August 2019

By Wesley D. Hurst and Leslie J. Pujo*

Cite as: Wesley D. Hurst & Leslie Pujo, Vehicle Rental Laws: Road Blocks to Evolving Mobility Models?, 2019 J. L. & Mob. 73.

I.          Introduction

The laws and regulations governing mobility are inconsistent and antiquated and should be modernized to encourage innovation as we prepare for an autonomous car future. The National Highway Traffic Safety Administration (“NHTSA”) has concluded that Autonomous Vehicles, or Highly Automated Vehicles (“HAVs”) may “prove to be the greatest personal transportation revolution since the popularization of the personal automobile nearly a century ago.” 1 1. Federal Automated Vehicles Policy, NHTSA 5 (2016), https://www.transportation.gov/sites/dot.gov/files/docs/AV%20policy%20guidance%20PDF.pdf. × Preparation for a HAV world is underway as the mobility industry evolves and transforms itself at a remarkable pace. New mobility platforms are becoming more convenient, more automated and more data driven—all of which will facilitate the evolution to HAVs. However, that mobility revolution is hindered by an environment of older laws and regulations that are often incompatible with new models and platforms.

Although there are a number of different mobility models, this article will focus on carsharing, peer-to-peer platforms, vehicle subscription programs, and rental car businesses (yes, car rental is a mobility platform). All of these mobility models face a host of inconsistent legal, regulatory and liability issues, which create operational challenges that can stifle innovation. For example, incumbent car rental, a mobility platform that has been in place for over 100 years, is regulated by various state and local laws that address everything from driver’s license inspections to use of telematics systems. Although physical inspection of a customer’s driver’s license at the time of rental is commonplace and expected in a traditional, face-to-face transaction, complying with the driver’s license inspection for a free-floating carsharing or other remote access mobility model becomes more problematic.

Part B of this article will review current federal and state vehicle rental laws and regulations that may apply to incumbent rental car companies and other mobility models around the country, including federal laws preempting rental company vicarious liability and requiring the grounding of vehicles with open safety recalls, as well as state laws regulating GPS tracking, negligent entrustment, and toll service fees. Part C poses a series of hypotheticals to illustrate the challenges that the existing patchwork of laws creates for the mobility industry. 2 2. Note: This article focuses on existing laws applicable to short-term rentals of vehicles, rather than long-term leases (including the federal Consumer Leasing regulations, known as “Regulation M,” which are set forth in 12 C.F.R., Part 213). For a more detailed discussion of long-term vehicle leasing laws, see Thomas B. Hudson and Daniel J. Laudicina, The Consumer Leasing Act and Regulation M, in F&I Legal Desk Book (6th edition 2014). × For instance, whether a mobility operator can utilize GPS or telematics to monitor the location of a vehicle is subject to inconsistent state laws (permitted in Texas, but not California, for example). And vehicle subscription programs are currently prohibited in Indiana, but permitted in most other states. Similarly, peer-to-peer car rental programs currently are prohibited in New York, but permitted in most other states. Finally, Part D of the article will offer some suggested uniform rules for the mobility industry.

First, however, we offer the following working definitions for this article:

  • Carsharing” – a membership-based service that provides car access without ownership. Carsharing is mobility on demand, where members pay only for the time and/or distance they drive. 3 3. About the CSA, Carsharing Ass’n., https://carsharing.org/about/ (last visited May 7, 2019). ×
  • Peer-to-peer Carsharing” or “Rentals” – the sharing of privately-owned vehicles in which companies, typically for a percentage of the rental charge, broker transactions among car owners and renters by providing the organizational resources needed to make the exchange possible (i.e., online platform, customer support, driver and motor vehicle safety certification, auto insurance and technology). 4 4. Car Sharing State Laws and Legislation, Nat’l Conf. of St. Legislatures (Feb. 16, 2017), http://www.ncsl.org/research/transportation/car-sharing-state-laws-and-legislation.aspx. Since most personal auto policies do not cover commercial use of personal vehicles, if the peer-to-peer platform does not provide liability and physical damage coverage, there likely will be no coverage if the vehicle is involved in an accident during the rental period. As noted above, peer-to-peer carsharing platforms currently do not operate in New York, based, in part, on the New York Department of Insurance’s findings that a peer-to-peer platform operator’s insurance practices (including sale of group liability coverage to vehicle owners and renters) constituted unlicensed insurance producing. See RelayRides, Inc. Consent Order (N.Y. Dep’t of Fin. Serv., 2014). Although a detailed discussion of insurance-related issues is beyond the scope of this article, the Relay Rides experience in New York illustrates the need for the insurance industry and insurance laws to evolve to accommodate new mobility models. See Part B.2.d. for a discussion of legislative approaches that several states have taken to address the insurance issues implicated by the peer-to-peer model (including a 2019 New York bill). ×
  • Subscriptions” – a service that, for a recurring fee and for a limited period of time, allows a participating person exclusive use of a motor vehicle owned by an entity that controls or contracts with the subscription service. 5 5. See Ind. Code § 9-32-11-20(e) (2018). The prohibition on vehicle subscription services in Indiana originally expired on May 1, 2019, but was recently extended for another year through May 1, 2020. The Indiana definition also provides that “[Subscription] does not include leases, short term motor vehicle rentals, or services that allow short terms sharing of a motor vehicle.” A bill pending in North Carolina uses similar language to define “vehicle subscription” for purposes of determining highway use tax rates. See H.B. 537 (N.C. 2019). As further discussed in Part C below, it is not clear whether other states would take the same approach and classify a subscription model as distinct from rental or leasing instead of applying existing laws. × Typically, the subscriber is allowed to exchange the vehicle for a different type of vehicle with a certain amount of notice to the operator. This is a developing model with a number of variations, including whether the subscription includes insurance, maintenance, a mileage allowance, or other features and services.
  • Vehicle Rental” – a customer receives use of a vehicle in exchange for a fee or other consideration pursuant to a contract for a period of time less than 30 days. 6 6. See Cal. Civ. Code § 1939.01 (Deering 2019). Although for purposes of this article, we use a traditional 30-day period to define short-term rentals, we note that the time period for rentals varies by state (or even by statute for a particular state) with some defining a short-term rental for periods as long as 6 months or even one year. See, e.g., Md. Code Ann., Transportation § 18-101 (LexisNexis 2019) (defining “rent” as a period of 180 days or less). Compare 35 Ill. Comp. Stat. 155/2 (2019) (defining “rent” as a period of one year or less for purposes of the Illinois Automobile Renting Occupation and Use Tax), with 625 Ill. Comp. Stat. 27/10 (defining “rental company” as one that rents vehicles to the public for 30 days or less for purposes of the Illinois damage waiver law). ×
  • Mobility Operators” – any person or entity that provides access to a vehicle to another person whether by an in-person transaction, an app-based or online platform, or any other means and whether the entity providing the access is the owner, lessee, beneficial owner, or bailee of the vehicle or merely facilitates the transaction.

II.          Existing Laws: Lack of Uniformity and Certainty

As noted above, a patchwork of federal, state (and in some cases city or county) laws regulate short-term car rentals (in addition to generally applicable laws affecting all businesses, such as privacy and data security laws, 7 7. In addition to general privacy and data security concerns applicable to all businesses, the advent of HAVs and connected vehicles may trigger additional privacy and data security issues for mobility operators. For example, issues surrounding the control, access, and use of vehicle-generated data is still unsettled and the subject of much debate. See, e.g. Ayesha Bose, Leilani Gilpin, et al., The Vehicle Act: Safety and Security for Modern Vehicles, 53 Willamette L. Rev. 137 (2017) for additional information on this topic. × the Americans with Disabilities Act (“ADA”), employment law, and zoning laws). Car rental laws have developed over time and typically address:

  1. State and local taxes and surcharges;
  2. Licensing and operational requirements, including airport concessions and permits for picking-up and dropping-off passengers;
  3. Public policy issues, such as liability insurance and safety recalls; and
  4. Consumer protection matters, like rental agreement disclosures, restrictions on the sale of collision damage waivers, prohibitions on denying rentals based on age or credit card ownership, and restrictions on mandatory fees. 8 8. See, e.g., Final Report and Recommendations of the National Association of Attorneys General Task Force on Car Rental Industry Advertising and Practices, 56 Antitrust & Trade Regulation Report No. 1407 (March 1989) at S-3 (“NAAG Report”). The NAAG Report includes “guidelines,” which were intended for use by states in providing guidance to car rental companies on compliance with state unfair and deceptive practice laws, Id. at S-5. ×

As is often the case with regulated industries, state and local vehicle rental laws vary considerably, which can lead to uncertainty and inefficiency. For example, a multi-state operator may need to vary product offerings and pricing, customer disclosures, and agreement forms, depending upon the state in which the rental commences. 9 9. Typically, a state law will apply to a transaction if the renter accepts delivery of the vehicle in that state, regardless of where the rental company’s physical offices are located, where the vehicle is typically parked, or where the vehicle is returned. See, e.g., 24 Va. Code Ann. § 20-100-10 (2019) (“The term [rental in this State] applies regardless of where the rental agreement is written, where the rental terminates, or where the vehicle is surrendered.”). × The uncertainty and inefficiency increases dramatically when considering whether and how existing vehicle rental laws apply to new mobility platforms and services since many of the existing laws do not address or even contemplate modern technology like self-service, keyless access to vehicles, digital agreements, or telematics fleet management.

The following paragraphs provide a brief overview of some of the existing laws.

A.         Federal Law

1. Graves Amendment

The federal Graves Amendment, 10 10. 49 U.S.C.S. § 30106 (LexisNexis 2019). × passed in 2005, preempts any portion of state law that creates vicarious liability for a vehicle rental company based solely on ownership of a vehicle. Specifically:

An owner of a motor vehicle that rents or leases the vehicle to a person . . . shall not be liable . . . by reason of being the owner of the vehicle . . . for harm to persons or property that results or arises out of the use, operation, or possession of the vehicle during the period of the rental or lease, if– (1) the owner . . . is engaged in the trade or business of renting or leasing motor vehicles; and (2) there is no negligence or criminal wrongdoing on the part of the owner . . . 11 11. Before passage of the Graves Amendment, many car leasing and renting companies ceased activities in states with unlimited vicarious liability laws based solely on ownership, such as New York. See Graham v Dunkley, 852 N.Y.S.2d 169 (App. Div. 2008); see also Susan Lorde Martin, Commerce Clause Jurisprudence and the Graves Amendment: Implications for the Vicarious Liability of Car Leasing Companies, 18 U. FLA. J.L. & Pub. Pol’y 153, 162 (2007). ×

Determining whether the Graves Amendment applies to a particular case involves an analysis of both factual and legal issues. The factual issues include a determination of whether:

(A) the claim involves a “motor vehicle”;

(B) the individual or entity is the “owner” of the motor vehicle (which may be a titleholder, lessee, or bailee) or an affiliate of the owner;

(C) the individual or entity is “engaged in the trade or business of renting or leasing motor vehicles”; and

(D) the accident occurred during the rental period. 12 12. Johnke v. Espinal-Quiroz, No. 14-CV-6992, 2016 WL 454333 (N.D. Ill. 2016). ×

    The legal issues include:

(A) whether the owner is being sued in its capacity as owner (as opposed to the employer or other principal of another party); and

(B) whether there are allegations that the owner was negligent or criminal. 13 13. Id. ×

Perhaps not surprisingly, the Graves Amendment has been highly litigated, from early challenges to its constitutionality, 14 14. See, Rosado v. Daimlerchrysler Fin. Servs. Trust, 112 So. 3d 1165 (2013); Garcia v. Vanguard Car Rental USA, Inc., 540 F.3d 1242 (2008); Rodriguez v. Testa, 993 A.2d 955 (Conn. 2009); Vargas v. Enter. Leasing Co., 60 So. 3d 1037 (Fla. 2008). × to later assertions that it does not apply to a particular case because the vehicle’s owner was not “engaged in the business of renting or leasing,” 15 15. See e.g., Minto v. Zipcar New York, Inc., No. 15401/09 (N.Y. Sup. Ct., Queens County Mar. 17, 2010); Moreau v. Josaphat, et al., 975 N.Y.S.2d 851 (N.Y. Sup. Ct. 2013). × or that an accident did not occur during the “rental period.” 16 16. Currie V. Mansoor, 71 N.Y.S.3d 633 (App. Div. 2018); Chase v. Cote, 2017 Conn. Super. LEXIS 3533 (2017); Marble v. Faelle, 89 A.3d 830 (R.I. 2014). ×

Two New York cases are instructive to operators of newer mobility models. In Minto v. Zipcar New York, Inc. 17 17. See Minto v. Zipcar New York, Inc., No. 15401/09. × and Moreau and Duverson v. Josaphat, et al., 18 18. See Moreau, 975 N.Y.S.2d 851. × a New York court examined whether carsharing company Zipcar was “engaged in the trade or business of renting or leasing motor vehicles” for purposes of the Graves Amendment – despite the fact that it touted itself as an alternative to car rental.

In the 2010 Minto case (which the Moreau case closely followed), the court stated that Zipcar’s advertising, which contrasted the company to “‘traditional car rental cars’, d[id] not foreclose the possibility that it is nevertheless also in the rental car business, although not of a traditional sort.” 19 19. See Minto v. Zipcar New York, Inc., No. 15401/09 at 2. × The court then noted that the Graves Amendment did not define “trade or business of renting or leasing motor vehicles.” 20 20. Id. × As a result, it analyzed the “constituent terms” of “renting” and “leasing” to determine whether Zipcar was a rental company for purposes of the Graves Amendment 21 21. Id. See also Moreau, 975 N.Y.S.2d at 855-856. × and concluded that the key features of a “lease” or rental” were the “transfer of the right to possession and use of goods for a term in return for consideration.” 22 22. See Minto v. Zipcar New York, Inc., No. 15401/09 at 2-3. × With these definitions in mind, the court focused on the requirement that Zipcar members pay fees in exchange for the right to use Zipcar vehicles, which it found to be “little different from ‘traditional rental car’ companies, notwithstanding Zipcar’s marketing statements that contrast it with those companies” and held that Zipcar was covered by the Graves Amendment. 23 23. Id. at 3. × As further support of its conclusion, the Minto court noted that the Zipcar marketing “shows that the company competes with traditional car-rental companies and serves a similar consumer need.” 24 24. Minto v. Zipcar New York, Inc., No. 15401/09 at 4. ×

2. Safe Rental Car Act

The Raechel and Jacqueline Houck Safe Rental Car Act of 2015 (“Safe Rental Car Act”) 25 25. Raechel and Jacqueline Houck Safe Rental Car Act of 2015, S. 1173, 114th Cong. (2015) (codified as amended in scattered sections of 49 U.S.C.). × places limits on the rental, sale, or lease of “covered rental vehicles”. 26 26. 49 U.S.C.A. § 30120(i) (2017). × A “covered rental vehicle” is one that: (A) has a gross vehicle weight rating (“GVWR”) of 10,000 pounds or less; (B) is rented without a driver for an initial term of less than 4 months; and (C) is part of a motor vehicle fleet of 35 or more motor vehicles that are used for rental purposes by a rental company. 27 27. 49 U.S.C.A. § 30102(a)(1) (2017). × A “rental company” is any individual or company that “is engaged in the business of renting covered rental vehicles,” and “uses, for rental purposes, a motor vehicle fleet of 35 or more covered rental vehicles, on average, during the calendar year.” 28 28. 49 U.S.C.A. § 30102(a)(11) (2017). ×

Under the Safe Rental Car Act, after receiving notice by electronic or first class mail of a NHTSA-approved safety related recall, a rental car company may not rent, sell, or lease an affected vehicle in its possession at the time of notification, until the defect has been remedied. The rental car company must comply with the restrictions on rental/sale/lease “as soon as practicable,” but no later than 24 hours after the receipt of the official safety recall notice (or within 48 hours if the notice covers more than 5,000 vehicles in its fleet). 29 29. 49 U.S.C.A. § 30120(i)(1) and (3) (2017). The 24-hour/48-hour time requirement applies only to vehicles in the possession of the rental company when the safety recall is received, and does not require rental companies to locate and recover vehicles that are on rent at that time. × If the safety recall notice indicates that a remedy is not immediately available, but specifies interim actions that an owner may take to alter the vehicle and eliminate the safety risk, the rental company may continue to rent (but not sell or lease) the vehicle after taking the specified actions. 30 30. 49 U.S.C.A. § 30120(i)(3)(C) (2017). Once a permanent remedy becomes available, the rental company may not rent affected vehicles until those vehicles have been repaired. ×

Despite the federal recall legislation, several states have introduced bills for similar legislation with California passing a law in 2016 that extends the restrictions on rental, sale, and lease to fleets of any size, as well as to cars loaned by dealers while a customer’s own vehicle are being repaired or serviced. 31 31. Cal. Veh. Code § 11754 (Deering 2019). × Effective January 1, 2019, the California prohibitions on the rental, lease, sale, or loan of vehicles subject to safety recalls also apply to “personal vehicle sharing programs,” which are defined as legal entities qualified to do business in the State of California that are “engaged in the business of facilitating the sharing of private passenger vehicles for noncommercial use by individuals within the state.” 32 32. Cal. Veh. Code § 11752 (West 2019); Cal Ins. Code § 11580.24(b)(2) (West 2011). ×

B.         State Law

Several states, including California, 33 33. Cal. Civ. Code §§ 1939.01 – 1939.37 (West 2017). × Hawaii, 34 34. Haw. Rev. Stat. Ann. §437D (West 2019). × Illinois, 35 35. 625 Ill. Comp. Stat. 27 (West 2019); 625 Ill. Comp. Stat. 5/6-305 (West 2019). × Nevada, 36 36. Nev. Rev. Stat. Ann. §§ 482.295–482.3159 (West 2019). × and New York, 37 37. N.Y. Gen. Bus. Law § 396-z (McKinney 2019). × have comprehensive vehicle rental laws that regulate a variety of issues, including minimum age requirements; sales of damage waivers; limitations on amounts recoverable from renters, fees that a vehicle rental company may charge; recordkeeping practices; general licensing or permit requirements; 38 38. See, e.g., Conn. Gen. Stat. Ann. § 14-15 (West 2018); D.C. Code § 50-1505.03 (2019); Del. Code Ann. Tit. 21 § 6102 (West 2019); Haw. Rev. Stat. Ann. § 251-3 (West 2019); Minn. Stat. Ann. § 168.27 (West 2019); Nev. Rev. Stat. Ann. § 482.363 (West 2019); N.J. Stat. Ann. § 45:21-12 (West 2019); Okla. Stat. tit. 47, § 8-101 (2004); 31 R.I. Gen. Laws Ann. § 31-5-33 (West 2019); W. Va. Code Ann. § 17A-6D-1 (West 2019); Wis. Stat. Ann. § 344.51(1m) (West 2018). × imposition of short-term rental taxes and surcharges; airport concession and permit requirements; limitations on the use of telematics; deposit and credit card restrictions; required display of counter signs; and required disclosures on rental agreements (including specified language, font size/style, and placement on written agreements). California even requires rental companies to warn their customers that operation of a passenger vehicle can expose individuals to certain chemicals that are known to cause cancer and birth defects, and therefore the customers should avoid breathing exhaust and take other precautions. Other states regulate one or more of these issues, with most states varying the specific requirements. For example, approximately 21 states regulate the sale of damage waivers with states taking different approaches on several key issues, including the permissibility of selling partial or deductible waivers, customer disclosures, and the permissible bases for invalidation of a waiver. 39 39. The typical damage waiver statute requires vehicle rental companies to disclose the optional nature of the waiver on the front of the rental agreement form and/or signs at the rental counter. Some statutes also regulate the content of the waiver and its exclusions. See, e.g., Cal. Civ. Code § 1939.09 (Deering 2019). Hawaii, Illinois, Maryland, New York, and Wisconsin require the distribution of brochures summarizing the damages waiver and its terms, and rental companies selling damage waivers in Louisiana and Minnesota must file a copy of the rental agreement before using it. Haw. Rev. Stat. Ann. § 437D-10 (LexisNexis 2019); 625 Ill. Comp. Stat. Ann. 27/20 (LexisNexis 2019); La. Stat. Ann. § 22:1525 (2018); Md. Code Ann. Com. Law § 14-2101 (LexisNexis 2019); Minn. Stat. Ann. § 72A.125 (West 2019); N.Y. Gen. Bus. Law § 396-z(4) (Consol. 2019); and Wis. Stat. Ann. § 344.576 (West 2018). ×

In addition to the issues noted above, most states prohibit rental of a vehicle without first inspecting the renter’s driver’s license to confirm that it is “facially valid” and (1) comparing the signature on the license with the renter’s signature written at the time of rental; and/or (2) comparing the photo with renter. 40 40. See, e.g., Fla. Stat. Ann. § 322.38(1-2) (LexisNexis 2018); 625 Ill. Comp. Stat. Ann. 5/6-305(b) (LexisNexis 2019); Nev. Rev. Stat. Ann. § 483.610 (LexisNexis 2019); Md. Code Ann. Transp. § 18-103(a), (b) (LexisNexis 2019); Wash. Rev. Code Ann. § 46.20.220 (LexisNexis 2019); W. Va. Code Ann. § 17B-4-6 (LexisNexis 2019). × Moreover, case law from various states provide guidance on what may or may not constitute negligent entrustment (which is excluded from the Graves Amendment). Finally, some states have begun to recognize the emergence of new mobility models and have either amended existing laws or passed new legislation to address the new models.

The paragraphs below summarize typical state laws (and how they vary) on several of these issues, including use of telematics systems; tolls and other fees, negligent entrustment, and peer-to-peer car sharing programs.

2. Telematics Systems and Vehicle Technology

Many mobility operators equip their rental vehicle fleet with global positioning systems (GPS) or other telematics systems (collectively “Telematics Systems”) to track vehicles for a variety of purposes, including fleet management; locating and recovering vehicles that are not returned by the due-in date (or that have been reported missing); calculating information related to the use of the vehicle, such as mileage, location, and speed; and providing services to renters, such as roadside assistance, maintenance, and navigation. Connected cars and HAVs will provide even more data that mobility operators can use to manage their fleets and enhance the user’s experience. 41 41. See, e.g., Avis Budget Group Boosts Fleet of Connected Cars with 75,000 In-Vehicle Telematics Units From I.D. Systems, Avis Budget Group (Dec. 17, 2018), https://avisbudgetgroup.com/avis-budget-group-boosts-fleet-of-connected-cars-with-75000-in-vehicle-telematics-units-from-i-d-systems-2/. (last visited May 8, 2019). ×

At the same time, mobility operators that use Telematics Systems to impose fees related to vehicle use (e.g., fees for traveling outside a geographic area or excess speeding), may face customer complaints or even litigation. For example, rental companies have been subject to suit in the past when they used GPS to collect location or speed information about a vehicle while on rent and impose additional fees on customers who violated geographic limitations of the rental agreement or state speed limits. 42 42. See Turner v. American Car Rental 884 A.2d 7 (Ct. App. Ct. 2005); Proposed Judgment, People v. Acceleron Corp., (Cal. Super. Ct. 2004), https://oag.ca.gov/system/files/attachments/press_releases/04-129_settle.pdf. ×

Four states, including California, Connecticut, Montana, and New York, currently have laws that specifically regulate “rental company” use of Telematics Systems. Specifically:

CaliforniaCalifornia generally prohibits rental companies from using, accessing, or obtaining information about a renter’s use of a rental vehicle that was obtained from “electronic surveillance technology” (“a technological method or system used to observe, monitor, or collect information, including telematics, . . . GPS, wireless technology, or location-based technology”), including for the purpose of imposing fines or surcharges.  However, electronic surveillance technology may be used if:

(1) The rented vehicle is missing or has been stolen or abandoned;

(2) the vehicle is 72 hours past the due-in date (and the company notifies the renter and includes required disclosures in the rental agreement);

(3) the vehicle is subject to an AMBER Alert; or

(4)  in response to a specific request from law enforcement pursuant to a subpoena or search warrant. 43 43. See Cal. Civ. Code § 1939.23(a) (West 2019). ×

Rental companies that use electronic surveillance technology for any of the reasons identified above also must maintain certain records of each such use for one year from date of use. 44 44. Id. The records must include any information relevant to the activation of the GPS, including: (1) the rental agreement; (2) the return date; (3) the date and time the electronic surveillance technology was activated; and (4) if relevant, a record any communication with the renter or the police. The record must be made available to the renter upon request, along with any explanatory codes necessary to read the record. × Rental companies may also use telematics at the request of renters, including for roadside service, navigation assistance, or remote locking/unlocking – as long as the rental company does not use, access or obtain information related to the renter’s use of the vehicle beyond that which is necessary to render the requested service. 45 45. See Cal. Civ. Code § 1939.23(b) (West 2019).  In addition, rental companies may obtain, access, or use information from electronic surveillance technology for the sole purpose of determining the date and time of the start and end of the rental, total mileage, and fuel level. × Like most of the other provisions of the California Vehicle Rental law, customers cannot waive these requirements. 46 46. See Cal. Civ. Code § 1939.29 (West 2019). The only provisions of the California vehicle rental law that a customer may waive are those related to business rentals, rentals of 15-passenger vans, and driver’s license inspection exceptions for remote access programs. ×

ConnecticutConnecticut’s non-uniform version of UCC Article 2A, 47 47. Conn. Gen. Stat. § 42-2A-702 (2013). × (which applies to both short-term and long-term consumer and commercial leases) regulates the use of “electronic self-help,” including the use of GPS devices to track and locate leased property to repossess the goods (or render them unusable without removal, such as remotely disabling the ignition of a vehicle). Before resorting to electronic self-help, a lessor must give notice to the lessee, stating:

      • That the lessor intends to resort to electronic self-help as a remedy on or after 15 days following notice to the lessee;
      • The nature of the claimed breach which entitled the lessor to resort to electronic self-help; and
      • The name, title, address and telephone number of a person representing the lessor with whom the lessee may communicate concerning the rental agreement.

In addition, the lessee must separately agree to a term in the lease agreement that authorizes the electronic self-help. A commercial lease requires only that the authorization is included as a separate provision in the lease, which implies that a consumer lease requires the express, affirmative consent of the lessee. 48 48. Conn. Gen. Stat. § 42-2A-702(e)(2)-(3) (2013). Lessees may recover damages, including incidental and consequential damages, for wrongful use of electronic self-help (even if the lease agreement excludes their recovery). Conn. Gen. Stat. § 42a-2A-702(e)(4). In addition, a lessor may not exercise electronic self-help if doing so would result in substantial injury or harm to the public health or safety or “grave harm” to third parties not involved in the dispute – even if the lessor otherwise complies with the statute. Conn. Gen. Stat. § 42a-2A-702(e)(5). ×

Montana Montana requires a “rental vehicle entity” providing a rental vehicle equipped with a GPS or satellite navigation system to disclose in the rental agreement (or written addendum) the presence and purpose of the system. 49 49. See Mont. Code Ann. 61-12-801(1)(a) (2019). For purposes of the Montana law, a “rental vehicle entity” is a business entity that provides the following vehicle to the public under a rental agreement for a fee: light vehicles, motor-driven cycles, quadricycles, or off-highway vehicles. Mont. Code Ann. 61-12-801(2)(b)-(c) (2019). A “rental agreement” is a written agreement for the rental of a rental vehicle for a period of 90 days or less. Mont. Code Ann. 61-12-801(2)(a) (2019). × If the GPS or satellite navigation system is used only to track lost or stolen vehicles, disclosure is not required.

New York – New York prohibits a “rental vehicle company” from using information from “any” global positioning system technology to determine or impose fees, charges, or penalties on an authorized driver’s use of the rental vehicle. 50 50. N.Y. Gen. Bus. Law 396-z(13-a). New York defines a “rental vehicle company” as “any person or organization . . . in the business of providing rental vehicles to the public from locations in [New York]. NY Gen. Bus. Law 396-z(1)(c). × The limitation on use of GPS, however, does not apply to the rental company’s right to recover a vehicle that is lost, misplaced, or stolen.

More recently, vehicle infotainment systems, which may include Telematics Systems like GPS, have come under scrutiny. In a putative class action filed against Avis Budget Group in December 2018, the plaintiff asserted that:

(a) a customer’s personal information may be collected and stored automatically by a vehicle each time the customer pairs his or her personal mobile device to the vehicle infotainment system to access navigation, music streaming, voice dialing/messaging, or other services; and

(b) failure to delete the customer data after each rental violated customers’ right to privacy under the California constitution, as well as the California rental law electronic surveillance technology provisions.

As of the date of this article, the defendant had removed the case to federal court and filed a motion to compel arbitration based on the terms and conditions of the rental agreement. 51 51. See Complaint, Kramer v. Avis Budget Group, Inc., Case No. 37-2018-00067024-CU-BT-CTL (Ca. Super. Ct., San Diego County 12/31/2018). The federal case number is 3:19cv421 (S.D. Cal.). Similar claims have been filed against other companies in California and all were initially removed to federal court, however, one of the cases has been remanded to state court. ×

2. Tolls and Other Fees

Several states, including California, Nevada, and New York, limit the types and even the amounts of fees that rental companies can charge. For example, California prohibits additional driver fees, and Nevada and New York cap those fees. In other states, a fee that appears to be excessive or punitive may be unenforceable. Generally, a fee is more likely to be enforced if it is fully disclosed, and the customer can avoid paying it by either not selecting a particular product or service (such as supplemental liability insurance or an additional driver) or not engaging in a particular behavior (such as returning the car late or with an empty gas tank). 52 52. See, e.g., Blay v. Zipcar, Inc., 716 F. Supp. 2d (D. Mass. 2010); Reed v. Zipcar, Inc., 883 F. Supp. 2d 329 (D. Mass. 2012). Cf. Bayol v. Zipcar, Inc., 78 F.Supp.3d 1252 (N.D. Cal. 2015). ×

Although disgruntled customers may complain about any fee that they believe is excessive or “hidden,” over the past several years, toll program charges have been among the most disputed in the car rental industry. Indeed, several class action claims have been filed against rental companies alleging inadequate disclosure of toll payment terms, failure to disclose use of third parties, unauthorized charges to the customer’s credit card, breach of contract, and similar claims. 53 53. See Doherty and Simonson v. Hertz, No 10-359 (NLH/KMW) 2014 WL 2916494 (D.N.J. Jun. 25, 2014) (approving over $11 million settlement of class action case based on assertions that inadequate disclosure of a rental company’s toll program violated consumer protection laws and breached the rental agreement); see also Mendez v. Avis Budget Group, Inc., No. 11-6537(JLL), 2012 WL 1224708 (D. N.J. Apr. 10, 2012); Readick v. Avis Budget Group, Inc., No. 12 Civ. 3988(PGG), 2013 WL 3388225 (S.D. N.Y. Jul. 3, 2013); Sallee v. Dollar Thrifty Automotive Group, Inc., et al., 2015 WL 1281518 (N.D. Okla. Mar. 20, 2015); Maor v. Dollar Thrifty Automotive Group, Inc., 303 F.Supp.3d 1320 (S.D. Fla. 2017). × State and local attorneys general have also investigated or filed civil claims against rental companies based on similar allegations. 54 54. See infra, note 55. ×

The increase in customer complaints and litigation likely stems from innovations in both toll collection methods and rental car toll payment processing (both of which seem likely to become an integral part of the connected car/HAV ecosystem). For example, an increasing number of toll roads and bridges are all-electronic. At the same time, many rental companies have introduced optional toll service products that permit renters to use electronic toll roads and lanes during the rental, some of which are provided by third parties. Often, a renter who declines to purchase the toll service at the time of rental will be subject to higher fees if he or she incurs toll charges by driving on an all-electronic road or lane during the rental.

The typical complaint focuses on alleged lack of or inadequate disclosure of the toll payment-processing program. For example, in recent settlement agreements with the Florida Attorney General, Avis Budget Group, Inc., and Dollar Thrifty Automotive Group, Inc. both agreed to disclose that Florida has cashless tolls, along with details about the rental company’s toll service options, and how the toll service charges can be avoided (such as by paying in cash, programming a GPS to avoid toll roads, contacting local authorities for other payment options, or using a personal transponder that is accepted on the toll road). 55 55. In February 2019, Hertz settled a case with the City Attorney of San Francisco for $3.65 million. The case alleged that the Hertz toll fee program as applied to the Golden Gate Bridge (an all-electronic toll road) failed to adequately disclose the fees or to provide customers the ability to opt-out. See Julia Cheever, Hertz Reaches $3.65 Million Settlement with SF over Golden Gate Bridge Tolls, San Francisco Examiner (Feb. 19, 2019), http://www.sfexaminer.com/hertz-reaches-3-65-m-settlement-sf-golden-gate-bridge-toll-fees/. See also Office of the Att’y Gen. of Fla.v. Dollar Thrifty Automotive Group, Inc., No. 16-2018-CV-005938 (Fla. Cir. Ct Jan. 7, 2019), https://myfloridalegal.com/webfiles.nsf/WF/TDGT-B8NT5W/$file/Final+Signed+DT AG+Settlement+Agreement+1+11+19.pdf.; In re Investigative Subpoena Duces Tecum to Avis Budget Group, Inc. and Payless Car Rental System, Inc., No 2017 CA 000122 (Fla. Cir. Ct. Jul. 7, 2017), http://myfloridalegal.com/webfiles.nsf/WF/JMAR-AP6LZQ/ $file/Settlement+Agreement+Avis.pdf. ×

Finally, state legislatures are taking notice of the tolling issues with several states proposing new legislation to regulate rental company toll programs and fees. As of January 1, 2019, Illinois became the first state to directly regulate toll programs by establishing maximum daily fees for toll programs if the rental company fails to notify the customer of the option to use a transponder or other device before or at the beginning of the rental. 56 56. See 625 Ill. Comp. Stat. 5/6-305. ×

3. Negligent Entrustment.

As noted above, the federal Graves Amendment protects “rental” or “leasing” companies from vicarious liability for their customers’ accidents based solely on ownership of the vehicle; however, the rental or leasing company is still liable for its own negligence or criminal wrongdoing. As a result, one common challenge to a rental or leasing company’s assertion of the Graves Amendment as an affirmative defense is a claim that the rental or leasing company somehow negligently entrusted the vehicle to the customer.

A vehicle owner may be liable for negligent entrustment if: (1) it provides a vehicle to a person it knows, or should know, is incompetent or unfit to drive; (2) the driver is in an accident or otherwise causes injury; and (3) that injury is caused by that person’s incompetence. 57 57. See Osborn v. Hertz Corp., 205 Cal.App.3d 703, 708-709 (1989). × To be found liable for negligent entrustment in the vehicle renting or leasing context, the rental or leasing company generally must have some special knowledge concerning a characteristic or condition peculiar to the renter that renders that person’s use of the vehicle unreasonably dangerous. Plaintiffs’ counsel typically allege that negligent entrustment is at issue where the driver appears to be intoxicated at the time of the rental or has a known substance abuse problem; where a renter is known by the rental company and its agents to be a reckless driver; or  where the rental company has reason to know that the renter may cause injury to others.

On the other hand, courts around the country have found that the following circumstances did not constitute negligent entrustment:

(1) failure to research the renter’s driving record; 58 58. See Flores v. Enterprise Rent-A-Car Co., 116 Cal. Rptr. 3d 71, 78 (2010). ×

(2) failure to recognize the signs of habitual drug use (when renter was not under the influence at the time of rental); 59 59. See Weber v Budget Truck Rental, 254 P.3d 196 (Wash. Ct. App. 2011). ×

(3) renting to an individual whose license had been suspended, but who had not yet received notification of the suspension; 60 60. See Young v. U-Haul, 11 A.3d 247 (D.C. Cir. 2011). ×

(4) failure to administer a driving test or to ensure that the driver is capable of actually operating the vehicle; 61 61. See Reph v. Hubbard, No. 07-7119, 2009 WL 659910 at *3 (E.D. La. 2009). ×

(5) renting to an individual who does not speak English fluently; (6) renting to an individual with an arm splint who did not indicate that the splint would interfere with his ability to drive; 62 62. See Mendonca v. Winckler and Corpat, Inc., No 1-5007-JLV, 2014 WL 1028392 (D.S.D. 2014). ×  and

 (7) renting to a former customer who previously reported an accident in a rental car and also allegedly returned a car with illegal drugs left behind. 63 63. See Maisonette v. Gromiler, No. FSTCV176031477S, 2018 WL 3203887 (Conn. Super. Ct. 2018). ×

4. State Laws Addressing New Mobility Platforms

More recently, some states have begun to recognize the emergence of new mobility models and have amended existing laws or passed new laws to address some of the issues. For example:

  • In 2011, California amended its insurance code to include a “personal vehicle sharing” statute, which regulates insurance aspects of “personal vehicle sharing programs” that facilitate sharing of private passenger vehicles (i.e., vehicles that are insured under personal automobile policies insuring a single individual or individuals residing in the same household) for non-commercial purposes, as long as the annual revenue received by the vehicle’s owners from the personal vehicle sharing does not exceed the annual expenses of owning and operating the vehicle (including the costs associated with personal vehicle sharing). 64 64. See Cal. Ins. Code 11580.24 (West 2018). Oregon and Washington have similar laws. ×
  • In 2012, California amended its driver’s license inspection statute to exempt membership programs permitting remote, keyless access to vehicles from driver’s license inspection requirements. 65 65. Cal. Civ. Code § 1939.37 (Deering 2019). × As of the date of this article, a similar draft bill is pending in Massachusetts. 66 66. H.D. 4139 (Mass. 2019). A similar bill came into effect in Florida on July 1, 2019. See Fla. Stat. Ann. § 322.38 (West 2019). ×
  • In 2015, Florida and Hawaii amended their laws to impose modified car rental surcharges on “carsharing organizations” (i.e., membership programs providing self-service access to vehicles on an hourly or other short-term basis). 67 67. Fla Stat. Ann. § 212.0606 (LexisNexis 2019); Haw. Rev. Stat. Ann. § 251 (LexisNexis 2019). ×
  • Maryland passed the first comprehensive “Peer-to-Peer Car Sharing Program” law in 2018. The Maryland law defines a “peer-to-peer car sharing program” as, “a platform that is in the business of connecting vehicle owners with drivers to enable the sharingof motor vehicles for financial consideration” 68 68. Md. Code Ann., Ins. § 19-520(a)(9) (LexisNexis 2019). Illinois also passed a peer-to-peer car sharing/rental law in 2018, but that law was vetoed by then-Governor Rauner. Michael J. Bologna, Illinois Governor Pumps the Brakes on Car-Sharing Taxes, Bloomberg; Daily Tax Report: State (August 31, 2018), https://www.bna.com/illinois-governor-pumps-n73014482161/ (last visited May 15, 2019). × and extends a number of vehicle rental law requirements, including those related to safety recalls, 69 69. Md. Code Ann., Transp., § 18.5-109 (LexisNexis 2019). ×  collision damage waiver sales, 70 70. Md. Code Ann., Com. Law, § 14-2101 (LexisNexis 2019). ×  limited lines licensing in connection with the sale of car rental insurance, 71 71. Md. Code Ann., Ins., § 10-6A-02 (LexisNexis 2019). × airport concession agreements, 72 72. Md. Code Ann., Transp. § 18.5-106 (LexisNexis 2019). ×  and recordkeeping requirements, to peer-to-peer car sharing programs. 73 73. Md. Code Ann., Ins. § 19-520 (LexisNexis 2019). × It also exempts the Peer-to-Peer Car Sharing Program operator and the shared vehicle’s owner from vicarious liability based solely on vehicle ownership in accordance with the Graves Amendment. 74 74. Md. Code Ann., Ins. § 19-520(e) (LexisNexis 2019). ×

 As of June 2019, the following states have pending, or have passed, peer-to-peer car sharing/car rental (or personal motor vehicle sharing) legislation: Arizona, California, Colorado, Georgia, Hawaii, Indiana, Iowa, Massachusetts, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, Washington, and West Virginia. 75 75. Arizona H.B. 2559 (Ariz. 2019) and S.B. 1305 (Ariz. 2019); A.B. 1263 (Cal. 2019); S.B. 090 (Colo. 2019); H.B. 378 (Ga. 2019); H.B. 241 HD2 SD 1 (Haw. 2019) and S.B. 662 SD2 (Haw. 2019); Pub. L. No. 253 (Ind. 2019) (to be codified at Ind. Code § 9-25-6-3); H.F. 779 (Ia. 2019); H.D. 4139 (Mass. 2019); L.B. 349 (Neb. 2019); S.B. 478 (Nev. 2019); H.B. 274 (N.H. 2019); A.B. 5092 (N.J. 2019); S.B. 556 (N.M. 2019); S.B. 5995 (N.Y. 2019); H.B. 2071 (Wash. 2019); H.B. 2762 (W. Va. 2019). × The scope of the pending bills ranges from extension of rental tax obligations to peer-to peer rentals to more comprehensive schemes similar to that passed in Maryland in 2018.

III.          The Challenge of Compliance

As demonstrated in the brief survey of existing rental laws above incumbent vehicle rental companies (especially those that operate in several states) must navigate numerous and often-inconsistent federal and state laws in their day-to-day operations. In addition to the challenges created by inconsistencies in the substantive requirements of the laws, not all of the laws use the same definition of “vehicle rental company” (which may vary depending upon the length of the transaction and the type of vehicle rented), so it is possible for an entity or transaction to be considered a “rental” in some, but not all, states or for some, but not all, purposes. 76 76. See Minto v. Zipcar New York, Inc., No. 15401/09 (N.Y. Super. Ct., Queens County Mar. 17, 2010). ×

In recent years, the challenge of compliance with existing laws – most of which did not contemplate anything other than a face-to-face handover of vehicle and keys — has increased as new entrants and incumbent operators attempt to innovate and take advantage of new technology to improve operations and customer experience. For example, use of kiosks, keyless access and GPS fleet management are all innovations that can improve the customer experience, which existing vehicle rental laws fail to facilitate. Enter the newer mobility operators, and things become even more interesting, with a close analysis of the definition of “rental company,” “rental vehicle,” and other key terms becoming even more important. To provide some context, consider a few hypotheticals:

Hypothetical 1 A 26-year old driver with a facially valid, but recently suspended driver’s license, rents a car in Arizona and is involved in an accident injuring a third party. Under Arizona law and indeed the law of all states, the rental car operator meets its statutory obligations by inspecting the driver’s license and confirming that it is facially valid. There is no duty to conduct any further investigation into the status of the driver’s license or the driving record of the prospective renter. Under this simple fact pattern, the rental car company has no liability to the injured third party for the negligence of the renter (beyond any state mandated minimum financial responsibility limit). Should the outcome be the same for a carsharing operation where the user accesses the vehicle through an app without any direct in-person contact with personnel of the operator? What about an owner of small fleet of cars who “rents” his vehicles through a peer-to-peer rental platform? How about a subscription program where an employee delivers a vehicle to a “lessee” or “renter” who has elected to switch the model of car being used?

Hypothetical 2 A California carshare member has had possession of a vehicle for three days and the operator receives notice that the member’s credit card is expired. The member has not responded to inquiries from the operator. If the carsharing transaction is considered to be a rental, as noted above, in California and a few other states, the mobility operator is precluded by statute from utilizing the vehicle’s GPS to locate the vehicle (at least until certain time periods have expired). Should that same limitation apply to the carshare operator? What if the purpose was to make sure that vehicles are properly distributed around a region so that it can serve its members’ anticipated demands? What about the renter of a peer-to-peer vehicle who is late with the car – can either the owner of the car or the peer-to-peer platform assist in locating the car via the vehicle’s GPS system? Can the operator of a subscription program utilize GPS to track the location of vehicles?

Hypothetical 3 A 30-year old renter with a valid license rents a vehicle through a peer-to-peer platform and two days later causes an accident resulting in substantial property damage and injuries. Pursuant to the federal Graves Amendment, if a peer-to-peer rental is characterized as a car rental transaction, the vehicle owner might argue there is no vicarious liability for the actions of the driver (assuming there was no negligence in how the transaction was handled). It is possible the arguments would vary if the owner of the vehicle operated a small fleet of cars, which it placed on a peer-to-peer platform. A few courts have concluded that the Graves Amendment protection extends to carshare operations. 77 77. See id. × Should that protection extend to the individual or small fleet owner that utilizes a peer-to-peer platform? Is there any basis to extend the Graves Amendment protection to the platform operator given that it typically does not own the vehicles?

Currently, the answers to many of the questions raised above are unclear with scant guidance from state legislatures or courts. As a result, a mobility operator generally must look to the definition of “rental company” to determine whether its model is or may be covered by a particular law. And that inquiry may lead an incumbent car rental operator to argue that it should no longer be subject to the outdated vehicle rental laws and regulations either.

IV.          Proposal

There is an ongoing debate in the mobility industry as to the extent that some models need to comply with existing laws and regulations related to the rental car industry. In particular, some peer-to-peer companies resist the application of those rules to their operations and argue that they are merely a technology company providing a platform to connect drivers with cars, and therefore are not subject to taxes, licensing requirements, or consumer protection laws governing incumbent rental companies. 78 78. See Turo, Inc. v. City of Los Angeles, 2019 U.S. Dist. LEXIS 6532 (C.D. Cal. 2019) (dismissing as unripe a peer-to-peer platform provider’s claim that it is immune from liability for state law violations under Section 230 of the Communications Decency Act and denying motions to dismiss claims that the City of Los Angeles misclassified the peer-to-peer platform provider as a rental company). × However, others urge that if all mobility operators are offering essentially the same services (use of a non-owned vehicle), then it seems more accurate to consider all mobility operators in the same business – mobility. As the New York Supreme Court noted in the Zipcar cases discussed in Part B, the services provided by a carsharing company (Zipcar) served a similar consumer need and were “little different from ‘traditional rental car’ companies, notwithstanding marketing statements that contrast it with those companies.” 79 79. See Minto v. Zipcar New York, Inc., No. 15401/09; see also Orly Lobel, “The Law of the Platform,” 101 Minn. L. Rev. 87, 112 (November 2016). ×

Setting aside those differences, there is some value to the mobility industry as a whole in consistent laws and regulations on some issues across the country and, of course, in protecting the safety and privacy of users. What follows are a few recommendations that could form the basis for a set of uniform laws applicable to the mobility industry. 80 80. The authors are unaware of any existing model laws for car rental or the broader mobility industry. Although the National Association of Attorneys General issued the NAAG Report on car rental practices and “guidelines” in 1989, those Guidelines were not intended to serve as model and uniform law, but rather guidance on compliance with state unfair and deceptive trade practice laws. See supra note 8. In addition, the NAAG Guidelines are now 30 years’ old and somewhat outdated in light of the changes in technology and the evolution in the mobility industry discussed in this article. ×

A.         Standardized Terms and Definitions 

Mobility operators, consumers, and regulators would benefit if federal and state laws used more consistent definitions for key terms and phrases. The definitions of the different platforms at the beginning of this article could be a starting point (which we repeat here without citations for ease of reference):

  • “Carsharing” – a membership-based service that provides car access without ownership. Carsharing is mobility on demand, where members pay only for the time and/or distance they drive.
  • “Peer-to-Peer Carsharing or Rentals” – the sharing of privately-owned vehicles in which companies, typically for a percentage of the rental charge, broker transactions among car owners and renters by providing the organizational resources needed to make the exchange possible (i.e., online platform, customer support, driver and motor vehicle safety certification, auto insurance and technology).
  • “Subscriptions” – a service that, for a recurring fee allows a participating person exclusive use of a motor vehicle owned by an entity that controls or contracts with the subscription service. Typically, the subscriber is allowed to exchange the vehicle for a different type of vehicle with a certain amount of notice to the operator. The term of the subscription can vary, but should be subject to a periodic renewal by the subscriber (user).
  • “Vehicle Rental” – a customer receives use of a vehicle in exchange for a fee or other consideration pursuant to a contract for an initial period of time less than 30 days.
  • “Mobility Operators” – any person or entity that provides access to a vehicle to another person whether by an in-person transaction, an app-based or online platform, or any other means and whether the entity providing the access is the owner, lessee, beneficial owner, or bailee of the vehicle or merely facilitates the transaction.

In addition, standard definitions for the terms, “rental” and “rental company” would provide additional clarity for all mobility operators, and to the extent feasible, the more narrow term “rental” and its derivatives should be replaced with “mobility.”

“Rental” should focus on the service provided and be distinguished from long-term leases (which are subject to additional laws and regulations, including federal Regulation M). As a starting point, “rental” could be defined as the right to use and possess a vehicle in exchange for a fee or other consideration for an initial period of less than 90 days. 81 81. Although the definition of “consumer lease” is a transaction for a period exceeding 4 months, we note that other federal laws, such as Graham-Leach-Bliley impose additional requirements on leases of at least 90 days. See 12 C.F.R. § 213.2(e)(1) (2011); 16 C.F.R. § 313.3(k)(2)(iii) (2000). ×

“Rental Company” or “Mobility Company” should be defined as “any corporation, sole proprietorship or other entity or person who is engaged in the business of facilitating vehicle rental transactions.” 82 82. See, e.g., H.B. 2762 (W. Va. 2019). × A de minimis exemption for individuals renting private vehicles through a peer-to-peer or other private vehicle program could apply (e.g., no more than X vehicles available for rent during a 12-month period). 83 83. See id. ×

A more uniform definition for “Rental Vehicle” or “Mobility Vehicle” also could produce more consistency across or even within states since some existing vehicle rental laws currently apply only to “private passenger vehicles,” while others apply more broadly to “motor vehicles.” Before proposing model language, however, we believe that regulators and industry experts need to consider several important (and somewhat thorny) issues.

For example, consider the rental of a pick-up truck to a contractor for use at a construction site. If a law applies only to rentals of “private passenger vehicles,” then the pick-up truck likely would not be subject to the law. On the other hand, if the law applies more broadly to “motor vehicles,” then the pick-up truck rental likely would be covered. The policy argument for covering our hypothetical pick-up truck rental may be weaker for consumer protection statutes, like required disclosures for sales of damage waiver or child safety seat rules. On the other hand, using a broader definition of “rental vehicle,” which would include the hypothetical pick-up truck, may better serve the general public policy goals of the Graves Amendment, the Safe Rental Act, and laws related to liability and insurance.

B.         Use of GPS and Telematics Technology

The use of this technology for locating and monitoring vehicles for a legitimate business, operational, maintenance or safety purpose should be permitted. Those states that have restricted the use of GPS tracking have done so to protect the privacy of renters. Operators in states where there is no statutory limitation often provide a full disclosure to users that vehicle location and other data may be monitored. We believe there are certain mobility models and circumstances where location and other data should be monitored – as long as there is full disclosure. For example, a free-floating carshare operator should be allowed to monitor vehicle location for the purpose of serving anticipated demand. Similarly, an operator of an EV fleet should be allowed to monitor a vehicle’s battery charge and location to ensure an adequate charge level for the next user. Finally, mobility operators should have the right to use GPS or other technology to locate vehicles that have not been returned on time or when the operator otherwise has reason to believe that the vehicle has been abandoned or stolen, or to track mileage driven or fuel used for purposes of charging associated fees (provided there is appropriate notice and full disclosure to the user). On a broader scale, uniform regulation that permits some vehicle monitoring, as long as done in a manner to protect the privacy of a user and with full disclosure, should be adopted across all mobility platforms.

C.         Vehicle Access

Provided there is an initial verification of a driver’s license, a mobility operator that either allows access to vehicles without in-person contact or does not require signing of a rental agreement at the time of rental should be subject to a provision similar to the following:

If a motor vehicle rental company or private vehicle rental program provider facilitates rentals via digital electronic, or other means that allow customers to obtain possession of a vehicle without in person contact with an agent or employee of the provider, or where the renter does not execute a rental contract at the time of rental, the provider shall be deemed to have met all obligations to physically inspect and compare a renter’s driver license pursuant to this article when such provider:

  1. At the time a renter enrolls, or any time thereafter, in a membership program, master agreement, or other means of establishing use of the provider’s services, requires verification that the renter is a licensed driver; or
  2. Prior to the renter taking possession of the rental vehicle, the provider requires documentation that verifies the renter’s identity.

D.         Graves Amendment    

The Graves Amendment, by its language, applies to the business of “renting or leasing” vehicles. A few state court cases have confirmed that Graves applies to carsharing. That application should be expressly adopted on a national basis and extended to all mobility models that involve a vehicle “owner’s” grant of the right to possess and use a vehicle in exchange for a fee or other consideration (including loaner vehicles).

Similarly, subscription programs which operate somewhere between incumbent car rental and vehicle leasing programs, at their core involve the short-term use of a vehicle in exchange for payment. Provided the subscription program complies with state rental car laws or applicable subscription legislation, the operation should be subject to the Graves Amendment. For that reason, we recommend that state legislatures either refine the Indiana/North Carolina definition of “subscription” to clarify that the model is a rental or lease for purposes of the Graves Amendment or simply state that subscription models are exempt from state vicarious liability laws based on vehicle ownership.

Peer-to-Peer platforms raise some issues when considering the Graves Amendment. On the one hand, an end-user is paying money to use a vehicle that belongs to someone else much like an incumbent rental car operation. On the other hand, a true “peer”-or individual- who occasionally lists his or her personal vehicle for rent when not using it may not really be in the business of renting cars. Much of the recent Peer-to-Peer legislation addresses this and related issues. Our suggestion is that Peer-to-Peer be subject to express state legislation and that such legislation impose sufficient operational, safety and economic obligations on operators, including required insurance coverage. In the absence of Peer-to-Peer legislation, an operator should have to comply with existing state rental car regulations especially if the operator somehow claims it is subject to the Graves Amendment.

E.         Americans with Disabilities Act

    Compliance with and exceptions to the ADA is complex. However, we propose that all mobility operators with fleets above a certain size must provide adaptive driving devices for selected vehicles, as long as the customer provides advance notice (which may vary depending upon the operator’s location and fleet size) and the adaptive driving devices are compatible with vehicle design and do not interfere with the vehicle’s airbag or other safety systems.

F.         Disclosure Requirements

All operators must provide sufficient disclosures to users regarding the following matters: fees, charges, damage waivers, added insurance, and vehicle technology. However, typical requirements in the existing state rental laws, including specified placement and font size for disclosures and in-person acknowledgment of receipt of those disclosures, simply do not contemplate modern technology, including digital agreements and remote access.  We propose the 2018 amendment to the New York vehicle rental law as the model for addressing required disclosures and formatting in electronic and/or master, membership agreements. That amendment provides:

(a) Notwithstanding any other provision of this section, any notice or disclosure of general applicability required to be provided, delivered, posted, or otherwise made available by a rental vehicle company pursuant to this section shall also be deemed timely and effectively made where such notice or disclosure is:

(i)       provided or delivered electronically to the renter at or before the time required provided that such renter has given his or her expressed consent to receive such notice or disclosure in such a manner; or

(ii)      included in a member or master agreement in effect at the time of rental.

(b)  . . . Notices and disclosures made electronically pursuant to this subdivision shall be exempt from any placement or stylistic display requirements, including but not limited to location, font size, typeset, or other specifically stated description; provided such disclosure is made in a clear and conspicuous manner.

G.         Other Issues

There are, of course, other issues the industry can consider. For example, some states (New York and Michigan) have laws requiring rental car companies to make vehicles available to younger drivers, subject to certain conditions. Some uniformity on the ability of mobility operators to set minimum age requirements would reduce risk. Additionally, there are inconsistent laws across the country regarding the amount of time a rental car company must wait after a renter fails to return a car before it can notify law enforcement. Appropriate and consistent rules as to when an operator can start to recover a valuable (and mobile) asset would help promote growth in the industry.

The mobility revolution involves a number of different players with disparate and sometimes competing interests. Not all the participants will agree on all the issues, however, we offer the above suggestions to encourage discussion and to advance some level of consistency on a few points.


Wes Hurst is an attorney with a nationwide Mobility and Vehicle Use Practice. He represents rental car companies, carsharing companies, automobile manufacturers and companies pursuing new and emerging business models related to mobility and the use of vehicles. Wes is a frequent speaker and author on mobility related topics. Wes is in the Los Angeles office of Polsinelli and can be reached at whurst@polsinelli.com.

Leslie Pujo is a Partner with Plave Koch PLC in Reston, Virginia. In her Mobility and Vehicle Use Practice, Leslie regularly represents mobility operators of all types, including car rental companies, RV rental companies, automobile manufacturers and dealers, carsharing companies and other emerging models. Leslie is a frequent speaker and author on car rental and other mobility topics and can be reached at lpujo@plavekoch.com.

* The authors wish to thank Naila Parvez for her assistance

“Safety.” A single word that goes hand-in-hand (and rhymes!) with CAV. If much has been said and written about CAV safety already (including on this very blog, here and there,) two things are certain: while human drivers seem relatively safe – when considering the number of fatalities per mile driven – there are still too many accidents, and increasingly more of them. 

The traditional approach to safely deploying CAVs has been to make them drive, drive so many miles, and with so few accidents and “disengagements,” that the regulator (and the public) would consider them safe enough. Or even safer than us!  

Is that the right way? One can question where CAVs are being driven. If all animals were once equal, not every mile can be equally driven. All drivers know that a mile on a straight, well-maintained road by a fine sunny day is not the same as a mile drive on the proverbially mediocre Michigan roads during a bout of freezing rain. The economics are clear; the investments in AV technology will only turn a profit through mass deployment. Running a few demos and prototypes in Las Vegas won’t cut it; CAVs need to be ready to tackle the diversity of weather patterns we find throughout the world beyond the confines of the US South-West.

Beyond the location, there is the additional question of whether such “testing” method is the right one in the first place. Many are challenging what appears to be the dominant approach, most recently during this summer’s Automated Vehicle Symposium. Their suggestion: proper comparison and concrete test scenarios. For example, rather than simply aiming for the least amount of accidents per 1000’s of miles driven, one can measure break speed at 35mph, in low-visibility and wet conditions, when a pedestrian appears 10 yards in front of the vehicle. In such a scenario, human drivers can meaningfully be compared to software ones. Furthermore, on that basis, all industry players could come together to develop a safety checklist which any CAV must be able to pass before hitting the road. 

Developing a coherent (and standardized?) approach to safety testing should be at the top of the agenda, with a looming push in Congress to get the AV bill rolling. While there are indications that the industry might not be expecting much from the federal government, this bill still has the possibility of allowing CAVs on the road without standardized safety tests, which could result in dire consequences for the industry and its risk-seeking members. Not to mention that a high-risk business environment squeezes out players with shallower pockets (and possibly innovation) and puts all road users, especially those without the benefit of a metal rig around them, at physical and financial risk were an accident to materialize. Signs of moderation, such as Cruise postponing the launch of its flagship product, allows one to be cautiously hopeful that “go fast and break things” mentality will not take hold in the automated driving industry.

*Correction 9/9/19 – A correction was made regarding the membership to 1958 Agreement and participation at the World Forum.

By Emily Frascaroli, John Isaac Southerland, Elizabeth Davis, and Woods Parker

Cite as: Emily Frascaroli et al., Let’s Be Reasonable: The Consumer Expectations Test is Simply Not Viable to Determine Design Defect for Complex Autonomous Vehicle Technology, 2019 J. L. & Mob. 53.

Abstract

Although highly automated vehicles (“HAVs”) have potential to reduce deaths and injuries from traffic crashes, product liability litigation for design defects in vehicles incorporating autonomous technology is inevitable. During the early stages of implementation, courts and juries will be forced to grapple with the application of traditional product liability principles to a never before experienced category of highly technical products. Recent decisions limiting the use of the consumer expectations test in cases involving complex products prompted the authors to examine more closely the history behind and the future viability of the consumer expectations test in HAV litigation.

I.          Introduction

In 2016, more than 35,000 individuals died in vehicle crashes in the U.S. and the National Highway Traffic Safety Administration (“NHTSA”) estimated that 94% of these deaths were attributable to human error. 84 84. Automated Vehicles for Safety, NHTSA, https://www.nhtsa.gov/technology-inn ovation/automated-vehicles-safety (last visited May 2, 2019). × In 2017 and 2018, in their own self-driving safety reports, General Motors and Waymo also noted that approximately 1.2 million lives are lost worldwide each year due to car crashes. 85 85. Waymo, Waymo Safety Report: On the Road to Fully Self-Driving 3 (2018), https://storage.googleapis.com/sdc-prod/v1/safety-report/Safety%20Report%20 2018.pdf; General Motors, 2018 Self-Driving Safety Report 3 (2018), https://ww w.gm.com/content/dam/company/docs/us/en/gmcom/gmsafetyreport.pdf. × Each of these entities further agree that highly automated vehicle (“HAV”) 86 86. For purposes of this paper, the terms highly automated vehicle (HAV) or “self-driving” will refer to vehicles defined by SAE Levels 4–5. See SAE International, Taxonomy and Definitions for Terms Related to Driving Automation Systems for On-Road Motor Vehicles J3016 (2018), https://saemobilus.sae.org/content/j3016 _201806. The SAE levels of automation are as follows: (0) No automation; the vehicle has zero autonomy, and the driver performs all tasks; (1) Driver Assistance: the vehicle is controlled by the driver, but some driver assistance features are included; (2) Partial Driving Automation: the vehicle has combined automated functions, but the driver must remain engaged with the driving task and monitor the environment constantly; (3) Conditional Driving Automation: the driver is necessary, but is not required to constantly monitor the environment—the driver must be ready to take control of the vehicle at all times; (4) High Driving Automation: the vehicle is capable of performing all driving functions under certain conditions, but the driver has the option of controlling the vehicle; and (5) Full Driving Automation: the vehicle is capable of performing all driving functions under all conditions, with the driver having the option of controlling the vehicle. × technology has the potential to reduce or remove human error from the equation. 87 87. See Waymo, supra note 2; General Motors, supra note 2. × Additional potential benefits include reduced traffic congestion; increased mobility options for currently underserved populations; and, increased comfort and a reduction in lost time during vehicle operation. 88 88. General Motors, supra note 2. × Put simply, the stage is set for HAV technology to revolutionize the mobile world.

During the implementation of HAVs, most sources agree that, due to their highly complex and technical nature, consumer education about the products will be key to successful and effective implementation. For its part, in the 2017 update, Automated Driving Systems 2.0, NHTSA stated that “[E]ducation and training is imperative for increased safety during the deployment of [HAVs],” and encourages the development of “consumer education and training programs to address the anticipated differences in the use and operation of [automated driving systems] from those of the conventional vehicles that the public owns and operates.” 89 89. NHTSA, Automated Driving Systems: A Vision for Safety 2.0 15 (2017), https://www.nhtsa.gov/vehicle-manufacturers/automated-driving-systems#automated-driving-systems-av-20. × General Motors and Waymo echoed these sentiments in their respective self-driving safety reports with Waymo, in October 2017, even helping to launch – Let’s Talk Self-Driving – which it describes as “the world’s first public education campaign about fully self-driving vehicles.” 90 90. Waymo, supra note 2 at 30; General Motors, supra note 2, at 32. × Taking this one-step further, in 2018, Ford provided its Voluntary Safety Self-Assessment Report – A Matter of Trust. 91 91. Ford Motor Company, A Matter of Trust: Ford’s Approach to Developing Self-DrivingVehicles, https://media.ford.com/content/dam/fordmedia/pdf/ Ford_AV_LLC_FINAL_HR_2.pdf. × In it, Ford makes clear “that the central challenge in the development of self-driving vehicles” is not the technology, but, instead, it is consumer trust in the “safety, reliability and experience that the technology will enable.” 92 92. Id.at 3. × Ford reiterates this point stating about consumer education and training that, “[B]ringing self-driving vehicles to market will require a thoughtful and sustained effort to teach customers how they work, why they’re safe and how to use them.” 93 93. Id. at 42 (emphasis added). ×

In light of this, questions remain, particularly with respect to liability, if, and when, an injury or death occurs in an HAV. The question of who is liable when a self-driving vehicle crashes has generated significant debate and conversation. Per NHTSA, “these are among many important questions beyond the technical considerations that policymakers are working to address before automated vehicles are made available.” 94 94. Automated Vehicles for Safety, supra note 1. × NHTSA also posits that questions of liability pertaining to HAVs are something within the purview of each state to manage. 95 95. NHTSA, supra note 6, at 24. × In the wake of some interesting opinions in 2017, this question, and others, prompted the authors to examine the historical development of product defect theories and, in particular, whether the consumer expectations test can reasonably be applied to determine liability in cases involving complex products.

II.         Adoption of Design Defect Tests in the Wake of Section 402A of the Restatement (Second) of Torts.

In 1965, the law of torts and the field of product liability were altered dramatically by the adoption of Section 402A of the Restatement (Second) of Torts. 96 96. See generally George L. Priest, Strict Products Liability: The Original Intent, 10 Cardozo L. Rev. 2301, 2301 (1989). × Section 402A sought to impose strict liability on the manufacturers or sellers of defective products, regardless of negligence, and became perhaps the most cited section of any Restatement of Law in legal jurisprudence. 97 97. See James A. Henderson Jr. & Aaron D. Twerski, Proposed Revision of Section 402A of the Restatement (Second) of Torts, 77 Cornell L. Rev. 1512, 1512 n.1 (1992). ×

A.         The Consumer Expectations Test

Section 402A provides that “[o]ne who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property . . . .” 98 98. Restatement (Second) of Torts § 402A (Am. Law Inst. 1965). × To guide courts in determining whether a product is unreasonably dangerous, the drafters of the Second Restatement included the following comment: “The article sold must be dangerous to an extent beyond that which would be contemplated by the ordinary consumer who purchases it, with the ordinary knowledge common to the community as to its characteristics.” 99 99. Id. at cmt. i. × This comment provided support for the pure consumer expectations test in product defect cases. In turn, this product defect test was embraced by courts in the years following the release of the Second Restatement. 100 100. See, e.g., Aller v. Rodgers Machinery Mfg. Co., Inc., 268 N.W. 2d 830 (Iowa 1978); Phipps v. General Motors Corp., A.2d 955 (Md. 1976); Estate of Pinkham v. Cargill, Inc., 55 A.3d 1 (Me. 2012) (citing Adams v. Buffalo Forge Co., 443 A.2d 932, 940 (Me. 1982)); Simonetta v. Viad Corp., 197 P.3d 127 (Wash. 2008). × Over time, courts across the country recognized that there were significant issues with the Second Restatement’s pure consumer expectations approach to defective design.

For example, in the 1967 case of Heaton v. Ford Motor Co., the Supreme Court of Oregon was faced with application of the consumer expectations test in the context of a design defect claim involving a motor vehicle. 101 101. See Heaton v. Ford Motor Co., 435 P.2d 806 (Or. 1967). × In Heaton, the plaintiff’s vehicle struck a rock in the roadway. After the accident, the rim of the wheel was found to have separated from the rest of the wheel assembly. The court utilized the consumer expectations test to determine design defect, stating:

In the type of case in which there is no evidence, direct or circumstantial, available to prove exactly what sort of manufacturing flaw existed, or exactly how the design was deficient, the plaintiff may nonetheless be able to establish his right to recover, by proving that the product did not perform in keeping with the reasonable expectations of the user. When it is shown that a product failed to meet the reasonable expectations of the user the inference is that there was some sort of defect. 102 102. Id. at 471–72 (emphasis added). ×

However, the court recognized that in Heaton, the jury could not possibly state from their own experience what the expectations of the average consumer would be. 103 103. See id. at 472–73. × After all, high-speed collisions with large rocks are not so common that the average person would know from personal experience how the wheel assembly would perform in such a situation. 104 104. Id. at 473. × As such, “[t]he jury would therefore be unequipped, either by general background or by facts supplied in the record, to decide whether this wheel failed to perform as safely as an ordinary consumer would have expected.” 105 105. Id. × Unfortunately, the Heaton court ultimately refused to acknowledge that the consumer expectations test simply did not apply in this situation, but instead seemed to suggest that expert testimony would be required to establish the consumer expectations. 106 106. See id. at 474. × The paradox is obvious: if an expert is required to tell the consumer what to expect, is that truly the expectation of an ordinary consumer?

Fortunately, courts have begun to recognize that utilizing the consumer expectations test in cases involving alleged design defects in technically complex products is simply not workable. 107 107. See, e.g., Montag v. Honda Motor Co., Inc., 75 F.3d 1414 (10th Cir. 1996) (citing Camacho v. Honda Motor Corp., 741 P.2d 1240, 1246–48 (Colo. 1987)). See also 2 Louis R. Frumer & Melvin I. Friedman, Products Liability§ 11.03 (Matthew Bender, Rev. Ed.). × However, there are courts that have found the consumer expectations test applicable, even where the requisite knowledge is not within the purview of lay jurors. 108 108. See, e.g., Bresnahan v. Chrysler Corp., 38 Cal. Rptr. 2d 446, 451–52 (Cal. Ct. App. 1995). See also 2 Frumer & Friedman, supra note 25. ×

B.         Risk Utility Test

As a result, many courts began to apply the test commonly referred to as risk-utility balancing. Under this test, to establish a prima facie case of design defect, the plaintiff must show that on balance, the utility of the challenged product design outweighs the risk of danger inherent in the design. 109 109. See, e.g., Thibault v. Sears, Roebuck & Co., 395 A.2d 843 (N.H. 1978). × Traditionally, under risk-utility, courts consider a multitude of factors to determine whether a defect exists, including the following factors identified in an influential article by Dean John W. Wade in 1973:

    1. The usefulness and desirability of the product;
    2. the safety aspects of the product;
    3. the availability of safer substitute products;
    4. the possibility of elimination of dangerous characteristics of the product without impairing its usefulness;
    5. the user’s ability to avoid danger by safe use of the product;
    6. the anticipated dangers inherent in the product due to general knowledge or the existence of warnings; and
    7. the possibility of loss-spreading by the manufacturer through price setting or insurance. 110 110. See John W. Wade, On the Nature of Strict Tort Liability for Products, 44 Miss. L.J. 825 (1973). ×

Further, “[t]he utility of the product must be evaluated from the point of view of the public as a whole, because a finding of liability for defective design could result in the removal of an entire product line from the market.” 111 111. See Thibault, 395 A.2d at 807. ×

In 1998, the element of a reasonable alternate design was written into the new Restatement (Third) of Torts. 112 112. See Restatement (Third) of Torts § 2 (Am. Law Inst., 1998). × Under § 2of the Third Restatement, a product is:

 “[D]efective in design when the foreseeable risks of harm posed by the product could have been reduced or avoided by the adoption of a reasonable alternative design by the seller or other distributor, or a predecessor in the commercial chain of distribution, and the omission of the alternative design renders the product not reasonably safe. 113 113. Id. The Third Restatement explicitly rejects consumer expectations as an independent standard for determining design defect. See id. at §2 cmt. g. ×

As noted in 2009, the “reasonable alternative design” standard of the Third Restatement ultimately came to embody the “risk-utility test” that is applied in the majority of United States jurisdictions today. 114 114. See Aaron D. Twerski & James A. Henderson, Jr., Manufacturer Liability for Defective Product Designs: The Triumph of Risk Utility, 74 Brook. L. Rev. 1061, 1065 (2009). Notably, even courts that continue to utilize the consumer expectations test exclusively often acknowledge that evidence of an alternative design is the most appropriate and useful means of showing that a product is unreasonably dangerous. See, e.g., Ford Motor Co. v. Trejo, 402 P.3d 649, 655 (Nev. 2017). ×

Significant developments since 2009, some of which are discussed more fully below, further exemplify the national trend towards applying risk-utility in complex design defect cases and moving away from the consumer expectations test in this context. Indeed, in 2017, the Ninth Circuit recognized that, “when the ultimate issue of design defect calls for a careful assessment of feasibility, practicality, risk, and benefit, the case should not be resolved simply on the basis of ordinary consumer expectations.” 115 115. See Edwards v. Ford Motor Co., 683 Fed. App’x 610, 611 (9th Cir. 2017) (quoting Soule v. General Motors Corp., 882 P.2d 298, 305 (Cal. 1994)) (emphasis supplied in original). ×

C.         Hybrid Test

Other jurisdictions utilize a dual-approach to design defect claims. California, for example, utilizes the consumer expectations test when consumers are capable of developing expectations about the characteristics of a product from everyday use. 116 116. See Soule, 882 P.2d at 310–311. × For more complex products, where the characteristics are outside the knowledge of an everyday consumer, courts apply the risk-benefit test. 117 117. See id. × Thus, the determinative issue in many cases in California and similar jurisdictions is whether a product is too complex or unfamiliar for average consumers to develop expectations, such that utilization of the consumer expectations test is improper. 118 118. See, e.g., Saller v. Crown Cork & Seal Co., Inc., 115 Cal. Rptr. 3d 151, 160–61 (Cal. Ct. App. 2010). × Making this determination in the context of autonomous technology should not be an issue.

This hybrid approach combines elements of both the consumer expectations test and the risk-utility test. One example is the “either-or” concept, which posits that:

[A] product is defective in design either (1) if the product has failed to perform as safely as an ordinary consumer would expect when used in an intended or reasonably foreseeable manner, or (2) if, in light of the relevant factors . . . the benefits of the challenged design do not outweigh the risk of danger inherent in the design. 119 119. Barker v. Lull Eng’g Co., 573 P.2d 443, 446 (Cal. 1978). ×

This approach allows courts more flexibility in applying the appropriate test based upon all of the relevant circumstances. For example, in Barker v. Lull Engineering, the plaintiff sustained injuries while operating a loader at a construction site and alleged that his injuries were caused by a defective design of the product because it was not equipped with a roll bar or seat belts. 120 120. Id. at 447–48. × The California Supreme Court rejected a pure consumer expectations test and a pure risk-utility test, instead articulating the two-prong test allowing a plaintiff to establish a design defect through either test. 121 121. Id. at 455–56. × In so holding, the court noted the benefits of the more flexible approach stating:

[I]t subjects a manufacturer to liability whenever there is something “wrong” with a product’s design – either because the product fails to meet ordinary consumer expectations as to safety or because, on balance, the design is not as safe as it should be – while stopping short of making the manufacturer an insurer for all injuries which may result from the use of its product. This test, moreover, explicitly focuses on the trier of fact’s attention to the adequacy of the product itself, rather than on the manufacturer’s conduct, and places the burden on the manufacturer, rather than the plaintiff, to establish that because of the complexity of, and trade-offs implicit in, the design process, an injury-producing product should nevertheless not be found defective. 122 122. Id. at 456. ×

Other courts have taken a different approach in formulating a hybrid consumer expectations and risk-utility test, incorporating risk-utility factors into the consumer expectation analysis, and vice versa. 123 123. See, e.g.,Potter v. Chicago Pneumatic Tool Co., 694 A.2d 1319, 1333–34 (Conn. 1997). × For example, in Potter v. Chicago Pneumatic Tool Co., the plaintiffs alleged that pneumatic hand tools manufactured by the defendant were defective in design because they exposed the plaintiffs to excessive vibration, resulting in injuries to the plaintiffs. 124 124. Id. at 1325. × Although Connecticut courts had long applied the Second Restatement’s consumer expectations test, the court recognized that “there may be instances involving complex product designs in which an ordinary consumer may not be able to form expectations of safety.” 125 125. Id. at 1333. × In recognizing this issue with the pure consumer expectations test, the Connecticut Supreme Court adopted a “modified consumer expectation test, provid[ing] the jury with the product’s risks and utility and then inquir[ing] whether a reasonable consumer would consider the product unreasonably dangerous.” 126 126. Id. × In determining a consumer’s reasonable expectations, the jury should consider various factors, including but not limited to the “relative cost of the product, the gravity of the potential harm from the claimed defect and the cost and feasibility of eliminating or minimizing the risk.” 127 127. Id. × In sum, under this approach, “the consumer expectation test would establish the product’s risks and utility, and the inquiry would then be whether a reasonable consumer would consider the product design unreasonably dangerous.” 128 128. Id. × The Connecticut Supreme Court’s approach was based, in part, on early drafts of the Restatement (Third) of Torts on Product Liability. 129 129. Id. at 1331. ×

III.       More and More Courts Are Recognizing the Limitations of the Consumer Expectations Test in Complex Design Defect Cases.

In March 2017, the United States Court of Appeals for the Ninth Circuit examined the question of whether the consumer expectations test or risk-utility balancing test should be applied to determine whether a design defect existed in a product liability case involving vehicle roof deformation. 130 130. See Edwards v. Ford Motor Co., 683 Fed. App’x 610 (9th Cir. 2017). × In Edwards v. Ford Motor Co., the plaintiffs claimed that the roof of their vehicle was defectively designed because it deformed inward eight inches into the passenger compartment during a multiple rollover event. The plaintiffs alleged that a properly designed roof should have resulted in less than three inches of deformation in the subject crash.

The Edwards plaintiffs sought to prove design defect by showing that the roof did not perform as the average consumer would have expected. Ford filed a motion contending that the jury should be instructed on the risk-utility test alone. Ford’s motion was granted and plaintiffs appealed. The Ninth Circuit held that the risk-utility test was the proper test to be applied, specifically recognizing the “lack of consumer expectations regarding the extent to which the [vehicle]’s roof would crush in a multiple rollover accident.” 131 131. Id. at 611. × The Ninth Circuit went on to note that “[d]rivers’ everyday experiences do not allow for the formulation of reasonable expectations as to the degree that a vehicle’s roof should crush during a rollover.” 132 132. Id. × The Ninth Circuit did not feel it necessary to state whether or not this product was too complex for the consumer expectations test to govern; instead, it was enough to know that consumers simply would not have expectations related to roof performance in a rollover. 133 133. See id.; See also Branham v. Ford Motor Co., 701 S.E. 2d 5, 13–14 (S.C. 2010) (finding that the consumer expectations test was not appropriate in design defect case after examining the issue in the context of an automotive rollover case involving an allegedly defective seatbelt design). × Thus, the risk-utility test was the appropriate test. 134 134. See id. ×

Another recent case decided by the Court of Appeal of California also limited the applicability of the consumer expectations test. The plaintiff in Trejo v. Johnson & Johnson contracted a rare condition known as SJS/TEN as a reaction to taking over-the-counter ibuprofen produced by Johnson & Johnson. Plaintiff sought to show that the drug was defectively designed through utilization of the consumer expectations test.

The Court of Appeal found the consumer expectations had no place in proving design defect under these facts, noting that “‘[t]he consumer expectations test is reserved for cases in which the everyday experience of the product’s users permits a conclusion that the product’s design violated minimum safety assumptions, and is thus defective regardless of expert opinion about the merits of the design.’” 135 135. Trejo v. Johnson & Johnson, 220 Cal. Rptr. 3d 127, 165 (Cal. Ct. App. 2017) (quoting Soule v. General Motors Corp., 882 P.2d 298, 308 (Cal. 1994). × The plaintiff essentially attempted to use consumer expectations to avoid having to confront the more difficult risk-utility standard or any showing of a reasonable alternative design, but also wished to introduce expert testimony to establish that the ibuprofen did not meet consumer expectations. The court found this fact alone sufficient to demonstrate the consumer expectations test was inappropriate for that case. 136 136. See id. at 168. ×

Succinctly explaining the problem with applying consumer expectations in the case of complex products or products with which consumers are unfamiliar, the court stated: “[I]t could be said that any injury from the intended or foreseeable use of a product is not expected by the ordinary consumer. If this were the end of the inquiry, the consumer expectations test always would apply and every product would be found to have a design defect.” 137 137. See id. at 167 (emphasis added). ×

As to a non-complex product, the Tenth Circuit’s examination of consumer expectations in Kokins v. Teleflex, Inc. is instructive. 138 138. See Kokins v. Teleflex, Inc., 621 F.3d 1290 (10th Cir. 2010). × Kokins involved the determination of what design defect test should be used under Colorado law in the context of a claim involving a metal marine cable, a seemingly simple product. The court initially noted that, under Colorado law, the risk-utility test and consumer expectations test are not mutually exclusive of each other and can sometimes even be applied in the same case. 139 139. See id. at 1297. × However, the Tenth Circuit held that in the context of this particular product, only the risk-utility test was proper, due to the technical and specific information related to metallic corrosion. 140 140. See id. × Quite simply, in cases where technical and scientific issues predominate, use of the consumer expectations test, alone or in conjunction with the risk-utility test, is inappropriate. 141 141. See id. ×

Finally, as recently as November, 2017, the Colorado Supreme Court determined that the “risk-benefit test is the appropriate test to assess whether a product was unreasonably dangerous due to a design defect when . . . the dangerousness of the design is ‘defined primarily by technical, scientific information.’” 142 142. See Walker v. Ford Motor Co., 406 P.3d 845, 850 (Colo. 2017) (quoting Ortho Paharm. Corp. v. Heath, 722 P.2d 410, 414 (Colo. 1986)). × In Walker v. Ford Motor Co., the plaintiff proceeded to trial against Ford for injuries sustained in a rear-end impact. 143 143. See id. at 847­–48. × The plaintiff alleged the seat in his vehicle was defectively designed, alleging theories based in both strict liability and negligence. 144 144. See id. at 848. × At the end of trial, the trial court instructed the jury that it could apply either a consumer expectation test or risk-benefit test, and the jury found in favor of the plaintiff. 145 145. See id. at 848. × The court of appeals reversed the jury verdict. 146 146. See id. at 849. ×

In affirming the Colorado Court of Appeals, the Colorado Supreme Court recognized that it had “stated repeatedly that the risk-benefit test, not the consumer expectation test, is the proper test to use in assessing whether a product like the car seat . . . is unreasonably dangerous due to a design defect.” 147 147. Id. at 850. × The Court further noted:

[P]roducts-liability law has developed in part to “encourage manufacturers to use information gleaned from testing, inspection and data analysis” to help avoid product accidents. Using the risk-benefit test . . . helps further this objective, as it directs the fact-finders to consider the manufacturer’s ability to minimize or eliminate risks and the effect such an alteration would have on the product’s utility, other safety aspects, or affordability. 148 148. Id. at 851 (quoting Camacho v. Honda Motor Co., 741 P.2d 1240, 1247 (Colo. 1987)). ×

While the authors recognize the debate about whether to apply the consumer expectations test or the risk-utility test continues to this day, and that some jurisdictions still apply the consumer expectations test, even in cases of complex products, the above referenced opinions illustrate the issues and concerns with asking jurors to determine the expectations of an ordinary consumer when evaluating a highly technical products in design defect matters.

IV.       The Consumer Expectations Test Is Not the Appropriate Test of Design Defect as Applied to Autonomous Vehicle Technology

The arrival of any new product technology will bring with it litigation, and along with that arguments for the legal standard that will place the lightest burden on plaintiffs in this new arena. Thus, it is likely that as lawsuits begin with autonomous vehicle technology, plaintiffs will argue that the consumer expectations test should apply to their claims for alleged design defects in autonomous vehicles. The argument will likely follow the reasoning employed by courts that refuse to adopt the Third Restatement approach, or that still strictly follow the consumer expectations test, i.e. that risk-utility balancing, especially when a reasonable alternative design is required, places too great of a burden on plaintiffs that do not have the resources to make showings that are so technical in nature. 149 149. See, e.g., Potter v. Chicago Pneumatic Tool Co., 694 A.2d 1319, 1332 (Conn. 1997); Vautour v. Body Masters Sports Indus., 784 A.2d 1178, 1183 (N.H. 2001). ×

A.         Highly Automated Vehicles Are Too Complex for Consumer Expectations to Govern.

The Society of Automotive Engineers lists six (6) levels of automation for HAVs. 150 150. See SAE International, supra note 3. × Currently, all vehicles on roadways are levels one and two, with Audi unveiling the world’s first production Level 3 vehicle in July 2017. 151 151. As reported in an article by IEEE Spectrum, Audi claims to have achieved level 3 through its “AI Traffic Jam Pilot” feature, which can only be activated when driving at less than 37 mph. See Philip E. Ross, The Audi A8: The World’s First Production Car to Achieve Level 3 Autonomy, IEEE Spectrum (July 11, 2017), https://spectrum.ieee.org/ca rs-that-think/transportation/self-driving/the-audi-a8-the-worlds-first-production-car-to-achieve-level-3-autonomy. × Further, even if fully autonomous vehicles were on the road today, the vast majority of consumers will remain unfamiliar with the technology for the foreseeable future. Drivers keep their vehicles on the road for over eleven years on average, 152 152. Reno Charlton, American Drivers Keeping Cars on the Road for Longer: Average Age Now 11.4 Years, Huffington Post (Aug. 9, 2013), https://www.huffpost.com/entry/american-drivers-keeping_b_3718301?guccounter=1. × so vehicles of lower automation levels will continue to be the predominant means of automotive transportation for years to come. 153 153. See Brian A. Browne, Self-Driving Cars: On the Road to a New Regulatory Era, 8. J. L., Tech. & Internet 1, 3 (2017) (Giving examples of the various lower level features many OEMs have planned for the coming years). ×

Further, NHTSA acknowledges the lack of consumer experience with autonomous vehicle technology, as well as how different these vehicles are from conventional vehicles on the roads today. In 2017, in Automated Driving Systems 2.0: A Vision for Safety, NHTSA pronounced that:

Proper education and training is imperative to ensure safe deployment of automated vehicles. Therefore, manufacturers and other entities should develop document, and maintain employee, dealer, distributor, and consumer education and training programs to address the anticipated differences in the use and operation of HAVs [highly automated vehicles] from those of conventional vehicles that the public owns and operates today. Such programs should be designed to provide the target users the necessary level of understanding to use these technologies properly, efficiently, and in the safest manner possible. 154 154. National Highway Traffic Safety Administration, Federal Automated Vehicles Policy: Accelerating the Next Revolution in Roadway Safety 24 (2016), https://www.transportation.gov/sites/dot.gov/files/docs/AV%20policy%20guidance%20PDF.pdf (emphasis added). ×

Essentially, NHTSA is recommending a completely new dimension of consumer education on how to use these products. Likewise, this education will be aimed at and received primarily by consumers who actually purchase and use autonomous vehicle technology and not automotive consumers generally.

On this point, in a 2014 survey conducted by researchers at the University of Michigan’s Transportation Research Institute, Americans were asked, “[h]ow interested would you be in having a completely self-driving vehicle . . . as the vehicle you own or lease?” The most commonly chosen answer, comprising 33.7% of responses, was “not at all interested” with another 22.4% of respondents answering that they would be only “slightly interested.” 155 155. See Brandon Schoettle & Michael Sivak, Public Opinion About Self-Driving Vehicles in China, India, Japan, the U.S. and Australia 16 (Univ. of Mich. Trans. Res. Inst. Report No. 2014-30, 2014), https://deepblue.lib.umich.edu/handle/202 7.42/109433 (emphasis added). × This information suggests that not only are most Americans personally unfamiliar with HAVs, but that a majority of Americans will not become familiar with such vehicles any time soon.

Another striking result of that survey was that, of Americans with Internet access, only 70.9% of respondents had even heard of autonomous or self-driving vehicles. 156 156. See id. at 5. × If these respondents were placed on a jury in a jurisdiction applying the consumer expectations test, roughly three of twelve jurors would be deciding liability based on the ordinary expectations of a consumer for a product about which they had never heard

Moreover, a study by various researchers in the MIT AgeLab suggests that naming conventions for autonomous or “advanced driver assistance systems” can influence the expectations that a consumer may have about these systems. 157 157. Hillary Abraham, et al., What’s in a Name: Vehicle Technology Branding & Consumer Expectations for Automation, AutomotiveUI ‘17 Proceedings of the 9th International Conference on Automotive User Interfaces and Interactive Vehicular Application 226-234 (2017), available at http://st.sigchi.org/publications/ toc/auto-ui-2017.html. × In particular, the authors of this paper observed that:

[D]rivers’ attitudes and beliefs about system capability and performance are known to influence their use of technology. Factors such as a driver’s prior experience with similar technologies, predisposed trusting tendencies, and attitudes formed from exposure to media and societal opinion might all contribute to a driver’s belief that a system can handle a task outside of its [operational design domain].” 158 158. Id. ×

Further, the authors found that “the name of a driver assistance system also has the potential to impact their perceptions of system capability. 159 159. Id. × These same perceptions or misconceptions developed by unfamiliar consumers simply from the name of a particular system are sure to carry over to these consumers ability to judge the systems if called upon in a legal setting.

This is important because, while the consumer expectation test is intended to be an objective test that is applied based on the ordinary consumer’s expectation, the gravamen of the test is that “the everyday experience of the product’s users permits a conclusion that the product’s design violated minimum safety assumptions . . . .” 160 160. See Edwards v. Ford Motor Co., 683 Fed. App’x 610, 611 (9th Cir. 2017) (quoting Soule v. General Motors Corp., 882 P.2d 298, 305, 308 (Cal. 1994)). × At least initially, and most likely for quite a period thereafter, the average juror will simply not possess the everyday experience necessary to properly assess the product in a consumer expectations analysis. Rather, it is much more appropriate and fair to aid a jury by allowing the greater body of evidence encompassed within a risk-utility analysis.

B.         Consumer Expectations of Autonomous Vehicle Technology are Inconsistent and Unrealistic at this Point.

Even when consumer expectations are drawn broadly (i.e., safe versus unsafe), instead of in terms of how a particular aspect of an autonomous vehicle should perform at a technical level, consumer expectations at this point in time have not reached any kind of meaningful consistency. For example, many consumers are highly skeptical of new HAV technology and believe that the technology is inherently unsafe. 161 161. Jeremy Hsu, 75 Percent of U.S. Drivers Fear Self-Driving Cars, But It’s an Easy Fear to Get Over, IEEE Spectrum (Mar. 7, 2016, 15:01 GMT), http://spectrum.ieee.org/ cars-that-think/transportation/self-driving/driverless-cars-inspire-both-fear-and-hope. × On the other hand, some organizations anticipate large reductions in automotive accidents and injuries as a result of this new technology and propound this message to the general public. 162 162. See, e.g., Mothers Against Drunk Driving, MADD Statement on Autonomous Vehicle Technology Legislation, (October 4, 2017), https://www.ma dd.org/press-release/madd-statement-autonomous-vehicle-technology-legislation/. × For its part, NHTSA helped promote the narrative that the promise of self-driving vehicles will lead to a marked increase in automotive safety, noting in their 2017 update that, “in the transportation sector, where 9 out of 10 serious roadway crashes occur due to human behavior, automated vehicle technologies possess the potential to save thousands of lives, as well as reduce congestion, enhance mobility, and improve productivity.” 163 163. NHTSA, supra note 6, at ii. × Some manufacturers are no different: in GM’s 2018 Self-Driving Safety Report, the manufacturer optimistically stated that as a result of self-driving technology, they “envision a future with zero crashes.” 164 164. General Motors, supra note 2 at 3 (emphasis added). ×

Further, HAV manufacturers, eager to explain the admittedly revolutionary technology their vehicles employ, may inadvertently present consumers with the impression that these vehicles truly can do no wrong. Consider the following language from Delivering Safety: Nuro’s Approach:

Our vehicle is engineered to be safer than nearly any other – it is lighter than a passenger vehicle, narrower and more nimble, and operates at lower speeds. This approach gives us more time to react, shortens our stopping distance, and provides an additional safety buffer to the side of the vehicle. Together, these advantages help prevent accidents that standard vehicles cannot avoid, such as someone jumping out from between parked cars or swerving across the road. 165 165. Nuro, Delivering Safety: Nuro’s Approach 8 (2019), https://tonnietal ler.files.wordpress.com/2019/03/d5d69-delivering_safety_nuros_approach.pdf. ×

It is certainly true that HAV technology will revolutionize automotive safety overall. However, these types of statements may lead many consumers to believe that autonomous vehicles should perform to the point of infallibility, which is simply not possible, especially at this early stage of development.

For example, on May 7, 2016, a driver of a Tesla Model S was killed when the driver collided with a tractor-trailer who was crossing an uncontrolled intersection. 166 166. NHTSA Office of Defects Investigation Report, available at https://static.n htsa.gov/odi/inv/2016/INCLA-PE16007-7876.pdf. × The vehicle’s data resulted in three important findings:

  1. That the Tesla was being driven in autopilot mode at the time of the accident;
  2. the automatic emergency braking (AEB) system did not automatically brake or warn to avoid the collision, and;
  3. that the driver did not take any preventive steps, i.e. braking or steering, to avoid the collision. 167 167. NHTSA Office of Defects Investigation Report, supra note 83, at 1. ×

Because of the accident, both the National Transportation Safety Board (“NTSB”) and the National Highway Traffic Safety Administration (NHTSA) through their Office of Defects Investigation (“ODI”) conducted investigations. 168 168. See NHTSA Office of Defects Investigation Report, supra note 83;see also NTSB, NTSB/HAR-17/02, Collision Between a Car with Automated Vehicle Control Systems and a Tractor-Semitrailer Truck (2017), available at https://www.ntsb.gov/investigations/AccidentReports/Reports/HAR1702.pdf. ×

For example, the ODI investigated: (1) the AEB system design and performance; (2) human-machine interfaces related to operating in autopilot mode; (3) additional accident data regarding Tesla’s autopilot and AEB systems; and, (4) the changes if any Tesla has made to such autopilot and AEB systems. 169 169. See NHTSA Office of Defects Investigation Report, supra note 83, at 1. × The result of the investigation was that there were no defects in the design or performance of the autopilot or AEB systems in the vehicles studied – nor was there a situation to which the systems did not perform as designed. 170 170. See id. at 12. ×

Given the situation, is it reasonable to task an “ordinary consumer” with properly determining whether the AEB and autopilot systems are in fact functioning properly or improperly? Compare the reported results of the investigations by NHTSA’s ODI and the NTSB with the statements by Forbes contributor, Brad Templeton, in his article, “Tesla Autopilot Repeats Fatal Crash; Do They Learn From Past Mistakes? 171 171. Brad Templeton, Tesla Autopilot Repeats Fatal Crash; Do They Learn From Past Mistakes?, Forbes (2019), https://www.forbes.com/sites/bradtempleton/2019/05/2 1/tesla-autopilot-repeats-fatal-crash-do-they-learn-from-past-mistakes/#400f773f2f2e. × To wit, Templeton posits, “Even so, most would hope the Tesla Autopilot would have detected the truck crossing in front of it, which appeared not to happen. No braking or evasive actions were taken. The Autopilot was engaged just 10 seconds before the collision.” 172 172. Id. × He further opines:

As such, having already had a fatality from (the old system’s) failure to identify the broad side of a transport trailer, that would have to be very high on the list of the sort of thing they would want their fleet to find and identify for them, so they can confirm it never fails to perceive a crossing truck. Somehow, it still failed. Of all the things you would expect Tesla to identify, these few things which resulted in fatal accidents, like a truck side and a highway crash attenuator, should be at the very top of the list. 173 173. Id. (emphasis in original). ×

Although Templeton is likely more informed than the ordinary consumer, the opinions expressed in his article and the conclusions reached by the NHTSA and NTSB are in clear contradiction of one another. Thus, when considering the expectations of the everyday consumer, it is clear the necessary information is simply not available to conduct investigations such as the one carried out by the ODI or the NTSB, which can take months of analysis and result in sixty-three-page accident reports, and ultimately determine what actually occurred.

Similar to the California Court of Appeal’s reasoning in Trejo that the consumer expectations test could lead to virtually unlimited liability in cases of complex products, the current climate of high expectations regarding HAVs would likely mean that a HAV manufacturer would lose every time when the consumer applications test is applied. Consumers will expect that HAVs should avoid accidents one hundred percent of the time, so any time one of these vehicles is involved in an accident, it has already failed the consumer expectations test. This type of res ipsa loquitur conclusion undermines the concept of design defects in products liability law and would allow plaintiffs to completely sidestep the requirement of a showing that an HAV was in fact defective, effectively making manufacturers of HAVs insurers of those products’ safety. 174 174. See Funkhouser v. Ford Motor Co., 736 S.E.2d 309, 314–15 (Va. 2013) (noting that in failure to warn cases, as well as in products liability cases, removal of the defect requirement could allow plaintiffs to attribute any generalized danger to a manufacturer without any showing of defect in that product). × In essence, plaintiffs would no longer bear the burden of making a showing of product defect.

Further, much of an individual consumer’s expectations about the way a vehicle should perform in an accident scenario are shaped by the behavior of other drivers. 175 175. See Michael Sivak & Brandon Schoettle, Road Safety with Self-Driving Vehicles: General Limitations and Road Sharing with Conventional Vehicles 5 (Univ. of Mich. Trans. Res. Inst. Report No. 2015-2, 2015). × Without the traditional feedback from other drivers to which consumers are accustomed, these expectations are wholly lacking to describe how autonomous vehicle technology will perform in an accident situation. 176 176. See id. × As noted in a report issued by the University of Michigan’s Transportation Research Institute, “[t]he degree of importance of both driver expectations and feedback from other drivers, and the consequent effects on the safety of a traffic system containing both conventional and self-driving vehicles, remain to be ascertained.” 177 177. See id. (emphasis added). ×

V.        Policy Reasons for Not Applying the Consumer Expectations Test to Autonomous Vehicle Technology.

As noted, autonomous vehicle technology has the potential to decrease traffic injuries and deaths. 178 178. See, e.g., Mothers Against Drunk Driving, supra note 79. × By applying the consumer expectations test, in which unknowledgeable consumers are not required to take into account the utility of a product, or the possibility of a feasible alternative design, courts could expose manufacturers to significant uncertainty in product liability litigation. If the standard by which a product will be judged is on the unpredictable expectations of consumers in such a complex and changing technology, rather than by demonstration of the product’s utility, the threshold for deployment by a manufacturer may change:

Thus, even though an autonomous vehicle may be safer overall than a conventional vehicle, it will shift the responsibility for accidents, and hence liability, from drivers to manufacturers. The shift will push the manufacturer away from the socially optimal outcome—to develop the autonomous vehicle. 179 179. See Gary E. Marchant & Rachel A. Lindor, The Coming Collision Between Autonomous Vehicles and the Liability System, 52 Santa Clara L. Rev. 1321, 1334 (2012). ×

To the contrary, under a risk-utility analysis, particularly one that requires proof of a safer, practicable alternative design, automotive manufacturers will be able to show that the societal benefits from the use of HAV technology as opposed to other technologies outweigh the risk of individual malfunctions in individual cases. 180 180. See id. ×

Consider the following example that illustrates the possible effect of unbridled consumer expectations on the introduction of beneficial new technology:

Suppose . . . that a particular type of “autobrake” crash-avoidance technology works to prevent crashes 80 percent of the time. The other 20 percent of the time, however, the technology does not work and the crash occurs as it would have in the absence of the technology. Victims in those crashes may sue the manufacturer and argue that the product was defective because it failed to operate properly in their crashes. Under existing liability doctrine, they have a plausible argument: The product did not work as designed . . . . A manufacturer facing the decision whether to employ such a technology in its vehicles might very well decide not to, purely on the basis of expected liability costs. 181 181. James M. Anderson et al., RAND Corp. Autonomous Vehicle Technology: A Guide for Policymakers 125 (2016). ×

Without any balancing of the utility of these vehicles or the requirement of a reasonable alternative design, it would be possible, even reasonable, for juries applying the consumer expectations test to find defective design every time. This will be especially true in situations such as those involving self-driving vehicle technology, since consumers tend to have unrealistic expectations about the benefits of this new technology as a whole. 182 182. See id. at 125. ×

Further, the consumer expectations test will not allow for consideration of non-safety related societal benefits that HAV technology provides, since the only consideration will be on whether the product performed as expected in that one instance. The average American commuter spends about one week of his or her life in traffic each year—a statistic that HAV manufacturers have set their sights on reducing. 183 183. See General Motors, supra note 2, at 3; see also David Schrank, Bill Eisele, Et Al., The Texas A&M Transportation Institute & INRIX, 2015 Urban Mobility Scorecard 1–2 (2015), https://static.tti.tamu.edu/tti.tamu.edu/documents/mo bility-scorecard-2015.pdf (noting that, as of 2014, the American commuter spends an average of approximately 42 hours per years in traffic). × The potential time saved by commuters on the whole is not a factor that would be considered under the consumer expectations test.

Another benefit of HAV technology outside of the realm of safety is the potential for added mobility for those who cannot currently drive. 184 184. See generally Waymo, supra note 2, at 6. × According to a report from NHTSA, 3 million Americans are blind or suffer from poor vision. 185 185. NHTSA, DOT HS 811 304, Quieter Cars and the Safety of Blind Pedestrians: Phase I 6 (2010), https://www.nhtsa.gov/DOT/NHTSA/NVS/Crash%20Avoidance/Technical%20Publications/2010/811304rev.pdf. × Further, 79 percent of Americans over the age of 65 live in car-dependent communities. The independence these communities could gain with the widespread use of HAV technology would be yet another consideration the jury could not take into account when utilizing the consumer expectations test.

VI.       Conclusion

Courts should reject the consumer expectations test as grounds for determining design defect in cases involving autonomous vehicle technology. This technology is simply too complex and unfamiliar for consumer expectations to have developed enough to have any real meaning or reasonable application. Utilization of risk-utility balancing is a more appropriate means of establishing whether or not a design is defective and will encourage manufacturers to continue to develop and implement this important technology, which stands to have a truly revolutionary impact on automotive safety.


  John Isaac Southerland is a partner at Huie Fernambucq & Stewart LLP in Birmingham, Alabama. Mr. Southerland’s practice areas include automotive product liability, personal injury, heavy equipment product liability, trucking litigation, and towing and recovery liability. He also serves as national coordinating discovery counsel for a major automotive client. Mr. Southerland is a frequent lecturer at various industry conferences and has written and spoken about the emergence of highly automated vehicles and technology on numerous occasions.  He also serves as a Barrister and the Programs Chairperson in the James Edwin Horton Inn of Court at Cumberland School of Law. 

Elizabeth Davis is an associate at Huie, Fernambucq & Stewart LLP in Birmingham, Alabama. Ms. Davis concentrates her law practice in the areas of automotive litigation, product liability and discovery practice and procedure, including serving as national coordinating discovery counsel for a major automotive client. Ms. Davis is an active member of Alabama Defense Lawyers Association, Birmingham Bar Association, and Defense Research Institute.

Woods Parker is an associate at Huie, Fernambucq & Stewart LLP in Birmingham, Alabama. Mr. Parker concentrates his law practice in the areas of automotive litigation, product liability, trucking litigation, consumer lemon law, and discovery practice and procedure, including serving as national coordinating discovery counsel for a major automotive client. Mr. Parker is an active member of Alabama Defense Lawyers Association, Birmingham Bar Association, and Defense Research Institute.

A European Commission plan to implement the connected car-specific 802.11p “Wi-Fi” standard for vehicle-to-vehicle (V2V) communication was scrapped early July after a committee of the Council of the European Union (which formally represents individual member states’ during the legislative process) rejected it. The standard, also known as ITS-G5 in the EU, operates in the same frequency range as domestic Wi-Fi, now most often deployed under the 802.11n specification.

The reason for this rejection were made clear by the opponents of “Wi-Fi V2V”: telecommunication operators, and consortia of IT equipment and car manufacturers (such as BMW and Qualcomm) would never allow locking out 5G and its ultra-low latency, “vehicle-to-everything” (V2X) solutions. In turn, countries with substantial industrial interest in those sectors (Germany and Finland, to name only two,) opposed the Commission plan.

Yet it appears that Commissioner Bulc had convincing arguments in favor of 802.11p. In her letter to the European Parliament’s members, she stresses that the technology is available now, and can be successfully and quickly implemented, for immediate improvements in road safety. In her view, failure to standardize now means that widespread V2V communication will not happen until the “5G solutions” come around.

5G is a polarizing issue, and information about it is often tainted with various industries’ talking points. It first matters to differentiate 5G as the follow-up on 4G, and 5G as the whole-new-thing-everyone-keeps-talking-about. As the follow up on 4G, 5G is the technology that underpins data delivery to individual cellphones. It operates mostly in higher frequencies than current 4G, higher frequencies which have a lower range and thus require more antennas. That in turn explains why most current cellphone 5G deployments are concentrated in large cities.

The “other” 5G is based on a promise: the higher the frequency, the higher the bandwidth and the lower the latency. Going into the hundreds of GHz, 5G theoretically delivers large bandwidth (in the range of 10 Gbps) in less than 1ms, with the major downside of a proportionally reduced range and ability to penetrate dense materials.

The logical conclusions of these technical limitations is that the high-bandwidth, low-latency 5G, set to revolutionize the “smart”-everything and that managed to gather some excitement will become a reality the day our cities are literally covered with antennas at every street corner, on every lamppost and stop sign. Feasible over decades in cities (with whose money, though?), a V2X world based on a dense mesh of antennas looks wholly unrealistic in lower density areas.

Why does it make sense, then, to kick out a simple, cheap and patent-free solution to V2V communication in favor of a costly and hypothetical V2X?

Follow the money, one would have said: what is key in this debate is understanding the basic economics of 5G. As the deployment goes on, it is those who hold the “Standard Essential Patents” (SEPs) who stand to profit the most. As reported by Nikkei in May 2019, China leads the march with more than a third of SEPs, followed by South Korea, the US, Finland, Sweden and Japan.

If the seat of the V2V standard is already taken by Wi-Fi, that is one less market to recoup the costs of 5G development. It thus does not come as a surprise that Finland was one of the most vocal opponents to the adoption of 802.11p, despite having no car industry – its telecom and IT sector have invested heavily in 5G and are visibly poised to reap the rewards.

Reasonable engineers may disagree on the merits of 802.11p – as the United States’ own experience with DSRC, based on that same standard, shows. Yet, the V2X 5G solutions are nowhere to be seen now, and investing in such solutions was and remains to this day a risky enterprise. Investments required are huge, and one can predict there will be some public money involved at some point to deploy all that infrastructure.

“The automotive industry is now free to choose the best technology to protect road users and drivers” said Lise Fuhr, director general of the European Telecommunications Network Operators’ Association (ETNO) after their win at the EU Council. I would rather say: free to choose the technology that will preserve telcos’ and some automakers’ risky business model. In the meantime, European citizens and taxpayers subsidize that “freedom” with more car accidents and fatalities, not to speak of other monetary costs 5G brings about. The seat will have been kept warm until the day their 5G arrives – if it does – at some point between 2020 and 2025. In the meantime, users will have to satisfy ourselves of with collision radars, parking cameras, cruise control and our good ol’ human senses.