An Interesting Question about Self-Driving Cars

The first reported death caused by the crash of a self-driving car raises an intriguing question: does existing insurance actually cover autonomous vehicles?

Was Joshua Brown actually insured when his Tesla Model S collided with a semi-tractor rig in Florida on May 7? That question has to be asked because Brown was reportedly using Tesla’s autopilot; self-driving feature, when the accident occurred.

Brown might not have been covered even if he had insurance, because the policy may not have been written to include self-driving vehicles. The policy might not be valid because liability for the accident has not been assigned.

The real question is who was liable for the accident? Was Brown at fault, some witnesses claim he was watching a movie on DVD instead of driving? Or was Tesla at fault because the autopilot failed to notice the semitrailer? If Tesla is at fault; that means the automaker; and not Brown or his insurance company, is liable for the accident.

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Where’s the Insurance?

Another dilemma raised here is: was Brown violating the law by driving without insurance at the time of the crash. If his policy did not cover the autopilot feature, he may have technically been uninsured at the time of the crash. That means he was violating Florida law which requires insurance. Worse, Brown might have also been violating the law in his home state of Ohio, where insurance is also required.

A more interesting legal question is did Tesla Motors (NASDAQ: TSLA) violate the law by putting a car for which there is no insurance coverage on the road? If it did, Elon Musk’s auto company is setting itself up for a major lawsuit.

A fascinating point here; and one car companies like Fiat Chrysler (NYSE: FCA) will need to face, is will car companies have to insure self-driving cars. Are automakers assuming liability for accidents when they add autonomous features to vehicles?

That means the carmaker may have to include insurance in the price of purchase. It also means that automakers may have to enter the insurance business.

Both laws and insurance policies will have to be rewritten. I also imagine that it will be up to courts to answer some of these questions.

Will Insurance be the Greatest Obstacle to Self-Driving Cars?

This means that insurance might be the greatest barrier to the widespread adoption of autonomous vehicles in the United States. A paradigm shift in auto insurance might be needed for self-driving cars.

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The current insurance system is based on the assumption that drivers and their insurance companies bear the brunt of the liability in accidents. The advent of autonomous vehicles will mean that manufacturers may bear the brunt of the liability because they are literally taking over the car’s operations.

These issues will be clouded as autonomous vehicles are widely adopted for such purposes as hauling freight, delivery and passenger service. If Uber puts a self-driving Dodge minivan on the road that contains autonomous features created by Uber, who is liable in a crash: Uber, Fiat-Chrysler (which owns Dodge) or the Uber driver? A major problem in that scenario is that the Uber driver is an independent contractor, but she would be relying on Uber’s technology.

Will there be separate insurance policies for the car, the driver and the self-driving features. Or will insurers have to create special coverage for autonomous vehicles. If so that could get real expensive, real fast, making the cost of self-driving cars prohibitive.

Insurance might actually be the most complex issue surrounding self-driving cars. The questions of liability might become the roadblock that delays the adoption of this technology.