Updates to California DMV’s Proposed Autonomous Vehicle Deployment Regulations May Empower Innovation by Limiting Manufacturer Liability

Key Points

  • The California Department of Motor Vehicles has proposed changes to its autonomous vehicle deployment regulations that would narrow the circumstances in which manufacturers can be held liable for incidents involving autonomous vehicles. The changes may encourage further innovation in California’s autonomous vehicle sector.
  • Under the revised proposed regulations, a manufacturer could avoid liability for the operation of its autonomous vehicle if the vehicle is not maintained in strict compliance with manufacturer specifications, or if modifications to the vehicle that affect its autonomous technology are not carried out in compliance with manufacturer specifications.
  • The proposed California regulations are part of a larger trend among states—including Florida, Michigan, Nevada and the District of Columbia—to limit liability for manufacturers where third parties modify their vehicles to be autonomous, except where a defect is present in the vehicle as originally manufactured. The proposed California regulations would provide a wider shield for manufacturers than other states and may signal a trend toward greater protections for manufacturers in the autonomous vehicle space.

Overview

In 2012, the California Legislature adopted Senate Bill 1298 to open California roads to autonomous vehicle technology. (See Sen. Bill 1298, 2011-2012, Reg. Sess., ch. 7, 2012 Cal. Stat.) Among other things, Senate Bill 1298 directed the California Department of Motor Vehicles (DMV) to draft regulations for the testing and deployment of autonomous vehicles. The DMV finalized its testing regulations in January 2014, and those regulations went into effect in September 2014. Thereafter, the DMV began drafting regulations to govern the deployment of autonomous vehicles for public operation. It is set to finalize those deployment regulations in the coming months.

The latest version of the California DMV’s proposed deployment regulations, which was released in October, would exempt a manufacturer from liability related to the operation of an autonomous vehicle if the vehicle is not maintained or modified in accordance with the manufacturer’s specifications. Consumer advocacy groups and insurance carriers have objected to the proposed regulations as unduly benefiting manufacturers and improperly shifting unknown risks to owners, operators and passengers. Industry participants have praised the proposed regulations as properly accounting for risk without stifling innovation.

Although the California DMV is still finalizing its deployment regulations, which are expected to go into effect in 2018, whatever liability provisions are included in the final regulations could have a significant effect nationwide, given the size and influence of the California market. If adopted, the proposed regulations governing manufacturer liability may herald a growing trend among states to limit manufacturer liability in the autonomous vehicle context.

Background

In December 2015, the DMV released its first version of its draft deployment regulations for public review. Since that time, the proposed regulations have gone through several revisions, two rounds of public comment and discussion at a public hearing. On March 10, 2017, the California DMV issued a revised version of its proposed deployment regulations. Section 228.28(b) of the revised regulations stated that a manufacturer of a highly or fully autonomous vehicle, classified as an SAE level 4 or 5 vehicle, would be “responsible for the safe operation of the vehicle at all times the vehicle [was] operating in its operational design domain.”  (Cal. Code Regs. tit. 13 § 228.28(b) (proposed) (Mar. 10, 2017).)

On October 11, 2017, the DMV published its second revised version of the proposed regulations. The October 11 revisions are supposed to be the last version released before the regulations are finalized. Among other changes, the DMV revised Section 228.28(b) to limit manufacturer liability to incidents where vehicles have been maintained in accordance with the manufacturer’s specifications, or modifications affecting the autonomous technology have been made in accordance with a manufacturer’s specifications. For vehicles with both autonomous and normal driver-controlled capabilities, the revised regulations would limit a manufacturer’s liability to those incidents that take place while the vehicle is being used in its autonomous state.1    

Reaction to Proposed Regulations

Consumer advocacy groups and insurance carriers have raised concerns that the changes to the manufacturer liability provision in the October 11 revisions would shift unknown risks from manufacturers to owners, operators and passengers. If the proposed regulations take effect, liability for incidents where a manufacturer’s equipment fails could shift to the vehicle owner or operator if that owner or operator has not maintained or updated the equipment, unless the defect at issue was present in the vehicle as originally manufactured. Slightly under filled tires or a slightly delayed oil change could theoretically eliminate a manufacturer’s liability. Opponents also have suggested that the changes to the liability provision would effectively incentivize a manufacturer to include unreasonable or impractical maintenance specifications as a means of avoiding potential liability.

It remains to be seen whether or how the California DMV might address such concerns in its final proposed deployment regulations. The public comment period on the October 11 revised regulations closed on October 25. The DMV is now in the process of finalizing the deployment regulations and will submit its final recommended regulations for formal review in the coming months. The final regulations are expected to go into effect as early as June 2018. Consumer advocacy and insurance carrier groups have threatened legal action should the DMV keep the proposed provision on manufacturer liability as it appears in the October 11 proposed regulations.

Looking Forward – An Evolving Trend Toward Limiting Manufacturer Liability

The October 11 proposed deployment regulations are the latest step in what appears to be a growing trend among states toward limiting manufacturer liability in the autonomous vehicle context. The proposed California deployment regulations, however, go beyond the limits on manufacturer liability imposed by other states and may signal a greater willingness to balance risk and innovation.

Florida, Michigan, Nevada and the District of Columbia all shield manufacturers from liability for damages resulting from a third party’s conversion of a vehicle into an autonomous vehicle, except where the damages are caused by a defect that was present in the vehicle as originally manufactured. (See Fla. Stat. § 316.86 (2017); 2016 Mich. Pub. Acts 148, Sec. 2949b(1); Nev. Rev. Stat. § 482A.090 (2015); D.C. Code § 50-2353 (2017).)  Michigan also shields from liability certain subcomponent system producers and mechanics or repair facilities for work done in connection with autonomous vehicles under certain circumstances. (See 2016 Mich. Pub. Acts 148, Sec. 2949b(2)-(3).)  This summer, Nevada passed legislation that would extend immunity from liability for damages caused by modifications by an unauthorized third party to the original manufacturer or developer of an automated driving system. (See AB 69, 79th Leg., Reg. Sess., Sec. 9.5 (Nev. 2017).)

In comparison with other state statutes, the California DMV’s proposed deployment regulations provide manufacturers with a broader liability shield, dictating that vehicles be both maintained and modified in accordance with manufacturer specifications in order to trigger manufacturer liability. Some say that the California DMV’s regulations provide a practical and balanced approach to assigning liability and may spur innovation. Depending on the text of the final deployment regulations, the California rules could become a model for other states to limit manufacturer liability moving forward. In any event, all parties involved in the manufacture, conversion and operation of autonomous vehicles should carefully review state regulations and consider how best to protect their interests in sales and maintenance contracts and license agreements as the deployment of autonomous technology continues to proliferate.

Contact Information

If you have any questions concerning this alert, please contact:

Natasha G. Kohne
nkohne@akingump.com
415.765.9505 | San Francisco

Susan H. Lent
slent@akingump.com
202.887.4558 | Washington, D.C.

Kevin E. Cadwell
kcadwell@akingump.com
415.765.9544 | San Francisco
713.250.3545 | Houston
Diana E. Schaffner
dschaffner@akingump.com
415.765.9507 | San Francisco

1 The October 11 version of Section 228.28(b) provides that the manufacturer “shall be responsible for the safe operation of the vehicle at all times the vehicle is operating with the autonomous technology engaged and in its operational design domain,” which includes compliance with traffic laws “that pertain to performance of the dynamic driving task.”  (Cal. Code Regs. tit. 13 § 228.28(b) (proposed) (Oct. 11, 2017) (emphasis added).)