out some of the main changes in the revised PLD, and their potential impact, below.
Software is a product
In Article 4, the revised PLD would resolve a decades-old debate concerning whether software is a product by defining the term ‘Product’ to include software.
In the context of an AV claim, this could make it easier for insurers to pursue, say, a software developer which had supplied software to an AV manufacturer which had then caused an accident since there would be no ambiguity as to whether the software was a product or not.
Expanding the definition of defect
In Article 6, the revised PLD expands on the factors a court can take into account when considering whether a product is defective including by referring to:
- “the effect on the product of any ability to continue to learn after deployment”.
- “the effect on the product of other products that can reasonably be expected to be used together with the product”.
Here the revised PLD appears to confirm that for software in an AV a court should not just consider its starting functionality but also its ability to learn and change, and the scope for it to change in dangerous ways, as well as its ability to connect and interact with other products such as phones and other vehicles and the safety implications of this.
Expanding on when safety is assessed
The revised PLD also appears to confirm in Article 6(1)(e) that the assessment of safety is not limited to the point the AV was placed on the market by providing that courts should take into account “the moment in time when the product was placed on the market or put into service or, where the manufacturer retains control over the product after that moment, the moment in time when the product left the control of the manufacturer”.
Then at Article 10, whilst it remains a defence for a defendant to say the defect did not exist at the time the product was placed on the market, it can only rely on this defence if it can show the product was no longer in its control and the defect is not due to a software update or upgrade or lack of software update or upgrade.
The legal implications of changes to the AV over time
On the subject of products changing over time (through software updates and machine learning), the revised PLD deals with this in the following ways:
1. Article 6(2) provides that a product will not be considered defective just because there was a software update or upgrade available which was not applied, but (as above) under Article 10, a manufacturer can be liable where it retains control of a product and a defect is introduced because the product is not updated.
2. Article 7(4) imposes liability on “Any natural or legal person that modifies a product that has already been placed on the market … where the modification is considered substantial” – which is primarily aimed at the circular economy (where products are refurbished and reused) but could (potentially) apply to a third party having substantially modified the software in an AV i.e., an aftermarket software upgrade.
3. Article 14 deals with limitation periods and provides that for the 10-year longstop, time starts to run on the either date the product is placed on the market or the date it is “substantially modified” – which could be taken to include a substantial software update or upgrade, in which case such an update or upgrade would effectively reset the 10-year longstop.
On disclosure, Article 9(2)(a) of the revised PLD provides that “The defectiveness of the product shall be presumed, where … the defendant has failed to comply with an obligation to disclose relevant evidence at its disposal”, thereby effectively reversing the burden of proof where a defendant refuses to fulfil its disclosure obligations.
This could be a powerful tool for insurers where an AV manufacturer refuses to disclose data relating to an accident or its proprietary software. Such manufacturers could face a stark (but relatively straightforward) choice between revealing their data (and intellectual property) or conceding liability.
Reversal of the burden of proof
Similarly, Article 9(4) provides that where a claimant “faces excessive difficulties, due to technical or scientific complexity, to prove the defectiveness of the product or the causal link between its defectiveness and the damage, or both, the defectiveness of the product or causal link between its defectiveness and the damage, or both, shall be presumed”.
Again, this could be a significant boon for insurers pursuing claims relating to AV collisions, particularly where determining liability would involve an assessment of opaque AI systems, which may have developed through machine learning, and complex data which is only capable of being understood with assistance from the manufacturer. In such circumstances, the burden of proof could be reversed in favour of insurers.
Whilst the proposed changes to the PLD are primarily designed to make it more consumer friendly (perhaps even more so than had been expected), we can see the changes could also have a significant impact on claims by insurers against AV manufacturers (where the insurer would essentially be stepping into injured party’s shoes).
It is possible the EC’s consumer friendly approach will make it less likely to be adopted in the UK, where post-Brexit the government may be keen to differentiate itself from its European neighbours by offering greater protection to manufacturers.
But at least in the context of AV claims, insurers may want to consider advocating for similar provisions to be adopted in the UK in the hope of simplifying future product liability claims against AV manufacturers.
Daniel West, Head of Product Liability, HF
Image by mrstanno11 from Pixabay