Home Insights When good cars turn bad: who should pay for loss and injury caused by autonomous vehicles?

When good cars turn bad: who should pay for loss and injury caused by autonomous vehicles?

Although the technology is still in its infancy, autonomous vehicles may set the wheels in motion for a mobility revolution and pave the road to increased efficiency, safety and productivity. However, their introduction will bring a host of significant liability risks and challenges. 

In this article, we explore the ways aggrieved parties may seek redress for loss or injury arising from a collision, and the liability risks for autonomous vehicle manufacturers, owners and occupants.


In November 2016 the National Transport Commission (NTC) was tasked with developing regulations to enable autonomous vehicles (AVs) to operate safely in Australia.

In its Policy Paper, the NTC concluded that the current regulatory framework for liability can accommodate AVs and that no legislative reform is required – at least, not yet.

Why should we consider AV liability risks?

Although there is no specific legislation dealing with AV collision liability, it is important that vehicle users, manufacturers and other interested parties be aware of the associated liability risks. These have been starkly illustrated by recent incidents – some resulting in death – and subsequent lawsuits.

These incidents raise important questions. Should AV users and manufacturers be criminally liable for injury, loss and damage arising from AV use? What are the appropriate negligence and product defect standards to apply?

Who should be responsible for a collision?

Any legislative and regulatory framework governing liability for loss arising from AV collisions will needs to recognise the tension between holding AV manufacturers responsible for crashes, and imposing strict or fault-based liability on AV users.

On the one hand, it could be argued that car manufacturers should be held mainly responsible for any crash caused by an AV that they designed if it was operating autonomously. This would ensure that manufacturers do not economise on safety, and it is consistent with two overarching goals of liability law – namely, minimising accidents and compensating victims.

Further, it would give manufacturers a financial incentive to make safety improvements to AVs. Volvo has publicly supported this position, stating that it would accept full liability for the actions of its cars when in autonomous mode.

On the other hand, the NTC warns against imposing an excessive liability burden on manufacturers, as this could stifle innovation and technological advancement. Instead, it contends that AV users should observe a duty to pay attention. This would return liability to the driver in cases where they could have intervened to prevent the accident. Some commentators have suggested that AV users should be held strictly liable, simply because they assumed the risk of using an AV.

If taken too far, however, imposing liability on users of AVs would be equally problematic.

The law will need to strike a balance in attributing responsibility. This balance will likely be achieved by apportioning liability based on a consideration of ‘whether a human driver or the AV system was mainly operating the vehicle at the time of loss’.

What liability risks could arise from a collision?

In the event of a collision, aggrieved parties may seek redress under the common law, contract law and the Australian Consumer Law (ACL). This would potentially expose AV manufacturers, owners and occupants to significant liability risks. These are broadly discussed below.

Negligence claims

Each State and Territory currently has a compulsory third party (CTP) insurance scheme. CTP insurance provides compensation for personal injury or death arising from a motor vehicle accident. However, CTP insurance does not extend to property damage caused by a motor vehicle accident.

Some states, such as Victoria, have a no-fault CTP insurance scheme. Other states, such as Queensland, operate a common law fault-based CTP scheme. Under a common law fault-based CTP scheme, an injured third party can claim for damages if they can establish negligence against the owner or driver of a motor vehicle. This means that CTP insurers of AV owners and occupants may be liable for damages claims, reduced by any full or partial contributions from other parties (potentially including the AV manufacturer).

One possible cause of action is a negligence claim against the CTP Insurer of an AV occupant who is found to be in breach of a duty to pay attention. If an injury arose out of negligent AV maintenance, a claim could also be available against the vehicle owner or CTP insurer. This would be based on a failure to service, maintain or upgrade the vehicle or its software in line with manufacturer instructions. A claim could also be brought on this basis against a car dealer or service centre if they were responsible for failing to install a software update that might have prevented a collision.

Breach of contract

The contract under which an AV is sold may include express or implied warranties from the seller about the capabilities of the AV’s automated driving system, or the vehicle more generally. If the automated driving system proves to be less capable than warranted, then the purchaser may pursue a claim for breach of contract against the retailer of the AV.

The terms of the contract of sale will be relevant to the extent that a manufacturer or retailer seeks to limit their liability through limitation of liability clauses, acknowledgements and warnings.

Claims against manufacturers and suppliers 

We can expect the widespread usage of AVs to also lead to increased manufacturer and retailer liability. Plaintiffs in AV collisions could pursue a negligence claim, or seek an ACL remedy for defective products, breach of consumer guarantees or misleading and deceptive conduct.

A manufacturer owes a duty to take reasonable care to avoid injury being suffered by users of their vehicles and reasonably foreseeable bystanders, who include road users and passengers. If they are found not to have done so, they may be held liable for that injury under the common law principle of negligence.

To determine whether a manufacturer has exercised reasonable care, courts will consider the state of technical and scientific knowledge available at the time of the vehicle's manufacture or distribution.

Similarly, the ACL confers statutory rights of action on people who suffer injury or loss caused by a manufacturer’s defective goods. In defining ‘defect,’ the ACL adopts an objective test based on consumer expectations. As with negligence at common law, the safety defect provisions afford an exception based on the ‘state of scientific or technical knowledge’ at the time the goods were supplied.

The greatest legal risk?

Perhaps the greatest legal risk is that collision liability will be markedly uncertain in practice, due to the vague legal tests embedded in the law and the complexities associated with attributing liability.

Most problematically, standards at common law and under the ACL may not be capable of dealing effectively with the unique legal issues raised by vehicles operating autonomously. In particular, the ACL consumer expectation test has been criticised as being unsuitable in the case of complex products that are not very familiar to consumers.

The Australian Competition and Consumer Commission (ACCC) has also voiced concerns that the ACL is not the best mechanism for compensating people injured in an AV collision. It has submitted that the court process required to seek damages for defective goods is ‘burdensome’, and would likely deter injured people from seeking compensation.

Given the ACCC’s concerns, we can expect any legislative reform of collision liability to be focused on expanding the current CTP insurance scheme to specifically cover injuries and deaths caused by AVs. In states with fault-based common law CTP schemes, we can expect that the need for legislative reform will arise as the courts identify issues with applying the common law principles of negligence to AV-related loss over time. As the NTC noted in a recent Policy Paper, relying on the common law to recover from at-fault parties for collisions involving an AV will likely result in ‘lengthy and expensive proceedings with uncertain outcomes’ for injured parties.

Although Australian transport and infrastructure ministers have agreed to a nationally uniform approach to legislative reform to help ensure national consistency, the NTC has identified a potential risk that national regulation in Australia may be inconsistent with international standards and conventions. This could present a significant barrier for introducing automated vehicles in Australia, given that Australia is a small market in a globally-integrated industry.

For now, we wait and see how the regulation of this complex area develops together with the rapidly-advancing technology.

This article was originally co-authored by David Warren.


Chloe Mo



Corporate/M&A Litigation and Dispute Resolution Technology, Media and Telecommunications

This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.