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Washington State May Be Creating a New Type of Insurance Product; The Hybrid Auto-Manufacturing Liability Policy

Author: Bryan D. Scholnick

July 16, 2018 9:00am

Generally, when we hear about autonomous vehicles, we hear about the innovations and strides being made by companies like Uber, Apple, Microsoft, and Google.  Other than Tesla, it is rare we hear news about the traditional automakers performing vehicle testing: the Big Three of their respective regions.  There is no doubt these companies will quickly start marketing and selling their branded autonomous vehicle.  If they plan to start doing so in the State of Washington, they will likely need to add motor vehicle liability insurance to their coverage portfolio.

Traditionally, a claim against an automobile manufacturer for damages arising from an alleged defective vehicle would fall under the Washington Products Liability Act (WPLA); RCW 7.72. The statute codified the law of products liability and addressed virtually all of the major questions that arise in those cases. The goals of the WPLA, according to the legislative preamble, were two-fold: (1) to simplify the pleadings in a product liability claim; and (2) to address the “[s]harply rising premiums for product liability insurance [that] increased the cost of consumer and industrial goods. These increases in premiums have resulted in disincentives to industrial innovation and the development of new products.”

Most businesses that manufacture and sell a product in Washington will obtain a business insurance policy to cover potential product liability claims.  Others may purchase a products liability insurance policy.  These policies historically helped to reduce risk.

Yet, in 2017, the Washington State legislature attempted to pass a bill relating to the regulation of autonomous vehicles that would be added the Chapter 46, laws governing motor vehicles.  This bill did not pass.  However, we can gain insight of how the legislation may deal with the allocation of liability coverage for an accident involving an autonomous vehicle in Washington.  Washington State was doing so since the SELF-DRIVE Act (HB 388) and AV START Act (s. 1885) leave the determination of liability allocation for a defective vehicle/product to state law.

Washington’s legislation attempt began with defining a “manufacturer” of autonomous technology as the entity that originally manufactures a vehicle and equips autonomous technology on the originally completed vehicle.  A manufacturer could also be an entity that modifies an existing luddite-vehicle by installing autonomous technology to convert it to an autonomous vehicle after the vehicle was originally manufactured.

The proposed legislation went on to require AV manufacturers maintain “[a] certification that the manufacturer will maintain a motor vehicle liability policy, self-insurance, a certificate of deposit, or a liability bond, as required by rule, of five million dollars.”

How many auto policies cover manufacturing defects?  Would this statute allow for a typical product liability or CGL policy to meet the obligation?  Essentially, Washington’s legislation would have required insurer’s to create a new type of auto policy that would cover manufacturing defects in AVs.

Moreover, this legislation would have directly contradicted the goal of the WPLA.  It would create increases in insurance premiums that would lead to an increase in cost passed to the consumer.  Moreover, the statutes would have been included in RCW 46, not the WPLA.  Would this mean the WPLA protections and scheme would not be applicable to claims of AV manufacturing defects?  We will need to continue to watch how the State of Washington, an all others, intend to allocate the risks and liabilities that may arise once AVs hit the streets.

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