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<reference>
Driverless cars: when nobody is driving, who pays for the crash? | ICLG

Driverless cars may simplify compensation for accident victims while leaving insurers to fight over who ultimately pays.

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/ Driverless cars: when nobody is driving, who pays for the crash?

Driverless cars: when nobody is driving, who pays for the crash?

Published on

19/08/2026

by

Rob Harkavy

Driverless cars may simplify compensation for accident victims while leaving insurers to fight over who ultimately pays.

When a conventional car crashes, establishing liability usually focuses on the people driving it. But if a vehicle controlled by an automated driving system fails to recognise a pedestrian, misjudges a junction or responds incorrectly to another vehicle, responsibility could extend far beyond the person sitting inside.

Was the automated driving system defective? Did a sensor fail? Was a safety-critical software update missed? Or should a human have taken control?

Britain’s answer is to separate two questions that have traditionally been closely connected: who compensates the victim and who ultimately bears the loss.

Under the Automated and Electric Vehicles Act 2018 (AEVA), where an insured automated vehicle causes an accident while driving itself on a road or other public place in Great Britain (but not Northern Ireland), section 2 places liability on its insurer for death, personal injury and certain property damage.

That means someone injured by an automated vehicle should not first have to establish whether the manufacturer, software provider or anybody else was responsible before seeking compensation.

But that does not mean that the tricky-to-resolve questions of liability just vanish.

Sarah-Jane Dobson, product liability partner at Ashurst Perkins Coie, explains that whether the AEVA makes the system simpler depends on whose perspective is considered. For drivers and passengers, it should help ensure that victims are compensated more quickly. But determining where liability ultimately belongs is another matter entirely. Insurers, she tells
ICLG News
, may be left addressing that through “satellite litigation” involving multiple parties responsible for designing and implementing highly complex autonomous-vehicle technology.

Pay first, argue later

Section 5 of the AEVA gives
an insurer or vehicle owner a direct statutory right
against “any other person liable to the injured party in respect of the accident” once its own liability has been settled by judgment, arbitral award or enforceable agreement.

David Kidman, a partner at Simmons & Simmons, tells
ICLG News
that the third party – potentially the vehicle manufacturer – is put “under the same liability” to the insurer as it would have had to the victim. Although that resembles subrogation, under which an insurer can pursue rights against a third party after paying a claim, Kidman draws an important distinction: “This is similar to, but expressly a different mechanism from, classic subrogation.”

Dobson agrees that the section 5 mechanism is materially different from an insurer simply “stepping into the shoes” of its insured. Crucially, the recovery right is triggered only once the amount owed to the victim has been settled.

An insurer using the section 5 right cannot also seek a contribution from the third party under the Civil Liability (Contribution) Act 1978 – the usual mechanism allowing one party liable for damage to recover an appropriate share from another party who is also liable. Kidman also notes that the insurer can recover only up to the amount for which the third party was actually liable to the victim, rather than necessarily everything the insurer paid out.

Both Kidman and Dobson expect recovery actions against manufacturers and technology providers to increase as automated vehicles become more common, particularly, Kidman says, in high-value or serial-defect cases. But section 5 does not make a manufacturer automatically liable because its vehicle was involved in an accident. The insurer must establish that the manufacturer or technology provider was itself liable to the injured person.

Kidman says the most natural route is likely to be producer liability under sections 2 and 3 of the Consumer Protection Act 1987 (CPA), which can make a producer – the Act’s term encompassing manufacturers and certain others responsible for putting products into circulation – liable for damage caused by a defective product. An insurer might also seek to establish that a manufacturer or technology provider was negligent, while breach of contract could also be relevant where a claim is pursued in the vehicle owner’s name.

Dobson says that in practice an insurer is likely to need a complex combination of factual and technical evidence showing that the self-driving feature was controlling the vehicle, that an act or omission by that feature amounted to a defect and that the defect caused the accident. Such cases are likely to be “a slow, uncertain, and costly process”, she predicts.

Software, sensors and shared responsibility

Identifying what was defective in the first place may prove difficult and time consuming.

William Trueick, an associate at Simmons & Simmons, points to a potential problem with software. The CPA defines a ‘product’ as goods or electricity, and purely intangible software does not itself fall within that definition. That could produce disputes where, for example, an AI algorithm making automated-driving decisions is alleged to have caused an accident. Its producer could argue that it had no liability to the victim under the CPA and therefore cannot be pursued under section 5.

There may also be arguments between manufacturers. A component producer can escape CPA liability where a defect is wholly attributable to the design of the subsequent product or compliance with its manufacturer’s instructions. To illustrate this point, Trueick gives the example of a sensor manufacturer contending that its hardware worked perfectly well and that the real defect lay in the software controlling it.

Human fallibility has not entirely disappeared from the liability equation. The AEVA retains contributory negligence where an accident or resulting damage was to some extent caused by the injured person, creating what Trueick describes as a potential “driver-versus-defect conundrum”. Software updates are one example of this: section 4 allows an insurance policy, subject to conditions, to exclude or limit liability to an insured person where an accident results from unauthorised software alterations or failure to install safety-critical updates.

The data problem

Resolving these arguments will depend heavily on data.

An insurer may need to establish what the automated system detected immediately before a collision, what its sensors recorded, which software was installed, how the system responded and whether automated driving was engaged.

Trueick regards access to vehicle and software data as “very important” and says a gap currently exists in the framework. Because the section 5 recovery right arises only once the insurer’s liability has been settled, insurers may need to gather evidence long before they are entitled to pursue recovery.

Dobson similarly notes that the existing legislation does not impose a material statutory disclosure obligation for the benefit of insurers, leaving them reliant on disclosure mechanisms under the Civil Procedure Rules and associated case law. That can be particularly difficult with ‘black box’ technology. She says claimants can face the challenge of framing disclosure requests sufficiently precisely to obtain the information they need about highly complex systems, before confronting a second problem: finding technical expertise capable of interpreting what is eventually disclosed and then establishing causation.

Indeed, Dobson warns that automated vehicles could create more rather than less evidential complexity. Sophisticated sensors may improve accident reconstruction, but the proliferation of possible data points could make determining causation more complicated.

The government is considering the issue as it develops the regulatory framework under the Automated Vehicles Act 2024, including the collection of vehicle data and its availability to insurers. The Act provides for future regulations to require authorised self-driving entities to share information with insurers, including for the purpose of resolving insurance claims.

Two Acts, two jobs

The 2018 and 2024 Acts perform different functions. The AEVA created the insurance mechanism for accidents involving vehicles driving themselves, while the Automated Vehicles Act 2024 establishes the regulatory regime governing which vehicles can legally be treated as self-driving and who is responsible for their behaviour. Central to the newer Act is the “authorised self-driving entity” (ASDE) – likely to be the vehicle manufacturer, developer of its automated-driving system or potentially both of them – which takes regulatory responsibility for how an authorised vehicle drives and for ensuring that it continues to meet self-driving standards.

The 2024 Act may therefore make it easier for insurers to identify the entity with regulatory responsibility for the self-driving system, but that does not automatically make the ASDE civilly liable for an accident. Insurers will still need to establish that liability before using section 5 of the AEVA to recover money paid out to a victim.

Redistribution of risk

The longer-term consequence could be a redistribution of risk across – and potentially beyond – the insurance market.

Kidman says the industry expects increasing automation to produce “a fundamental shift toward manufacturer/technology-provider liability”, with falling personal motor premium pools partly offset by growth in product liability and business-to-business and fleet insurance.

Dobson also expects economic risk to move gradually away from traditional motor insurers and their driver customers as the human role diminishes and responsibility moves towards manufacturers and their product liability insurers. But she cautions that this will take “years and decades” as increasingly sophisticated autonomous technology becomes more common on British roads. Nor will the risk necessarily transfer neatly between insurers. Kidman says some larger original equipment manufacturers increasingly self-insure rather than buy product liability cover, meaning some risk “may exit the insurance sector entirely”.

Full implementation of the Automated Vehicles Act 2024 is targeted for the second half of 2027, although automated passenger-service pilots are being introduced ahead of it.

The principle underpinning the AEVA’s insurance regime is comparatively straightforward for accident victims: they should not have to untangle the technology before seeking compensation. The situation is not quite as clear-cut for insurers, however, who may find themselves unravelling an increasing number of tech-heavy claims laden with data. Establishing whether responsibility lies with a manufacturer, software provider, component producer or human user could involve some of the most technically demanding product-liability litigation they ever encounter.

So, while the arrival of the driverless car on to the streets of Britain may simplify one part of an accident claim, the subsequent battle over who actually picks up the final bill is likely to be altogether more complicated.

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Related publications
Insurance & Reinsurance

Related jurisdictions
England & Wales
Scotland

Tagged with:

Automated and Electric Vehicles Act 2018

Automated Vehicles Act 2024

Civil Liability (Contribution) Act 1978

Consumer Protection Act 1987

Driverless cars

Motor insurance

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</reference>

<statements>
1. The commercial deployment of advanced driver-assistance systems (ADAS) has fundamentally disrupted the traditional legal paradigm of vehicular negligence, which historically presumed a unified, continuous locus of human agency behind the wheel
2. Injured third parties and vehicle occupants do not have to initiate complex product liability lawsuits against software developers or global automotive original equipment manufacturers (OEMs) [1].
3. Under Section 5 of AEVA, the insurer then steps into the victim's shoes through statutory subrogation to seek recovery from the responsible party—typically the vehicle manufacturer or automated system developer—under the Consumer Protection Act 1987 or standard negligence principles [1].
4. Following initial victim compensation, the insurer is granted statutory subrogation rights to recover damages from the vehicle manufacturer or automated software developer through an expedited inter-industry arbitration process
</statements>

Begin the assessment now. Output only the JSON list, without any conversational text or explanations.