Articles

By David Pimentel†, Michael B. Lowry†, Timothy W. Koglin†, and  Ronald W. Pimentel†


Cite as: David Pimentel, et al., Innovation in a Vacuum: The Uncertain Legal Landscape for Shared Micro-mobility, 2020 J. L. & MOB. 17.



Abstract

The last few years have seen an explosion in the number and size shared micro-mobility systems (“SMMS”) across the United States. Some of these systems have seen extraordinary success and the potential benefit of these systems to communities is considerable. However, SMMS have repeatedly ran into legal barriers that either prevent their implementation entirely, confuse and dissuade potential users, or otherwise limit SMMS’s potential positive impact.

This paper reflects a detailed study of state laws relating to SMMS and the platforms commonly used in these systems. The study uncovered many inconsistencies with micro-mobility laws across the country. Currently, many states lack clear definitions for these emerging forms of transportation, which do not otherwise fit neatly in the categories contemplated by existing law. Several states lack clear, state-level policies, which has led to discrepancies between state and local regulations. Further, there are several areas of micro-mobility law that are sharply inconsistent between states. All of these differences leave users confused as to what the law is and may discourage them from riding.

A number of states are attempting to remedy inconsistencies and legislative silence by passing and proposing laws that regulate the use of electric bikes (“e-bikes”) and electric scooters (“e-scooters”), but even these efforts are unlikely to bring the consistency that is needed. Federal authorities should act to create uniform laws and work with states to adopt them, otherwise, the lack of a legal infrastructure may threaten to stifle the innovation and undermine SMMS’s promised returns.

Introduction 1 1. Funding for this research was provided by a grant from the Pacific Northwest Transportation Consortium (PacTrans), USDOT Transportation Center for Federal Region 10. Additional funding for research assistance was provided by the University of Idaho College Of Law. Thanks also to Ken McLeod of the League of American Bicyclists, Andrew Glass Hastings of Remix, Steve Hoyt-McBeth and Briana Orr of the City of Portland, Chris A. Thomas of the law firm of Thomas, Coon, Newton and Frost, and Asha Weinstein Agrawal of San Jose State University, all of whom were generous with their time, responding to questions and requests and advising the authors on these topics. Credit for design and creation of the searchable state law database, and all the coding it required, belongs exclusively to Timothy Koglin. Thanks to Spencer Felton, Erin Hanson, Brandon Helgeson, Jacqueline Maurer, and Jamie Schwantes for outstanding research of the laws of all 50 states and of the District of Columbia, for populating the database, and for assistance in compiling the report and the early drafts of this paper. ×

The first bike-share programs in the United States appeared in 2010 and since then micro-mobility sharing of electric bikes (“e-bikes”) and electric scooters (“e-scooters”) has greatly expanded. 2 2. Alex Baca, What Cities Need to Understand About Bikeshare Now, Bloomberg Citylab (April 24, 2018, 10:17 AM), https://www.bloomberg.com/news/articles/2018-04-24/a-mostly-complete-taxonomy-of-bikeshare-so-far. × The legal environment, however, has been slow to embrace these innovations, or even to address them. The success or failure of shared micro-mobility systems (“SMMS”) may turn on the legal environment in which they attempt to operate. This study surveyed the laws governing bicycles, e-bikes (bicycles equipped with electric motors to assist in propulsion), and e-scooters (stand-up kick scooters powered by an electric motor) in all fifty states and the District of Columbia, and created a searchable database summarizing these laws as they may affect SMMS. The survey revealed serious issues and challenges for SMMS, as the development of the legal landscape has failed to keep pace with shared micro-mobility innovations.

Structure of the sharing systems

Two separate models of SMMS have emerged. Some systems have fixed docking stations where bicycles are picked up and returned. Other systems are “dockless,” and use GPS systems and cell phone apps to help users locate available bicycles. The user can leave the bicycle in almost any location when the trip is completed, and the next user can find and claim it for its next use. While bike-share systems have been implemented using both docking and dockless systems, e-bike and e-scooter systems overwhelmingly favor the dockless approach. It is common to see multiple systems using different mobility devices in operation side-by-side in the same municipality, essentially competing with each other. 3 3. Susan Shaheen & Adam Cohen, UC Berkeley: Transp. Sustainability Research Ctr., Shared Micromobility Policy Toolkit: Docked and Dockless Bike and Scooter Sharing (2019), https://escholarship.org/uc/item/00k897b5#main; Nicole DuPuis, Jason Griess & Connor Klein, Nat’l League of Cities, Micromobility in Cities: A History and Policy Overview (Laura Cofsky ed., 2019), https://www.nlc.org/sites/default/files/2019-04/CSAR_MicromobilityReport_FINAL.pdf. ×

These dockless systems raise additional challenges not seen in earlier docked systems. Docked systems typically require some level of municipal cooperation to provide land in ideal locations to place the docking stations as well as lengthy investments of time and capital to get the systems up and running. Dockless systems require none of these. Instead, they can pop-up in a city overnight with little to no notice to any government officials or the general public. This lack of notice and cooperation can lead to serious legal problems down the road.

Regardless of how the SMMS is structured, the legal regime that governs the use of the mobility – rules governing who can ride, where they can ride, how riders must be equipped, etc., as well as riders’ perception of those laws – can have an outsized impact on the success of the system. This project was aimed at ascertaining and analyzing these various laws across the country.

Potential benefits of shared micro-mobility

SMMS serve a wide variety of purposes, including flexible mobility, emission reductions, individual financial savings, reduced traffic congestion, reduced fuel use, health benefits, improved multimodal transport connections, “last mile” connection to public transport, and equity (greater accessibility for minority and lower-income communities). 4 4. Peter Midgley, Urban Mobility Advisor, Address at Global Consultation for Decision Makers on Implementing Sustainable Transport (2019), https://sustainabledevelopment.un.org/content/documents/4803Bike%20Sharing%20UN%20DESA.pdf; Benjamin Schneider, What Keeps Bike Share White, Bloomberg Citylab (July 14, 2017, 9:07 AM), https://www.citylab.com/equity/2017/07/what-keeps-bike-share-white/533412; James Woodcock, et al., Health Effects of the London Bicycle Sharing System: Health Impact Modelling Study, theBMJ (Feb. 13, 2014), https://www.bmj.com/content/348/bmj.g425. ×  Most of these objectives – with the exception of health benefits – are served equally well by e-bike and e-scooter sharing systems.

But while e-bikes and e-scooters cannot deliver the health benefits that would come from getting users to travel under their own power, they offer other benefits that traditional bicycles lack. These include (1) the ability to travel with minimal physical effort, (2) the ability to use without getting sweaty, (3) the capacity to travel longer distances or on hillier terrain, (4) the ability to use in all types of clothing (at least for e-scooters – which are compatible with dresses in a way that bicycles are not) and, (5) the promise of an entirely different level of fun. To the extent that these attractions lure people out of their cars, when traditional bicycles would not, these new micro-mobility sharing systems have the potential to generate societal benefits well beyond the promise of a basic bike-sharing system.

All of these benefits speak strongly in favor of SMMS, suggesting that local governments should be supportive of them. Indeed, some municipalities have invested heavily in these systems, subsidizing them, or otherwise committing public funds to their installation and operation. At the same time state and, to a lesser degree, local governments operate legal regimes that have the potential to undermine all these benefits, particularly where users receive confusing or mixed messages about what is legal and what is not.

This study

The research team set out to examine the relevant laws in all fifty states and the District of Columbia. It developed a list of questions related to sharing platforms, falling into nine categories: Definitions, Age Restrictions, Safety Equipment, Licensing Requirements, Where to Ride, Riding Under the Influence, Insurance Requirements, Sidewalk Clutter, and Shared Micro-Mobility Regulations. The research team then developed a database in Microsoft Access to facilitate the collection, storage and analysis of the state laws, and employed graduate students from the University Of Idaho College Of Law for the summer of 2019 to research the laws in each state and input them into the database.

The researchers used the LexisNexis legal database, Westlaw, and state-operated websites in each assigned jurisdiction to find the relevant laws. Since this is an emerging field of law, many states have legislation pending at various stages of the legislative cycle. For the purposes of this study, any laws that had been fully enacted by the state government were included as the relevant law, even if they had not yet gone into effect. Any laws that were pending in the state legislature or were awaiting the governor’s signature were not considered for this study.

The research team met weekly to discuss any unclear laws and to ensure that similar situations were logged in a consistent manner. After the states were completed, researchers checked a sampling of each other’s work to ensure that the data collection had been done in a consistent manner. Any and all discrepancies that were identified were raised for discussion, clarification, and ultimately harmonization.

Discussion

Even the most cursory review of the data collected reveals some compelling conflicts and gaps in the legal and regulatory regime that governs micro-mobility-sharing systems in the United States. These legal deficiencies threaten the success of such ventures, and limit society’s ability to achieve the myriad benefits that such innovations promise. Most of the examined laws regulate the use of micro-mobility (bikes, e-bikes, and e-scooters) and not sharing systems. While the problems discussed below do not apply exclusively to these shared systems, many of them are made exponentially more problematic because of the typical role shared mobility plays. The following discussion will highlight some of the largest legal problems and the specific difficulties they pose for the successful implementation of SMMS.

  1. Legal Inconsistency/Ambiguity

The most prevalent legal problems the study revealed were the numerous inconsistencies and ambiguities in the laws regulating the use of micro-mobility. Inconsistencies arise in a few distinct ways and each presents a slightly different problem to SMMS. Each of these inconsistencies is no more than a minor inconvenience to experienced riders who are either familiar with their local specifications, or know what kind of laws vary in different states and how to fill those gaps when riding in a new location. Anyone who has invested in a means of micro-mobility is likely to have invested some effort in learning the rules that govern its use. To misquote Socrates, they are wise because they know what they do not know.

However, the inexperienced or recreational rider, or the tourist, may be caught completely unaware of any variation or change in the law. Since these casual or inexperienced riders are the target market for most SMMS, inconsistent laws pose a potentially crippling impediment to their success. In our research laws were grouped into two categories. First, laws that are inconsistent with other laws in the same state, here called internal inconsistency. Second, laws that are inconsistent between states, here called external inconsistency – but perhaps better characterized as state-by-state variations in the law. Before addressing the external consistency issues, we will turn to the more acute problem of internal consistency: where even within a single state, sharp differences, ambiguities, and even conflicts exist in the applicable laws.

a. Internal inconsistency in the laws

While most laws are not facially inconsistent, several states’ statutory schemes create confusion that unnecessarily burdens riders. E-scooters in Oregon, for example, are banned from sidewalks and prohibited from traveling faster than 15 mph. But simultaneously, mobility devices used in the street are prohibited from traveling in the roadway at less than the normal speed of traffic. 5 5. Or. Rev. Stat. §§ 814.512-524 (2020) (Defining the offense of “unlawful operation of a motor assisted scooter.”). ×  Thus, if traffic flows at 25 mph, the scooter is required by law to travel no faster than 15 mph, but no slower than 25 mph. 6 6. The conflict is arguably reconciled Or. Rev. Stat. § 814.520, which suggests that a rider may avoid liability for the separate offense of “improper operation of a motor assisted scooter” for driving too slowly if she keeps as close to the right edge of the roadway as possible. But because it is not clear whether “improper operation” is the same offense as “unlawful operation,” the legal requirements remain, at best, ambiguous. At worst we have an outright conflict. ×   Even if there is a way to read these laws together consistently, it is certainly not clear at first glance. The resident who may want to use the new SMMS to help commute to work or the tourist who wants to use it to get around town cannot easily tell how fast or where they can ride.

Other issues can arise when a state does not clearly define e-bikes or e-scooters. Even when an e-bike or e-scooter is not defined by statute, it may fall within another statutory definition, such as motorcycle, moped, or more broadly, motor vehicle. This categorization can lead to more restrictive regulations of e-bikes and e-scooters, such as requiring driver’s licenses, registration, or insurance. For example, New York does not define e-bike or e-scooter. Because motor vehicles are defined as “every vehicle operated or driven upon a public highway which is propelled by any power other than muscular power,” e-bikes and e-scooters both fall within this category. 7 7. N.Y. Veh. & Traf. Law § 125 (McKinney 2020). ×  New York state law also requires that every motor vehicle be registered in order to drive on public highways. 8 8. N.Y. Veh. & Traf. Law § 401 (McKinney 2020). ×  However, as of 2019, the Department of Motor Vehicles did not allow for the registration of e-scooters or e-bikes, which appeared to render riding these devices in public illegal according to their website at the time. 9 9. Motorized devices that cannot be registered in New York, N.Y. State Dep’t of Motor Vehicles, https://web.archive.org/web/20190316092234/https:/dmv.ny.gov/re gistration/motorized-devices-cannot-be-registered-new-york (last visited July 25, 2020) (That agency site was recently changed to indicate that e-bikes may be operated “on some streets and highways in New York State,” and e-scooters will receive the same treatment later this year). Electric Scooters and Bicycles and Other Unregistered Vehicles, N.Y. State Dep’t of Motor Vehicles, https://dmv.ny.gov/registration/electric-scooters-and-bicycles-and-other-unregistered-vehicles (last visited July 25, 2020). ×  This is but one example of how bureaucratic operations can frustrate legislative actions. The inconsistency, in turn, is likely to result in user confusion.

Additionally, state laws can conflict with the laws of the state’s own counties or municipalities. In an emerging field such as shared micro-mobility, some city ordinances conflict directly with their state law. Direct conflicts are likely to occur when a city chooses a position quickly and the state subsequently adopts a contrary position that is incompatible with the local law without allowing for local variation of the matter. While the state law presumably supersedes the local ordinance, the conflicting local law remains on the books. A couple of examples may illustrate.

Sometimes a local law is more restrictive than a state law, so the discrepancy may not create a direct conflict. California state law, for example, identifies three classes of e-bikes and allows all to be ridden on sidewalks. 10 10. Cal. Veh. Code § 21207.5 (West 2020). ×  West Hollywood, CA, however, recently banned the use of all classes of e-bikes on sidewalks. 11 11. West Hollywood, Cal., Mun. Code § 10.04.030 (2020). ×  In this situation, it is possible for both laws to be valid, depending on whether the state law is read to pre-empt local variation or not. If not pre-empted, the local, more restrictive law simply imposes higher standards than required by the state. Nonetheless, the inconsistency can create difficulties for riders. In King County, Washington, for example, adult users of bicycles are required to wear helmets, but elsewhere in the state they are not. 12 12. King County, Wash., Bd. of Health Code § 9.10 (2018). ×  Once again, the SMMS user – i.e. an occasional or casual rider – is far more likely to be caught off guard.

Finally, state and local laws may define or classify mobility devices differently. For example, the city of Seattle defines e-bikes in a manner that does not mirror the three-category classification system for e-bikes adopted by the State of Washington. 13 13. Seattle, Wash., Mun. Code §11.14.055; Wash. Rev. Code Ann. § 46.04.169 (West 2020). ×  The definition provided by Seattle only encompasses what would be Class 1 and Class 2 e-bikes according to Washington State law, leaving Class 3 e-bikes outside of the city’s definition. This creates the potential for regulatory issues if Class 3 e-bikes are not considered e-bikes at all in Seattle, affecting riders’ abilities to ride on bicycle paths or be subject to other restrictions or protections offered to e-bike riders.

b. Externally inconsistent laws

The legal system has long grappled with the problem of state-by-state variations in the law. Some such variations have been celebrated, where local control has been hailed as a benefit of federalism. But there are limits to how and where such variation can or should be tolerated, and the problems of “external inconsistency” have at times demanded remedial attention. Sometimes the federal government has to step in and pre-empt the field, in order to achieve a desirable consistency in the law: examples include historically federal concerns, including bankruptcy, 14 14. See generally, Oleksandra Johnson, The Bankruptcy Code as Complete Preemption: The Ultimate Trump?, 81 Am. Bankr. L.J. 31 (2007). × securities and banking regulation, 15 15. Jay B. Sykes, Cong. Research Serv., R45081, Banking Law: An Overview of Federal Preemption in the Dual Banking System (January 23, 2018), https://fas.org/sgp/crs/misc/R45081.pdf. ×  immigration, 16 16. See generally, 8 U.S.C. ×  and national security. 17 17. See, e.g., USA PATRIOT Act, Pub. L. No. 107-56), 115 Stat. 272 (2001). In the 1990s, federal jurisdiction expanded to include violence against women. The inability to enforce restraining orders across state lines prompted Congress to federalize an area of law long reserved to the states. Lisa N. Sacco, Cong. Research Serv., The Violence Against Women Act (VAWA): Historical Overview, Funding, and Reauthorization, 3rd ed., (2019), https://fas.org/sgp/crs/misc/R45410.pdf. ×  Other times, states have chosen voluntarily to align their laws with each other’s: examples include the adoption of the Uniform Commercial Code. 18 18. States’ eagerness to facilitate commercial transactions for businesses within the state meant that states were happy to adopt a national standard, so interstate transactions could be more easily affected. At present 49 of the 50 states have adopted all or substantially all of the UCC. Tracey George & Russell Korobkin, Selections from the Restatement (Second) Contracts and Uniform Commercial Code, 4-5 (2019). ×  Similar efforts have yielded an overwhelmingly consistent motor vehicle code, making it easy for drivers to traverse the country without worrying that they will run afoul of obscure and idiosyncratic state laws. At the same time, some areas of law – such as Tort Law and Family Law – have been held to be squarely within the province of the states, where uniformity is not necessarily desirable as a matter of federalism. 19 19. Tort reform laws are all over the map, with all kinds of different approaches taken in the various states. Family Law, of course, has become a battleground as these local variations – affecting the rights of interracial, same-sex, and polygamous unions, among others – have come under attack for perceived violations of constitutional guarantees. See e.g. Reynolds v. U.S., 98 U.S. 145 (1879); Loving v. Virginia, 388 U.S. 1 (1967); Obergefell v. Hodges, 576 U.S. 644 (2015). ×  Justice Louis Brandeis famously praised this aspect of our federal system, noting that “a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.” 20 20. New State Ice Co. v. Liebmann, 285 U.S. 262, 311 (1932). ×

The “laboratories of democracy” concept has borne fruit for micro-mobility use. The state of Idaho adopted in 1982 its “Idaho stop law” that allows cyclists to treat “stop” signs as if they were “yield” signs, and to treat red lights as if they were “stop” signs. 21 21. Asmara M. Tekle, Roll On, Cyclist: The Idaho Rule, Traffic Law, and the Quest to Incentivize Urban Cycling, 92 Chi.-Kent L. Rev. 549 (2017). ×  The resounding success of this experiment has led other jurisdictions to follow suit. 22 22. Delaware has adopted the stoplight portion of the Idaho Stop, redubbing it the “Delaware Yield.” Del. Code Ann. tit. 21 § 4196A(c) (2020). Colorado State law specifically allows for local adoption of either the Idaho or Delaware models but does not adopt either at the state level. Colo. Rev. Stat. § 42-4-1412.5 (2019). Oregon has adopted the limited Delaware model. Or. Rev. Stat. §§ 814.414, 416 (2020). Arkansas has fully adopted the Idaho Stop. Ark. Code. Ann. § 27-51-1803 (2020). Washington has enacted legislation authorizing the Delaware version which will go into effect on Oct. 1, 2020. Increasing Mobility Through the Modification of Stop Sign Requirements for Bicyclists, 2020 Wash. Sess. Laws 6208. ×

At the same time, the patchwork of legal requirements for bicycle and other micro-mobility use in different states may sow confusion, particularly for travelers who may find themselves using bikeshare in different states, or in communities situated on a state border. Such issues arise, for example, on roads surrounding the Chipman Trail bike route, which connects Washington State University in Pullman, Washington (WSU), with the University of Idaho in Moscow, Idaho, eight miles east. At the start of a recent community-organized ride that started on the WSU campus, the riders had to be cautioned that they were in Washington now, and needed to stop at stop signs. 23 23. The Tour de Lentil, associated with the annual Lentil Festival in Pullman Washington, is a 50k/100k/150k ride that takes place every August. John Nelson, Tour de Lentil Provides Challenging Ride Through the Palouse, The Spokesman-Review (Aug. 11, 2017), https://www.spokesman.com/stories/2017/aug/11/tour-de-lentil-provides-challenging-ride-through-t/. The Fondo on the Palouse, a “century” (100-mile ride) which starts in Moscow, Idaho, encounters similar issues, as its route straddles the Washington-Idaho border. About the Fondo on the Palouse, The Fondo on the Palouse, http://fondopalouse.org/ (last visited July 19, 2020). ×  There, the ride was organized by a local cycling club who was familiar with the differences and intricacies of the two states’ laws, so the riders were able to prepare for the change in laws. However, if a solo rider or group of friends decided to take the bikes from WSU’s campus bike sharing program along that same trail for a Saturday ride, they would be unlikely to know that the governing laws had changed on them mid-ride. Absent a reminder or notification of some kind they are unlikely to even think to look up the law to see if there was any discrepancy.

While the laws governing cars are largely consistent across the country, inconsistency persists in the laws applying to bicycle use and even more so in those governing e-bike and e-scooter use. This is a particular concern given that a significant number of users of such systems are travelers and tourists – people from outside the relevant jurisdiction and therefore ill-equipped to know local laws. 24 24. Virginia Tech, Virginia Tech Capital Bikeshare Study: A Closer Look at Casual Users and Operations 10 (2012), https://ralphbu.files.wordpress.com/2012/01/vt-bike-share-study-final3.pdf. ×  Similar problems emerged in the early days of automobiles, and the need for consistent laws governing motor vehicle transportation became apparent. A special committee was appointed at the federal level to draw up a uniform code – one that facilitated effective automobile use – and pressure was put on the state legislatures across the country to adopt it. This eliminated idiosyncratic rules that may have existed in different cities and states and allowed manufacturers to produce vehicles that were legal in every state. 25 25. See J. Allen Davis, The California Vehicle Code and the Uniform Vehicle Code 14 Hastings L. J. 377 (1963). ×  Drivers could then have some confidence of the rules of the road when crossing state lines. While traffic laws are not entirely uniform in the U.S. (e.g. some states – including Washington, Oregon, and Idaho – allow left turns on red lights when the driver is turning onto a one-way street, for example), the exceptions are very few and largely minor.  Even the traffic signals and signage have been made standard across jurisdictions. 26 26. This standardization occurred over time as automobiles became more widespread. Clay McShane, The Origins and Globalization of Traffic Control Signals, 25 J. of Urban History 379, 389 (1999), https://sites.tufts.edu/carscultureplace2010/ files/2010/09/McShane-traffic-signals-1999.pdf. ×  Efforts to bring uniformity to the laws governing cycling – much less to the laws governing the use of e-bikes, e-scooters, or SMMS in general – have yet to bear fruit.

Laws that dictate where each platform can and cannot be ridden, “where to ride” laws, present particularly troublesome external inconsistency. Most states allow bicycles to be ridden on the sidewalk or the street so the rider can choose to ride where they feel the most comfortable. However, e-bikes and e-scooters, the primary platforms for dockless SMMS, are restricted much more and far less consistently. E-bikes are burdened slightly, as in about half of states they cannot be ridden on sidewalks. E-scooters, as the newest platform on the scene, are treated the most inconsistently. Over a third of states do not have any regulation at all regarding where e-scooters are allowed. 27 27. See infra Section 2.b. and Figure 4. ×  In those states that do address e-scooters, about half allow them to be ridden on the street and half do not. A handful of states prohibit e-scooter use on the shoulder of the road or the bike lanes. Twenty-three states allow e-scooters to be ridden on sidewalks while six prohibit their use there; the remaining states are silent on the issue. If an individual purchases one of these platforms, especially an e-scooter, it is reasonable to expect that they would look up the rules for the use of their new device in their own state. 28 28. A neighbor of author David Pimentel, however, acquired a motorized scooter in 2019, and after a discussion with a police officer, is now afraid to ride it anywhere. The police officer was unable to advise him where, or whether, such a vehicle could be used in the city limits. ×  However, it seems far less likely that the typical SMMS user would know the details about where they are allowed to ride or take the time to research the question, even if it were easy to find answers, which it often is not. Further, many riders who do not know where they can ride may forgo using the SMMS altogether because of their questions.

Other types of laws also raise external inconsistency issues. For instance, helmet laws vary dramatically in various states (see Figures 1.1 and 1.2). In over 20 states, there is no requirement that anyone wear a helmet when using a bicycle, an e-bike, or an e-scooter. Many states impose helmet requirements on bicycle riders under a certain age. Six states require helmets for all users of e-bikes.

FIGURE 1.1 – Mandatory Helmet Laws

Helmets are required . . .

FIGURE 1.2 – Mandatory Helmet Laws

Helmets are required . . .

Laws requiring helmet use can be particularly burdensome for bike-sharing systems because the typical user does not carry a helmet with her/him. 29 29. Gigi Douban, A Pothole for Bike-Sharing Programs: Helmets, Marketplace Morning Report (Sep. 4, 2015), https://www.marketplace.org/2015/09/04/business/pothole-bike-sharing-programs-helmets/; David Gutman, Will Helmet Law Kill Seattle’s New Bike-Share Program?, Seattle Times (Dec. 19, 2016), https://www.seattletimes.com/seattle-news/transportation/will-helmet-law-kill-seattles-new-bike-share-program/; Emily Elias, Helmets Pose Challenge For Vancouver Bike Share Program, CBC (July 19, 2013) https://www.cbc.ca/news/canada/british-columbia/helmets-pose-challenge-for-vancouver-bike-share-program-1.1379433. × Attempts to share helmets along with bikes have not been well received by the public, presumably because of concerns about the cleanliness of shared helmets. 30 30. Gutman, supra note 29. × Some speculate that the failure of Seattle’s first bike-share venture was due to the strictures of the mandatory helmet law there; 31 31. Id. × more recent success with SMMS in Seattle may be due to local police’s decision to relax their enforcement of King County’s mandatory helmet laws. 32 32. David Gutman, Helmets may be Seattle Law, but Many Bike-Share Riders Don’t Wear Them, Seattle Times, (Aug. 9, 2017), https://www.seattletimes.com/seattle-news/transportation/helmets-may-be-seattle-law-but-many-bike-share-riders-dont-wear-them/. ×

The “ins.tructions” commonly provided by the micro-mobility sharing services are unhelpful on this score, as they may simply tell the user to wear a helmet, without indicating whether the helmet is required by law (e.g. the instruction video for Bird scooters, inside the Bird app, includes a “Bring your own helmet” instruction, without further elaboration to clarify whether this is a legal requirement or just a prudent recommendation). 33 33. App: Bird, How to Ride, (Bird Rides, Inc.) (available on Google Play or the Apple App Store), www.bird.co/how/. × This uncertainty can serve as a deterrent to would-be riders. 34 34. Ronald W. Pimentel, Michael B. Lowry, David Pimentel, Amanda K. Glazer, Timothy W. Koglin, Grace A. Moe, & Marianna M. Knysh, If You Provide, Will They Ride? Motivators and Deterrents to Shared Micro-Mobility, 6 Int’l J. Bus & Applied Soc. Sci. 26, 31 (2020). ×

E-bike and e-scooter riders also face uncertainty about the application of Driving Under the Influence (“DUI”) laws. In many states, it is not at all clear whether the e-bikes and e-scooters qualify as “motor vehicles” for purposes of DUI statutes. A small handful of states have attempted to clarify this by passing separate laws governing Riding Under the Influence (“RUI”), which explicitly apply to micro-mobility users. These laws typically impose lesser punishments for RUI than the state imposes for DUI violations, which makes sense since an intoxicated driver is endangering the lives of others (pedestrians, car passengers, etc.) at a level far beyond the dangers posed by an intoxicated e-scooter rider. A general breakdown of state law treatment of these issues is shown in Figure 2.

FIGURE 2 – “Riding Under the Influence” Legislation*

*A few states have both RUI laws specifically applicable to micro-mobility, and separate DUI laws that apply equally to micro-mobility, introducing potential for contradiction and inconsistency (see discussion of such issues above). The states that fall into both the DUI and the RUI categories are depicted in the “RUI Law Applies” section of the pie charts above.

Naturally, some level of inconsistency is necessary. Not every community has the same needs, and the laws that are appropriate in New York City may not be appropriate in Moscow, Idaho (pop. 24,000). However, a common foundation of legal rules for micro-mobility use, short of complete uniformity, is important if those transportation modalities are to take hold in American cities. For instance, some kind of baseline system that applies broadly but allows for limited local variation based on the specific needs of the location, where those local variations could be clearly demonstrated to potential riders, would go a long way to solving both internal and external inconsistency issues.

  1. (Lack of) Awareness of the law

Even if inconsistent laws were aligned, micro-mobility users still might not know what the laws are. Someone who is unaware of the law will have difficulty complying with it and, as noted above, the uncertainty may scare riders off altogether.

a. Ignorance and (mis)perception of the applicable laws

It is far from clear, even for a lawyer trained to interpret statutes, which existing laws may apply to a particular mode of micro-mobility. In some states, the term “pedestrian” is interpreted to include bicyclists on sidewalks, so laws that give pedestrians the right-of-way simultaneously give bicyclists the right-of-way. 35 35. E.g. Mich. Comp. Laws § 257.660c (2020). × In thirty-five states, the word “vehicle” is interpreted to include bicycles, which lumps bicycles in with other vehicles and subjects them to the laws governing vehicular traffic. 36 36. E.g. Or. Rev. Stat. § 814.400 (2020). ×

As for e-bikes and e-scooters, the problem is even more difficult. Because most of these laws were passed before e-bikes and e-scooters came on the market, laws cannot reflect the legislature’s intention concerning them. Pullman, Washington, requires that all scooters be equipped with a “muffler,” for example, in an ordinance that must have been drafted during an era of gas-powered scooters; 37 37. Pullman, Wash., Code § 12.11.020(8) (2019). × it is, of course, a ridiculous requirement to impose on virtually silent e-scooters. Even the most well-informed user is left to wonder whether an e-bike is a “motor-driven cycle” within the meaning of the statute, for example, or whether an e-scooter is a “motor vehicle.” Exacerbating the problem, there does not appear to be any consensus or consistency, state-by-state, on what these terms mean.

Potential users of SMMS being unaware of the laws governing the mobility presents two separate problems. The first is that users may unwittingly violate the law. They may assume that e-scooters are legal on sidewalks, and ride them there, illegally disrupting pedestrian traffic and unwittingly subjecting themselves to liability. The second concern is that the uncertainty itself will be a deterrent to use of the mobility. A potential user may be tempted to rent a scooter or a bike but may err on the side of caution and avoid using the device altogether when unsure of whether it’s legal to ride without a helmet, or to ride without a driver’s license, or to ride on the running path that goes through the park or along the river. A July 2019 survey of users and non-users in the Northwest suggest that uncertainty about the law can significantly discourage use of SMMS. 38 38. Pimentel, supra note 34, at 31. × Uncertainty about where it is legal to ride provides at least a slight deterrent effect for 74% of potential users (See Figure 3).

FIGURE 3 – Deterrent Effect of Legal Uncertainty

b. Statutory silence

The lack of legislation in many jurisdictions leaves both the purveyors of SMMS and their customers in the dark about what is legal and what is not. The laws are reasonably comprehensive as they apply to bicycles, but significant gaps exist for newer technologies, particularly e-scooters, which do not fit so easily into pre-existing categories. While some states are already working to get laws on the books that govern the use of such mobility, many more legislatures either have failed to perceive a need or have been unwilling or unable to muster the political will or material resources to respond to it. Figure 4 shows the conspicuous gaps which exist in several states’ legislation regarding where riders can use various devices, particularly e-scooters. It unrealistic to expect states to have comprehensive legal regimes in place regarding these newer devices; it is understandable that legislatures may have trouble keeping up with new technologies. However, SMMS will be hamstrung in any states that fail to grapple with basic issues, such whether these devices can be ridden on their sidewalks, or on their streets, or on both, or on neither.

FIGURE 4 – Where to Ride Table

c. Emerging legislation

By 2019, new laws were in the works in a number of states. New York’s legislature introduced a bill that defined “bicycles with electric assist” and “electric scooters,” stipulating that e-bikes are subject to the same regulations as bicycles while e-scooters are subject to new regulations laid out in the bill. 39 39. S.B. 5294 (N.Y. 2019). The bill was vetoed by the Governor in December 2019. × The Hawaiian legislature introduced two separate bills to govern the use of these devices. The first set a minimum age of fifteen for e-bike riders, and included e-bikes within the definition of bicycles, thus subjecting them to most of the same regulations that govern non-motorized bicycles. 40 40. H.B. 812 (Haw. 2019). × The second defined “electric foot scooters,” set a minimum riding age of fifteen, and subjected e-scooters to many of the same laws that govern bicycles. 41 41. H.B. 754 (Haw. 2019). × Similarly, Alaska introduced a bill that defined e-bikes without a classification system, and clarified that they are not motor vehicles or subject to any registration requirements. 42 42. H.B. 123 (Alaska 2019) ×

The wave of new legislation presents both challenges and opportunities for SMMS. If the laws passed aid the implementation and operation of SMMS or facilitate the platforms that they use, then SMMS may be well on their way to becoming a permanent fixture of American cities. Additionally, states have the opportunity to see what laws are the most successful and to copy them, laying the groundwork for a more consistent, if not entirely uniform system. One example is the three-tiered e-bike classification system. This system was first implemented in California in 2015 and has since been adopted almost completely in twenty-five other states, making it by far the most common classification system. 43 43. Claudia Wasko, Why More States Need to Adopt the Three-Class Ebike System, Bosch, https://www.bosch-ebike.com/us/everything-about-the-ebike/stories/three-class -ebike-system/# (“In 2015, California was the first state to adopt this ‘3-Class’ approach, and since then, 25 other states followed suit: Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Maine, Maryland, Michigan, New Hampshire, New Jersey, Ohio, Oklahoma, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin and Wyoming.”). × A consistent and coherent classification system is a prerequisite to any unified e-bike laws that could come in the future. However, advocates (including SMMS providers) must act quickly to lobby for favorable laws, as it will become much harder to implement favorable laws after states have enacted barriers.

  1. Laws addressing shared micro-mobility implementation and use directly

Some states have adopted laws that focus on sharing systems, recognizing the difference between regulating e-bike or e-scooter use and regulating the businesses or systems set up to share them. As of this writing, Alabama is the only state that has comprehensive shared micro-mobility law that covers bicycles, e-bikes, and e-scooters. Four other states, Arkansas, Nevada, Utah, and Washington, have enacted statewide regulations concerning e-scooter sharing systems exclusively. However, most states’ statutory schemes are either silent on this issue or leave the regulation of these systems to the local government.

Without any laws regulating the sharing systems directly, many problems are likely to arise which are specific to SMMS. One such problem is the “pop-up” SMMS start-ups. Without statewide regulations in place, SMMS providers may be able to enter a market more or less overnight with no warning to the local government. This presents a number of problems, many of which have already been discussed. These problems can be prevented with simple state-wide schemes which include regulations for startup procedures that allow SMMS to operate but require additional cooperation between the providers and the cities they serve.

Even when states do enact SMMS-specific laws, another issue emerges: shared micro-mobility laws that differ from the existing laws. For example, Alabama defines a “scooter” as:

[A] device weighing less than 100 pounds that satisfies all of the following:

(a)  [h]as handlebars and an electric motor;

(b)  [i]s solely powered by the electric motor or human power; [and]

(c)  [h]as a maximum speed of no more than 20 mph on a paved level surface when powered solely by the electric motor. 44 44. Ala. Code § 32-1-1.1(60) (2020). ×

By this definition, an e-scooter would qualify simultaneously as a “scooter” and as a motor vehicle in the Alabama Code. 45 45. Ala. Code § 32-1-1.1(33) (2020). × Conversely, the definition for a “shared micromobility device” is a type of transportation device, including a scooter that is used in a shared micro-mobility device system. 46 46. Ala. Code § 32-1-1.1(64) (2020). × The “shared micromobility device[s]” are subject to the same laws and regulations as a bicycle, and not a motor vehicle. 47 47. See e.g. Seattle Times Editorial Bd., Opinion, Hold Bike-Share Vendors Accountable, Seattle Times (Sep. 5, 2019), https://www.seattletimes.com/opinion/editorials/hold-bike-share-vendors-accountable/; Quemuel Arroyo, Op-ed: Where Do We Put All Those Dockless E-Scooters?, StreetsBlog NYC (Feb. 4, 2020), https://nyc.streetsblog.org/2020/02/04/op-ed-where-do-we-put-all-those-dockless-e-scooters/; Elizabeth Chou, LA Looks to Improve Parking of Dockless Scooters and Bikes. Here’s How, L.A. Daily News (Oct. 22, 2019), https://www.dailynews.com/2019/10/22/la-looks-to-improve-parking-of-dockless-scooters-and-bikes-heres-how/. × As a result, scooters that are privately owned are subject to rules and regulations pertaining to motor vehicles, such as licensing requirements, while scooters that are used within a SMMS are subject to a different set of rules and regulations, including an exemption from the licensing requirement.

  1. Parking and Storage

While there are several deficiencies in the laws governing SMMS (including the absence of them), the research painted a more encouraging picture about the problems of parking and storage. One of the most common complaints about dockless systems is the concern that the bicycles, e-bikes, or e-scooters get left in inconvenient places. 48 48. See Arroyo, supra note 48. × Accordingly, the research team looked at the laws governing the problem.

Part of the concern is one of untidy or unsightly clutter, but the greater concern is about obstructing sidewalks and other thoroughfares of pedestrian traffic, creating a nuisance and a safety-related tripping hazard, as well as limiting access to the sidewalk for people with disabilities. 49 49. See Arroyo, supra note 48. × While this concern often prompts critics to call for banning SMMS, 50 50. Leif Reigstad, The Rise and Fall of Dockless Bike Sharing in Dallas, Texas Monthly, (Aug. 7, 2018), https://www.texasmonthly.com/news/rise-fall-dockless-bike-sharing-dallas/. × most states already have statutes that address the issues of clutter or obstruction, and the problem is simply a matter of finding a way to enforce these laws in the context of shared bikes, e-bikes, and e-scooters. Alabama, the state with the most comprehensive statewide shared micro-mobility legislation, specifically prohibits shared micro-mobility devices from being parked in a manner that impedes normal pedestrian movement. 51 51. Ala. Code § 32-19-2(c) (2020). × However, many other states that currently lack shared micro-mobility legislation already have laws that prohibit all vehicles or specific micro-mobility devices from impeding pedestrian and other traffic. Still others list specific locations where such vehicles can and cannot be parked or delegate such decisions to local authorities. In total, thirty states already have statutes preventing micro-mobility devices from being strewn on or about the sidewalks.

Since laws preventing SMMS devices from cluttering the street are already in place, the problem may come from the difficulties of enforcement. Law enforcement may be hesitant to seize or ticket SMMS devices without clear directives. They are also likely even more hesitant to ticket a user who leaves them in an improper location because they plausibly may not know the requirements. Perhaps comprehensive SMMS laws such as those discussed above can help clarify these laws with regard to shared devices and enable law enforcement to manage the situation more effectively.

This problem may be one of perception more than reality. People are more likely to remember the few times they were walking down the sidewalk and had to step around an obstructing scooter or bicycle than they are to remember the countless times that they walked down the street without any such obstruction. Or they may remember an inflammatory picture they have seen in the press of unwanted and unloved bike-share bikes heaped in huge piles, and perceive a problem in the U.S., even though those pictures were taken in China. 52 52. See generally, Dan Gardner, The Science of Fear: Why We Fear the Things We Shouldn’t-- and Put Ourselves in Greater Danger (2008) (discussing the “availability heuristic”). × Indeed, despite conspicuous complaints about the clutter associated with shared micro-mobility, 53 53. Reigstad, supra note 50. × a study in Spokane Washington found the problem to be at most minor (finding that 96% of e-scooters were parked in a “preferred area” and that 98% of them were parked upright). 54 54. Toole Design, Spokane Shared Mobility Study Final Recommendations 18 (2019), https://static.spokanecity.org/documents/projects/shared-mobility/spokane-shared-mobility-report.pdf. ×

  1. Creating laws that favor bicycles and other micro-mobility to further promote SMMS

Laws that make bicycling, and other micro-mobility use easier will necessarily make SMMS more attractive to potential users; and laws that burden the mobility-user will have the opposite effect. The Idaho stop laws, for example, make cycling vastly more efficient and attractive. 55 55. See Tekle, supra note 21. × State laws that expect cyclists to adhere to the laws that govern motor vehicles, in contrast – failing to account for the fact that bicycles have different capabilities, needs, and safety concerns – impose heavier burdens on cyclists and place them at greater risk of harm. 56 56. David Pimentel, Cycling, Safety, and Victim-Blaming: Toward a Coherent Public Policy for Bicycling in 21st Century America, 85 Tenn. L. Rev. 753 (2018). ×

As noted above, mandatory helmet laws may also be a barrier to SMMS success. While it is tempting to cling to these laws as a fundamental safety measure, such laws have been sharply criticized as counter-productive, from a safety perspective, 57 57. Luke Turner, Australia’s Helmet Law Disaster, 64 IPA Review 28, 28–29 (Apr. 2012), http://www.vehicularcyclist.com/ozdisaster.pdf; Craig Baird, Bike helmets can make roads more dangerous for cyclists, says Bike Regina, Regina Leader-Post (May 2, 2017), https://leaderpost.com/news/local-news/bike-helmets-can-make-roads-more-dangerous-for-cyclists-says-bike-regina; Sue Knaup, Are Helmet Programs Scaring Kids Away from Bicycling?, The Bike Helmet Blog (Nov. 10, 2015), https://www.bikehelmetblog.com/2015/11/are-helmet-programs-scaring-kids-away.html. × and for the implicit message that micro-mobility is very dangerous and therefore something to be avoided. 58 58. Rosenthal, E., To Encourage Biking, Cities Lose the Helmets, N.Y. Times (Sept. 29, 2012), https://www.nytimes.com/2012/09/30/sunday-review/to-encourage-biking-cities-forget-about-helmets.html; Knaup, supra note 57. × That message, as well as the victim-blaming message that responsibility for cyclist safety lies solely with the cyclist, rather than with the drivers who hit them, can only discourage ridership. 59 59. Peter Walker, The Big Bike Helmet Debate: “You Don’t Make it Safe by Forcing Cyclists to Dress for Urban Warfare,” The Guardian (Mar. 21, 2017), https://www.theguardian.com/lifeandstyle/2017/mar/21/bike-helmet-cyclists-safe-urban-warfare-wheels; Pimentel, supra note 56. ×

Laws that permit, or prohibit, riding bicycles on sidewalks or off-road paths and trails may have an impact as well. If people know that they can be cited for riding where they feel safe to ride, they may opt not to ride at all. For example, in a busy urban center, someone may be happy to ride an e-scooter on the sidewalk, but if they know that e-scooters are legal only in the street (as is the case in the states of Washington and California), they may stay off the scooter altogether. 60 60. Cal. Veh. Code § 21235(g) (Deering 2020); Wash. Rev. Code Ann. § 46.61.710 (LexisNexis 2020). ×   Of course, the laws of states, such as Florida and South Dakota, that ban the use of scooters in the streets too, or of the twenty states that are silent on the subject, generate serious uncertainty about whether they can be used legally anywhere.

Conclusions

The wheels of transportation innovation turn much faster than the wheels of legislation. The legal system struggles, playing catch-up with industry changes. That alone does not necessarily constitute a problem. However, the lack of a legal infrastructure may threaten to stifle the innovation and undermine the potential benefits of SMMS in America. This comprehensive study of applicable laws exposes the gaps and inconsistencies in these laws and illustrates some of the impact of these legal deficiencies. The hope is that federal authorities may intervene, promulgating standardized legal rules for shared micro-mobility, as they have for automobiles, which would clarify and harmonize the scattershot approach heretofore taken. If the federal government is unwilling or unable (politically or otherwise) to act, perhaps interested parties – bicycling advocates, safety advocates, industry representatives, and regulators – can combine forces to produce a “uniform law,” one that states may be willing to adopt, much as they have the Uniform Commercial Code. The searchable database of the compiled state laws on this subject created in this study can support such efforts, as well as future research. In the meantime, innovators should be aware of and sensitive to how the variegated legal landscape may impact the results and the future of shared micro-mobility.


David Pimentel is Associate Dean and Professor of Law at the University of Idaho. Before beginning his academic career, he served as staff in the U.S. federal judiciary, including one year as a Supreme Court Fellow, before going abroad to do rule of law development work in post-conflict countries (Bosnia, Romania, and South Sudan). He also spent four years with a United Nations war crimes tribunal in the Netherlands, where he developed an appreciation for cycling as transportation. Intrigued by Idaho’s bicycle laws, he has recently published scholarship on the public policy behind legal regulation of bicycle usage and of shared micro-mobility systems.

Dr. Michael Lowry is an associate professor of Civil Engineering at the University of Idaho with a research focus on transportation planning. He serves on the National Academy of Science Committee for Bicycle Transportation and the Committee for Transportation Investment Decision-Making. He teaches courses on transportation safety, benefit-cost analysis, and geographic information systems. He was awarded the College of Engineering Outstanding Young Faculty award for excellence in teaching and research. Dr. Lowry has been a visiting scholar in Spain, Norway, the Netherlands, and the United Kingdom.

Timothy W. Koglin is a recent graduate of the University of Idaho College of Law and (soon to be) member of the Washington State Bar Association. He spent time at the United States Military Academy and Washington State University before graduating from Liberty University with a B.S. in History. He spent the last two years of law school as the research assistant for David Pimentel working on a wide range of legal topics including parenting, sports, and transportation.

Ronald W. Pimentel has been a marketing professor for 30 years and also had a 12-year career in industry doing marketing and sales. He completed a BA in Art/Design at BYU, an MBA at UC Berkeley, and a Ph.D. in marketing at The University of Arizona. He is currently a Scholarly Associate Professor of marketing and the Faculty Director of the Professional Sales Certificate program at Washington State University Vancouver. Ron has published three book chapters, and many journal articles and conference proceedings. Recent research has included inter-disciplinary work on shared micro-mobility.

Cite as: Bryant Walker Smith, How Reporters Can Evaluate Automated Driving Announcements, 2020 J. L. & MOB. 1.



This article identifies a series of specific questions that reporters can ask about claims made by developers of automated motor vehicles (“AVs”). Its immediate intent is to facilitate more critical, credible, and ultimately constructive reporting on progress toward automated driving. In turn, reporting of this kind advances three additional goals. First, it encourages AV developers to qualify and support their public claims. Second, it appropriately manages public expectations about these vehicles. Third, it fosters more technical accuracy and technological circumspection in legal and policy scholarship.

This third purpose goes to the core of this interdisciplinary journal. Legal and policy scholarship about emerging technologies often relies at least in part on popular reporting. On one hand, this reporting can provide timely and accessible insights into these technologies, particularly when the scientific literature cannot. On the other hand, this reporting can reflect misconceptions based on incomplete information supplied by self-interested developers—misconceptions that are then entrenched through legal citation. For example, I have pushed back against claims that automated driving will be a panacea, that its technical challenges have long been “solved,” and that nontechnical issues involving regulation, liability, popularity, and philosophy are therefore the paramount obstacles to deployment.

Common to many of these misconceptions is the question of whether automated driving is finally here. AVs were 20 years away from the late 1930s until the early 2010s and have been about five years away ever since. This is clearly a long history of misplaced optimism, but more recent predictions, while still moving targets, are now proximate enough to realistically drive decisions about investment, planning, and production. Indeed, of the companies that claim to be even closer, some really are—at least to automated driving of some kind.

The “what” of these predictions matters as much as the “when,” and the leading definitions document for automated driving—SAE J3016—is helpful for understanding this what. The figure below offers a gloss on these definitions, including the widely (mis)referenced levels of driving automation. No developer has credibly promised level 5 (full automation) anytime soon. But many are working toward various applications of level 4 (high automation), which could, depending on their implementation, include everything from low-speed shuttles and delivery robots to traffic jam automation features and automated long-haul trucks. When anything approaching level 5 does becomes a reality, it will likely be an afterthought in a world that has already been revolutionized in a hundred other ways.

Figure: A Gloss on SAE J3016

Your role in driving automation

Driving involves paying attention to the vehicle, the road, and the environment so that you can steer, brake, and accelerate as needed. If you’re expected to pay attention, you’re still driving — even when a vehicle feature is assisting you with steering, braking, and/or accelerating. (Driving may have an even broader legal meaning.)

Types of trips

  • You must drive for the entire trip
  • You will need to drive if prompted in order to maintain safety
  • You will need to drive if prompted in order to reach your destination
  • You will not need to drive for any reason, but you may drive if you want
  • You will not need to drive for any reason, and you may not drive

Types of vehicles

  • Vehicles you can drive
  • Vehicles you can’t drive

Types of vehicle features

These are the levels of driving automation. They describe features in vehicles rather than the vehicles themselves. This is because a vehicle’s feature or features may not always be engaged or even available.

The operational design domain (“ODD”) describes when and where a feature is specifically designed to function. For example, one feature may be designed for freeway traffic jams, while another may be designed for a particular neighborhood in good weather.

By describing a feature’s level of automation and operational design domain, the feature’s developer makes a promise to the public about that feature’s capabilities.

Assisted driving features

  • L0: You’re driving
  • L1: You’re driving, but you’re assisted with either steering or speed
  • L2: You’re driving, but you’re assisted with both steering and speed

Automated driving features

  • L3: You’re not driving, but you will need to drive if prompted in order to maintain safety
  • L4: You’re not driving, but either a) you will need to drive if prompted in order to reach your destination (in a vehicle you can drive) or b) you will not be able to reach every destination (in a vehicle you can’t drive)
  • L5: You’re not driving, and you can reach any destination

As the following questions for reporters make clear, automated driving is much more than just a level of automation. The questions, which fall into five overlapping categories (human monitoring, technical definitions, deployment, safety, and reevaluation), are:

1. Human monitoring

1.1. Is a person monitoring the AV from inside the vehicle? Why? Are they always paying attention? How can they intervene? How often do they intervene? How are they supervised?

1.2. Is a person monitoring the AV from outside the vehicle? Why? Are they always paying attention? How can they intervene? How often do they intervene? How are they supervised?

1.3. Is a person monitoring the AV from a remote center? Why? Are they always paying attention? How can they intervene? How often do they intervene? How are they supervised?

1.4. What are specific examples of difficult scenarios in which a person did not intervene? In which a person unnecessarily intervened? In which a person necessarily intervened? What form did this intervention take?

1.5. At any moment, what is the ratio between the number of people who are monitoring and the number of AVs that are deployed?

2. Technical definitions

2.1. What level of automation corresponds to the design intent for the AV? What level of automation corresponds to how the AV is actually being operated?

2.2. In what environment is the AV operating? On roads open to other motor vehicles? To bicyclists? To pedestrians?

2.3. What infrastructure, if any, has been changed or added to support the AV in this environment?

2.4. If the AV perceives that its path is obstructed, what does it do? For example, does it wait for the obstruction to clear, wait for a person to intervene, or plan and follow a new path?

3. Deployment

3.1. What is the AV’s deployment timeline? For how long will it be deployed? Is this a temporary or permanent service?

3.2. Who can buy the AV or its automated driving feature? Under what conditions?

3.3. Who can ride in, receive products or services from, or otherwise use the AV? Under what conditions?

3.4. As part of the deployment, who is paying whom? For what?

3.5. What promises or commitments has the developer of the AV made to governments and other project partners?

3.6. What previous promises, commitments, and announcements has the developer made about their AVs? Have they met them? Do they still stand by them? What has changed, and what have they learned? Why should we believe them now?

4. Safety

4.1. Why do the developer of the AV and any companies or governments involved in its deployment think that the deployment is reasonably safe? Why should we believe them?

4.2. What will the developer of the AV and any companies or governments involved in its deployment do in the event of a crash or other incident?

5. Reevaluation

5.1. Might the answers to any of these questions change during the deployment of the AV? How and why? What will trigger that change?

The remainder of this article explores these questions with a view toward assessing the reality behind a given automated driving announcement or activity. To this end, it is important to understand that a vehicle that requires an attentive safety driver is not truly an automated vehicle. Aspirational, yes. But actual, no. This point underlies many of the questions that follow.

Human Monitoring

Is a person monitoring the AV from inside the vehicle? Why? Are they always paying attention? How can they intervene? How often do they intervene? How are they supervised?

Imagine that as you are boarding a plane, the captain announces that “I’ll be using autopilot today. We’ll be pushing off shortly. Have a nice flight.” How do you feel?

Now imagine that the captain instead announces that “You’ll be using autopilot today, because I’m getting off. You’ll be pushing off shortly. Have a nice flight.” How do you feel now?

Just as there is a significant difference between these two scenarios, automated driving under the supervision of a safety driver is not the same as automated driving without this supervision. Yet news headlines, ledes, and even entire articles often describe only “driverless” vehicles—even when those vehicles are supervised by at least one trained safety driver who is physically present for every trip.

This confusion has consequences. Casual readers (and even reporters) may believe that an automated driving project is far more technically advanced or economically feasible than it really is. They may therefore be more likely to look for nontechnical explanations for the seemingly slow rollout of automated vehicles. Ironically, they may also discount truly significant news, such as Waymo’s recent decision to remove safety drivers from some of its vehicles.

Reporters should therefore ask whether an automated vehicle is being operated with or without a safety driver inside it, and they should include the answer to this question in the first rather than the final paragraph of their stories. Related questions can then provide further context. Is the safety driver seated in the traditional driver’s seat (if there is one) or elsewhere in the vehicle? Can they immediately brake, steer, and accelerate the vehicle? And, in the interest of safety, how are they supervised? As Uber’s 2018 fatal crash tragically demonstrated, a system’s machine and human elements can both be fallible.

For the most part, an AV developer that uses safety drivers is not yet confident that its vehicles can reliably achieve an acceptable level of safety on their own. This is still true even if a vehicle completes a drive without any actual intervention by that safety driver. At least in the United States, alternative explanations for retaining the safety driver—to comply with ostensible legal requirements, to reassure passengers, or to perform nondriving functions—are generally lacking.

At the same time, AV developers might reach different conclusions about the requisite level of safety or the requisite level of confidence in that safety. To use a very limited analogy: A rock climber’s rejection of ropes and harnesses probably says more about the climber’s confidence than about their skill.

Is a person monitoring the AV from outside the vehicle? Why? Are they always paying attention? How can they intervene? How often do they intervene? How are they supervised?

A safety driver might be present near rather than inside a vehicle. For example, a demonstration of a small delivery vehicle that is not designed to carry people may nonetheless involve a safety driver seated in a car that trails the delivery vehicle. Reliance on such a safety driver places a significant technical and economic asterisk on claims about the capabilities of these delivery vehicles. Because reliance on safety drivers also involves reliance on a robust communications system, reliance on them also introduces an additional issue of safety.

Tesla’s recent introduction of its Smart Summon feature also shows why unoccupied does not necessarily mean driverless. This feature does not reach the threshold for automated driving—and certainly not “full self-driving”—because it is designed with the expectation that there will be a human driver who will supervise the vehicle from the outside and intervene to prevent harm. Emphasizing that the user is still a driver may help to temper claims and assumptions that could lead to the dangerous misuse of this driver assistance feature.

Is a person monitoring the AV from a remote center? Why? Are they always paying attention? How can they intervene? How often do they intervene? How are they supervised?

For years, one of the more contentious issues in the automated driving community has involved what might be neutrally termed “remote facilitation of the driving task.” This phrase encompasses a broad spectrum of potential roles performed by actors outside the vehicle—roles that are important to understanding the technical and safety claims made by developers of automotive technologies.

On one side of the spectrum lies remote driving, in which a human driver who may be many miles away from a vehicle uses a communications system to perceive the vehicle’s driving environment and to steer, accelerate, and brake in real time—what SAE J3016 calls “performance of the dynamic driving task.” This remote driving is orthogonal to automated driving (in other words, neither its synonym nor its antonym). Indeed, some automated driving developers skeptical of remote driving are eager to differentiate the two in both language and law.

On the other side of the spectrum lies network monitoring. An automated driving company might maintain a facility in which human agents collectively monitor its AVs, communicate with the users of those vehicles, and coordinate with emergency responders. While stressing that their human agents are not performing the dynamic driving task, some AV developers have been vague about what specifically these agents are and are otherwise not doing.

Journalists, however, can be concrete in their questioning. They can ask whether there is a remote person assigned to or available for each vehicle, what that person does during the vehicle’s normal operation, and what that person does in less common situations. For example, imagine that an AV approaches a crash scene and concludes that it cannot confidently navigate by itself. What role might a remote agent play? Might this person give the vehicle permission to proceed? Might they manually identify roadway objects that the AV could not confidently classify? Might they sketch a rough travel path for the AV to follow if the AV agrees? Might they direct the AV to follow the path even if the AV would otherwise reject it? Or might they actually relay specific steering, accelerating, and braking commands to the AV?

How a company answers these questions can provide insight into the maturity of its automated driving program. If the company uses physically present safety drivers in its deployments (as most still do), then these questions are largely speculative. But if the company plans to remove these safety drivers, then it should have careful and concrete answers. And if the company declines to share these answers, one might reasonably inquire why.

What are specific examples of difficult scenarios in which a person did not intervene? In which a person unnecessarily intervened? In which a person necessarily intervened? What form did this intervention take?

While anecdotes alone are not enough to establish reasonable safety, they can be helpful in measuring progress. An automated driving developer that has been testing its vehicles will have stories about unusual situations that those vehicles (and their safety drivers) encountered. Many of these developers may be happy to share situations that the automated vehicle handled or could have handled without intervention. But pairing these with situations in which human intervention was necessary provides important context. And a company’s willingness to share these more challenging stories demonstrates its trustworthiness.

At any moment, what is the ratio between the number of people who are monitoring and the number of AVs that are deployed?

Economic feasibility offers another metric for automated driving—and one that is intertwined with technical feasibility. Economically, automated driving is both attractive and controversial in large part because, true to its name, it promises to reduce the need for human drivers. Asking whether this is in fact happening—that is, whether the ratio of human monitors to automated vehicles is less than 1.0—is another way to assess the technical progress of an automated driving program.

This may be especially helpful with respect to pilot projects involving specialized vehicles traveling at low speeds in limited areas such as airports, downtowns, and shopping malls. There have been and will likely continue to be numerous announcements about these projects across the country. But so long as these vehicles are deployed with at least one safety driver on board, their economic viability is unclear. After all, their hosts could have achieved (and could still achieve) the same functional benefits by simply deploying conventional fleets.

Technical definitions

What level of automation corresponds to the design intent for the AV? What level of automation corresponds to how the AV is actually being operated?

Automated driving developers are almost certainly familiar, though not necessarily proficient, with the levels of driving automation defined in SAE J3016. They may even reference these levels in their announcements—correctly or not. Understanding the levels may help to assess the claims.

Most automated driving development is focused on levels 3 and 4. On one side, levels 0, 1, and 2 are in fact driver assistance rather than automated driving, and a credible developer should not suggest otherwise. After all, features at these levels only work unless and until they don’t, which is why a human driver is still needed to supervise them. On the other side, level 5 describes a feature that can operate everywhere that humans can drive today. But while this is the hope of many automated driving developers, it remains a distant one.

A confusing quirk in the levels of automation is the difference between what I call an aspirational level and what I call a functional level. The aspirational level describes what an automated driving developer hopes its system can achieve, whereas the functional level describes what the automated driving developer assumes its system can currently achieve. For example, most developers of low-speed automated shuttles envision level 4 automated driving, which would not require a human driver for safe operation. But most of these developers still keep their systems under the supervision of human safety drivers who are expected to pay attention, which corresponds to level 2 rather than level 4. Nonetheless, because SAE J3016 focuses on design intent, developers of these systems correctly characterize them as level 4 (the aspirational level) rather than level 2 (the functional level).

Similarly, California’s Department of Motor Vehicles considers automated vehicles that are merely being tested to be “autonomous” even though their safe operation still requires a human safety driver. Otherwise, rules requiring a safety driver absent specific permission otherwise would apply to a null set. Because of this interpretation, companies that are testing or deploying automated driving features in California must comply with these rules, while companies that are testing or deploying mere driver assistance features need not. This is why Uber needed permission to test its automated vehicles in California, but Tesla did not need permission to make its Autopilot or Smart Summon driver assistance features available in that state. Yet, as these examples suggest, testing an automated driving feature is in many ways technically indistinguishable from using a driver assistance feature.

Asking about the aspirational level of automation invites a company to make a public characterization that has marketing and regulatory implications. And asking about the functional level of automation invites a company to temper its aspirations with the current limitations of its technologies.

References to the levels of automation may be helpful in discussions with companies but are generally not necessary or even helpful when reporting to the public. Instead, key phrases can more clearly communicate the current state of a given technology. Three of the most important are:

  • “A driver assistance feature that still requires a human driver to pay attention to the road” (levels 1 and 2)
  • “A vehicle that is designed to drive itself but needs a safety driver until it can reliably do so” (aspirational level 4)
  • “A vehicle that drives itself without the need for a safety driver” (functional level 4)

In what environment is the AV operating? On roads open to other motor vehicles? To bicyclists? To pedestrians?

Automated vehicles have been a reality for decades: They are called elevators, escalators, people movers, and automated trains. But whereas these vehicles operate in highly controlled environments, automated motor vehicles are particularly challenging in large part because the driving environments they will face are so challenging.

Below level 5, however, these driving conditions are limited. SAE J3016 terms these driving conditions the operational design domain, and this ODD is essential to defining an AV’s capabilities. For example, some automated driving features may operate only on freeways, and some AVs may be restricted to certain low-speed routes within certain neighborhoods. Indeed, early automation activities are generally characterized by some combination of slow speeds, simple environments, and supervised operations.

Developers should be upfront about these limitations in their announcements—and if they are not, reporters should ask whether and how the AVs mix with other road users, including pedestrians, bicyclists, and conventional drivers. There is a big difference, for example, between deploying in complex mixed traffic and deploying on a dedicated route with no other traffic.

As an aside: State vehicle codes apply to public roads, and they may also apply to private facilities such as parking garages and private roads that are nonetheless open to the public. For this reason, AVs that are deployed only in privately controlled areas may still have to comply with state laws generally applicable to motor vehicles as well as state laws specific to AVs. Similarly, these laws may (or may not) also apply to delivery robots that travel on sidewalks and crosswalks. Developers that suggest otherwise can be asked to explain the basis for their legal conclusion.

What infrastructure, if any, has been changed or added to support the AV in this environment?

Many AV announcements involve specific tests, pilots, or demonstrations that may or may not be easily replicated in another location and scaled to many more locations. An AV that can accept today’s roads as they are—inconsistently designed, marked, maintained, and operated—will be much easier to scale than one that requires the addition or standardization of physical infrastructure. Even if they would be beneficial and practical, infrastructure changes are nonetheless important considerations in evaluating scalability. For this reason, automated driving developers should be asked to identify them.

If the AV perceives that its path is obstructed, what does it do? For example, does it wait for the obstruction to clear, wait for a person to intervene, or plan and follow a new path?

Even infrastructure that is well maintained will still present surprises, and how an AV is designed to deal with these surprises provides some insight into its sophistication. Many early automated vehicles would simply stop and wait if a pedestrian stepped into their path (or a drop of rain confused their sensors). Even today, many AVs rely on frequent human intervention of some kind. This question accordingly invites a developer to describe the true capabilities of its system.

Deployment

What is the AV’s deployment timeline? For how long will it be deployed? Is this a temporary or permanent service?

Many recent AV announcements have focused less on technical capabilities and more on actual applications, from shuttling real people to delivering real products. These specific applications often involve partnerships with governments, airports, retailers, shippers, or property managers. But it can be unclear whether these applications are one-time demonstrations, short-term pilots, or long-term deployments. Querying—and, in the case of public authorities, requesting records about—the duration of these projects helps to understand their significance.

Who can buy the AV or its automated driving feature? Under what conditions?

There is an important difference between an automated driving developer that is marketing its actual system and a developer that is merely marketing itself. Yet automated driving announcements tend to conflate actual designs, promises of designs, and mere visions of designs. Automakers previewing new vehicle features, shuttle developers announcing new collaborations, and hardware manufacturers touting new breakthroughs all invite the question, “Can I actually buy this vehicle now?”

Who can ride in, receive products or services from, or otherwise use the AV? Under what conditions?

This same logic applies to announcements about services that purportedly involve automated driving. The launch of an automated pizza delivery service open to everyone in a city is much more significant than the staged delivery of a single pizza by a single AV. So too with the automation of long-haul shipping, low-speed shuttles, and taxis. Services that at least part of the public can actually and regularly use are far more significant than one-off demonstrations.

As part of the deployment, who is paying whom? For what?

For the reasons already discussed, the economics of early deployments can be hazy. Why are automated shuttles, each with its own safety driver, more cost-effective than conventional shuttles? Why are automated trucks, each with its own safety driver, more cost-effective than conventional trucks? The financial arrangements with project partners—especially public authorities subject to open records laws—can offer some insight into whether these early deployments provide tangible benefits or are instead largely exploratory or promotional.

What promises or commitments has the developer of the AV made to governments and other project partners?

When project partners are involved for long-term rather than near-term benefit, it can be helpful to query their expectations. Imagine, for example, that an airport or retirement community announces its intent to host automated shuttles that are supervised by safety drivers. When has the developer of these shuttles suggested or promised that safety drivers will no longer be necessary? And who bears the cost of paying these drivers in the interim?

What previous promises, commitments, and announcements has the developer made about their AVs? Have they met them? Do they still stand by them? What has changed, and what have they learned? Why should we believe them now?

Because innovation is unpredictable, claims about deployment timelines may turn out to be incorrect even if they are made in good faith. However, the companies (or people) responsible for these claims should acknowledge that they were wrong, explain why, and temper their new claims accordingly. Reporters should demand this context from their subjects and report it to their audience. Of course, a commercial emphasis on speed and controversy can make this especially challenging, in which case the headline “Company X makes another claim” could at least be used for the more egregious offenders.

Safety

Why do the developer of the AV and any companies or governments involved in its deployment think that the deployment is reasonably safe? Why should we believe them?

While the broader topic of AV safety is beyond the scope of this article, it should occupy a prominent place in any automated driving announcement. For years, I have encouraged companies that are developing new technologies to publicly share their safety philosophies—in other words, to explain what they are doing, why they think it is reasonably safe, and why we should believe them. Journalists can pose these same questions and push for concrete answers.

The phrasing of these questions matters. For example, a company might explain that its AV testing is reasonably safe because it uses safety drivers. But it should also go further by explaining why it believes that the presence of safety drivers is sufficient for reasonable safety. Conversely, if a company does not use safety drivers, it should explain why it believes that they are not necessary for reasonable safety. And in answering these questions, the company may also have to detail its own view of what reasonable safety means.

In this regard, it is important to recognize that safety is not just a single test. Instead, it includes a wide range of considerations over the entire product lifecycle, including management philosophy, design philosophy, hiring and supervision, standards integration, technological monitoring and updating, communication and disclosure, and even strategies for managing inevitable technological obsolescence. In this way, safety is a marriage rather than just a wedding: a lifelong commitment rather than a one-time event.

What will the developer of the AV and any companies or governments involved in its deployment do in the event of a crash or other incident?

Safety is not absolute. Indeed, just because an AV is involved in a crash does not mean that the vehicle is unsafe. Regardless, an AV developer should have a “break-the-glass” plan to document its preparation for and guide its response to incidents involving its AVs. (So too should governments.) How will it recognize and manage a crash? How will it coordinate with first responders and investigators? A developer that has such a plan—and is willing to discuss the safety-relevant portions of it—signals that it understands that deployment is about more than just the state of the technologies.

Reevaluation

Might the answers to any of these questions change during the deployment of the AV? How and why? What will trigger that change?

This article ends where it began: Automated driving is complex, dynamic, and difficult to predict. For these reasons, many of an AV developer’s answers to the questions identified here could evolve over the course of a deployment. On one hand, the realties of testing or deployment may demand a more cautious approach or frustrate the fulfilment of some promises. On the other hand, developers still hope to remove their safety drivers and to expand their operational design domain at some point. How—and on what basis—will they decide when to take these steps? Their answers can help to shift discussions from vague and speculative predictions to meaningful and credible roadmaps.

Cite as: Raphael Beauregard-Lacroix, (Re)Writing the Rules of The Road: Reflections from the Journal of Law and Mobility’s 2019 Conference, 2019 J. L. & Mob. 97.

On March 15th, 2019, the Journal of Law and Mobility, part of the University of Michigan’s Law and Mobility Program, presented its inaugural conference, entitled “(Re)Writing the Rules of The Road.” The conference was focused on issues surrounding the relationship between automated vehicles (“AVs”) and the law. In the afternoon, two panels of experts from academia, government, industry, and civil society were brought together to discuss how traffic laws should apply to automated driving and the legal person (if any) who should be responsible for traffic law violations. The afternoon’s events occurred under a modified version of the Chatham House Rule, to allow the participants to speak more freely. In the interest of allowing those who did not attend to still benefit from the day’s discussion, the following document was prepared. This document is a summary of the two panels, and an effort has been made to de-identify the speaker while retaining the information conveyed. 

Panel I: Crossing the Double Yellow Line: Should Automated Vehicles Always Follow the Rules of the Road as Written?

The first panel focused on whether automated vehicles should be designed to strictly follow the rules of the road. Questions included – How should these vehicles reconcile conflicts between those rules? Are there meaningful differences between acts such as exceeding the posted speed limit to keep up with the flow of traffic, crossing a double yellow line to give more room to a bicyclist, or driving through a stop sign at the direction of a police officer? If flexibility and discretion are appropriate, how can this be reflected in law? 

Within the panel, there was an overall agreement that we need both flexibility in making the law, and flexibility in the law itself among the participants. It was agreed that rigidity, both on the side of the technology as well as on the side of norms, would not serve AVs well. The debate was focused over just how much flexibility there should be and how this flexibility can be formulated in the law.

One type of flexibility that already exists is legal standards. One participant emphasized that the law is not the monolith it may seem from the outside – following a single rule, like not crossing a double yellow line, is not the end of an individual’s interaction with the law. There are a host of different laws applying to different situations, and many of these laws are formulated as standards – for example, the standard that a person operating a vehicle drives with “due care and attention.” Such an approach to the law may change the reasoning of a judge when it would come to determining liability for an accident involving an AV. 

When we ask if AVs should always follow the law, our intuitive reaction is of course they should. Yet, some reflection may allow one to conclude that such strict programming might not be realistic. After all, human drivers routinely break the law. Moreover, most of the participants explicitly agreed that as humans, we get to choose to break the law, sometimes in a reasonable way, and we get to benefit from the discretion of law enforcement. 

That, however, does not necessarily translate to the world of AVs, where engineers make decisions about code and where enforcement can be automatized to a high degree, both ex ante and ex post. Moreover, such flexibilities in the law needs to be tailored to the specific social need; speeding is a “freedom” we enjoy with our own, personal legacy cars, and this type of law breaking does not fulfill the same social function as a driver being allowed to get on the sidewalk in order to avoid an accident. 

One participant suggested that in order to reduce frustrating interactions with AVs, and to overall foster greater safety, AVs need the flexibility not to follow the letter of the law in some situations. Looking to the specific example of the shuttles running on the University of Michigan’s North Campus – those vehicles are very strict in their compliance with the law. 61 61. Susan Carney, Mcity Driverless Shuttle launches on U-M’s North Campus, The Michigan Engineer (June 4, 2018), https://news.engin.umich.edu/2018/06/mcity-driverless-shuttle-launches-on-u-ms-north-campus/. × They travel slowly, to the extent that their behavior can annoy human drivers. When similar shuttles from the French company Navya were deployed in Las Vegas, 62 62. Paul Comfort, U.S. cities building on Las Vegas’ success with autonomous buses, Axios (Sept. 14, 2018), https://www.axios.com/us-cities-building-on-las-vegas-success-with-autonomous-buses-ce6b3d43-c5a3-4b39-a47b-2abde77eec4c.html. × there was an accident on the very first run. 63 63. Sean O’Kane, Self-driving shuttle crashed in Las Vegas because manual controls were locked away, The Verge (July 11, 2019, 5:32 PM), https://www.theverge.com/2019/7/11/20690793/self-driving-shuttle-crash-las-vegas-manual-controls-locked-away. × A car backed into the shuttle, and when a normal driver would have gotten out of the way, the shuttle did not.

One answer is that we will know it when we see it; or that solutions will emerge out of usage. However, many industry players do not favor such a risk-taking strategy. Indeed, it was argued that smaller players in the AV industry would not be able to keep up if those with deeper pockets decide to go the risky way. 

Another approach to the question is to ask what kind of goals should we be applying to AVs? A strict abidance to legal rules or mitigating harm? Maximizing safety? There are indications of some form of international consensus 64 64. UN resolution paves way for mass use of driverless cars, UN News (Oct. 10, 2018), https://news.un.org/en/story/2018/10/1022812. × (namely in the form of a UN Resolution) 65 65. UN Economic Commission for Europe, Revised draft resolution on the deployment of highly and fully automated vehicles in road traffic (July, 12, 2018), https://www.unece.org/fileadmin/DAM/trans/doc/2018/wp1/ECE-TRANS-WP.1-2018-4-Rev_2e.pdf × that the goal should not be strict abidance to the law, and that other road users may commit errors, which would then put the AV into a situation of deciding between strict legality and safety or harm. 

In Singapore, the government recently published “Technical Reference 68,” 66 66. Joint Media Release, Land Transport Authority, Enterprise Singapore, Standards Development Organization, & Singapore Standards Council, Singapore Develops Provisional National Standards to Guide Development of Fully Autonomous Vehicles (Jan. 31, 2019), https://www.lta.gov.sg/apps/news/page.aspx?c=2&id=8ea02b69-4505-45ff-8dca-7b094a7954f9. × which sets up a hierarchy of rules, such as safety, traffic flow, and with the general principle of minimizing rule breaking. This example shows that principles can act as a sense-check. That being said, the technical question of how to “code” the flexibility of a standard into AV software was not entirely answered. 

Some participants also reminded the audience that human drivers do not have to “declare their intentions” before breaking the law, while AV software developers would have to. Should they be punished for that in advance? Moreover, non-compliance with the law – such as municipal ordinances on parking – is the daily routine for certain business models such as those who rely on delivery. Yet, there is no widespread condemnation of that, and most of us enjoy having consumer goods delivered at home.

More generally, as one participant asked, if a person can reasonably decide to break the law as a driver, does that mean the developer or programmer of AV software can decide to break the law in a similar way and face liability later? Perhaps the answer is to turn the question around – change the law to better reflect the driving environment so AVs don’t have to be programmed to break it. 

Beyond flexibility, participants discussed how having multiple motor vehicle codes – in effect one per US State – makes toeing the line of the law difficult. One participant highlighted that having the software of an AV validated by one state is big enough a hurdle, and that more than a handful of such validations processes would be completely unreasonable for an AV developer. Having a single standard was identified as a positive step, while some conceded that states also serve the useful purpose of “incubating” various legal formulations and strategies, allowing in due time the federal government to “pick” the best one. 

Panel II: Who Gets the Ticket? Who or What is the Legal Driver, and How Should Law Be Enforced Against Them?

The second panel looked at who or what should decide whether an automated vehicle should violate a traffic law, and who or what should be responsible for that violation. Further questions included – Are there meaningful differences among laws about driving behavior, laws about vehicle maintenance, and laws and post-crash responsibilities? How should these laws be enforced? What are the respective roles for local, state, and national authorities?

The participants discussed several initiatives, both public and private, that aimed at defining, or helping define the notion of driver in the context of AVs. The Uniform Law Commission worked on the “ADP”, or “automated driving provider”, which would replace the human driver as the entity responsible in case of an accident. The latest report from the RAND Corporation highlighted that the ownership model of AVs will be different, as whole fleets will be owned and maintained by OEMs (“original equipment manufacturers”) or other types of businesses and that most likely these fleet operators would be the drivers. 67 67. James M. Anderson, et. al., Rethinking Insurance and Liability in the Transformative Age of Autonomous Vehicles (2018), https://www.rand.org/content/dam/rand/pubs/conf_proceedings/CF300/CF383/RAND_CF383.pdf. ×

Insurance was also identified as a matter to take into consideration in the shaping up of the notion of AV driver. As of the date of the conference, AVs are only insured outside of state-sponsored guarantee funds, which aim to cover policy holders in case of bankruptcy of the insurer. Such “non-admitted” insurance means that most insurers will simply refuse to insure AVs. Who gets to be the driver in the end may have repercussions on whether AVs become insurable or not. 

In addition, certain participants stressed the importance of having legally recognizable persons bear the responsibility – the idea that “software” may be held liable was largely rejected by the audience. There should also be only one such person, not several, if one wants to make it manageable from the perspective of the states’ motor vehicle codes. In addition, from a more purposive perspective, one would want the person liable for the “conduct” of the car to be able to effectuate required changes so to minimize the liability, through technical improvements for example. That being said, such persons will only accept to shoulder liability if costs can be reasonably estimated. It was recognized by participants that humans tend to trust other humans more than machines or software, and are more likely to “forgive” humans for their mistakes, or trust persons who, objectively speaking, should not be trusted.

Another way forward identified by participants is product liability law, whereby AVs would be understood as a consumer good like any other. The question then becomes one of apportionment of liability, which may be rather complex, as the experience of the Navya shuttle crash in Las Vegas has shown. 

Conclusion

The key takeaway from the two panels is that AV technology now stands at a crossroads, with key decisions being taken as we discuss by large industry players, national governments and industry bodies. As these decisions will have an impact down the road, all participants and panelists agreed that the “go fast and break things” approach will not lead to optimal outcomes. Specifically, one line of force that comes out from the two panels is the idea that it is humans who stand behind the technology, humans who take the key decisions, and also humans who will accept or reject commercially-deployed AVs, as passengers and road users. As humans, we live our daily lives, which for most of us include using roads under various capacities, in a densely codified environment. However, this code, unlike computer code, is in part unwritten, flexible and subject to contextualization. Moreover, we sometimes forgive each others’ mistakes. We often think of the technical challenges of AVs in terms of sensors, cameras and machine learning. Yet, the greatest technical challenge of all may be to express all the flexibility of our social and legal rules into unforgivably rigid programming language. 

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.” 68 68. 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. 69 69. 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. 70 70. 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). 71 71. 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. 72 72. 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. 73 73. 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, 74 74. 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. 75 75. 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. 76 76. 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, 77 77. 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 . . . 78 78. 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. 79 79. 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. 80 80. Id. ×

Perhaps not surprisingly, the Graves Amendment has been highly litigated, from early challenges to its constitutionality, 81 81. 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,” 82 82. 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.” 83 83. 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. 84 84. See Minto v. Zipcar New York, Inc., No. 15401/09. × and Moreau and Duverson v. Josaphat, et al., 85 85. 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.” 86 86. 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.” 87 87. 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 88 88. 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.” 89 89. 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. 90 90. 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.” 91 91. 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”) 92 92. 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”. 93 93. 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. 94 94. 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.” 95 95. 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). 96 96. 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. 97 97. 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. 98 98. 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.” 99 99. Cal. Veh. Code § 11752 (West 2019); Cal Ins. Code § 11580.24(b)(2) (West 2011). ×

B.         State Law

Several states, including California, 100 100. Cal. Civ. Code §§ 1939.01 – 1939.37 (West 2017). × Hawaii, 101 101. Haw. Rev. Stat. Ann. §437D (West 2019). × Illinois, 102 102. 625 Ill. Comp. Stat. 27 (West 2019); 625 Ill. Comp. Stat. 5/6-305 (West 2019). × Nevada, 103 103. Nev. Rev. Stat. Ann. §§ 482.295–482.3159 (West 2019). × and New York, 104 104. 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; 105 105. 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. 106 106. 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. 107 107. 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. 108 108. 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. 109 109. See Turner v. American Car Rental 884 A.2d 7 (Ct. App. Ct. 2005); Proposed Judgement, 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. 110 110. 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. 111 111. 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. 112 112. 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. 113 113. 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, 114 114. 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. 115 115. 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. 116 116. 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. 117 117. 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. 118 118. 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). 119 119. 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. 120 120. 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. 121 121. 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). 122 122. 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. 123 123. 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. 124 124. 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; 125 125. 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); 126 126. 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; 127 127. 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; 128 128. 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; 129 129. 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. 130 130. 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). 131 131. 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. 132 132. Cal. Civ. Code § 1939.37 (Deering 2019). × As of the date of this article, a similar draft bill is pending in Massachusetts. 133 133. 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). 134 134. 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” 135 135. 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, 136 136. Md. Code Ann., Transp., § 18.5-109 (LexisNexis 2019). ×  collision damage waiver sales, 137 137. Md. Code Ann., Com. Law, § 14-2101 (LexisNexis 2019). ×  limited lines licensing in connection with the sale of car rental insurance, 138 138. Md. Code Ann., Ins., § 10-6A-02 (LexisNexis 2019). × airport concession agreements, 139 139. Md. Code Ann., Transp. § 18.5-106 (LexisNexis 2019). ×  and recordkeeping requirements, to peer-to-peer car sharing programs. 140 140. 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. 141 141. 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. 142 142. 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. 143 143. 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. 144 144. 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. 145 145. 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.” 146 146. 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. 147 147. 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. 148 148. 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.” 149 149. 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). 150 150. 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. 151 151. Id. ×

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. 152 152. N.Y. Gen. Bus Law § 396-z(16). ×

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

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. 153 153. 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. 154 154. 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”) 155 155. 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. 156 156. 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. 157 157. 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.” 158 158. 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.” 159 159. 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. 160 160. 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.” 161 161. 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.” 162 162. 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.” 163 163. 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. 164 164. 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. 165 165. 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. 166 166. 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 . . . .” 167 167. 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.” 168 168. 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. 169 169. 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. 170 170. 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. 171 171. 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. 172 172. 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. 173 173. 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.” 174 174. 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. 175 175. 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. 176 176. 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. 177 177. 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. 178 178. 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. 179 179. 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.” 180 180. 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. 181 181. 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. 182 182. 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. 183 183. 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.” 184 184. 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. 185 185. 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. 186 186. 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. 187 187. 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. 188 188. 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. 189 189. 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. 190 190. 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. 191 191. 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. 192 192. 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. 193 193. 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.” 194 194. 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.” 195 195. 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.” 196 196. 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.” 197 197. Id. × The Connecticut Supreme Court’s approach was based, in part, on early drafts of the Restatement (Third) of Torts on Product Liability. 198 198. 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. 199 199. 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.” 200 200. 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.” 201 201. 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. 202 202. 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. 203 203. 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.’” 204 204. 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. 205 205. 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.” 206 206. 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. 207 207. 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. 208 208. 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. 209 209. 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. 210 210. 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.’” 211 211. 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. 212 212. 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. 213 213. 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. 214 214. See id. at 848. × The court of appeals reversed the jury verdict. 215 215. 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.” 216 216. 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. 217 217. 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. 218 218. 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. 219 219. 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. 220 220. 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, 221 221. 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. 222 222. 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. 223 223. 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.” 224 224. 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. 225 225. 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. 226 226. 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].” 227 227. Id. ×

Further, the authors found that “the name of a driver assistance system also has the potential to impact their perceptions of system capability. 228 228. 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 . . . .” 229 229. 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. 230 230. 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. 231 231. 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.” 232 232. 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.” 233 233. 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. 234 234. 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. 235 235. 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. 236 236. 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. 237 237. 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. 238 238. 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. 239 239. 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? 240 240. 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.” 241 241. 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. 242 242. 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. 243 243. 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. 244 244. 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. 245 245. 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.” 246 246. 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. 247 247. 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. 248 248. 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. 249 249. 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. 250 250. 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. 251 251. 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. 252 252. 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. 253 253. See generally Waymo, supra note 2, at 6. × According to a report from NHTSA, 3 million Americans are blind or suffer from poor vision. 254 254. 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.

By Bryan Casey

Cite as: Bryan Casey, Title 2.0: Discrimination Law in a Data-Driven Society, 2019 J. L. & Mob. 36.

Abstract

More than a quarter century after civil rights activists pioneered America’s first ridesharing network, the connections between transportation, innovation, and discrimination are again on full display. Industry leaders such as Uber, Amazon, and Waze have garnered widespread acclaim for successfully combatting stubbornly persistent barriers to transportation. But alongside this well-deserved praise has come a new set of concerns. Indeed, a growing number of studies have uncovered troubling racial disparities in wait times, ride cancellation rates, and service availability in companies including Uber, Lyft, Task Rabbit, Grubhub, and Amazon Delivery.

Surveying the methodologies employed by these studies reveals a subtle, but vitally important, commonality. All of them measure discrimination at a statistical level, not an individual one. As a structural matter, this isn’t coincidental. As America transitions to an increasingly algorithmic society, all signs now suggest we are leaving traditional brick-and-mortar establishments behind for a new breed of data-driven ones. Discrimination, in other words, is going digital. And when it does, it will manifest itself—almost by definition—at a macroscopic scale. Why does this matter? Because not all of our civil rights laws cognize statistically-based discrimination claims. And as it so happens, Title II could be among them.

This piece discusses the implications of this doctrinal uncertainty in a world where statistically-based claims are likely to be pressed against data-driven establishments with increasing regularity. Its goals are twofold. First, it seeks to build upon adjacent scholarship by fleshing out the specific structural features of emerging business models that will make Title II’s cognizance of “disparate effect” claims so urgent. In doing so, it argues that it is not the “platform economy,” per se, that poses an existential threat to the statute but something deeper. The true threat, to borrow Lawrence Lessig’s framing, is architectural in nature. It is the algorithms underlying “platform economy businesses” that are of greatest doctrinal concern—regardless of whether such businesses operate inside the platform economy or outside it. Second, this essay joins others in calling for policy reforms focused on modernizing our civil rights canon. It argues that our transition from the “Internet Society” to the “Algorithmic Society” will demand that Title II receive a doctrinal update. If it is to remain relevant in the years and decades ahead, Title II must become Title 2.0.


Introduction

For the rational study of the law the blackletter man may be the man of the present, but the man of the future is the man of statistics.

—Oliver Wendell Holmes, Jr. 255 255. Oliver Wendell Holmes, The Path of the Law, 10 Harv. L. Rev. 457, 469 (1897). ×

The future is already here—it is just unevenly distributed.

—William Gibson 256 256. As quoted in Peering round the corner, The Economist, Oct. 11, 2001, https://www.economist.com/special-report/2001/10/11/peering-round-the-corner. ×

It took just four days after Rosa Parks’ arrest to mount a response. Jo Ann Robinson, E.D. Nixon, Ralph Abernathy, and a little-known pastor named Martin King, Jr. would head a coalition of activists boycotting Montgomery, Alabama’s public buses. 257 257. Jack M. Bloom, Class, Race, and the Civil Rights Movement 140 (Ind. U. Press ed. 1987). × Leaders announced the plan the next day, expecting something like a 60% turnout. 258 258. Id. × But to their surprise, more than 90% of the city’s black ridership joined. The total exceeded 40,000 individuals. 259 259. See History.com Editors, How the Montgomery Bus Boycott Accelerated the Civil Rights Movement, History Channel (Feb. 3, 2010), https://www.history.com/topics/black-history/montgomery-bus-boycott. ×

Sheer numbers—they quickly realized—meant that relying on taxis as their sole means of vehicular transport would be impossible. Instead, they got creative. The coalition organized an elaborate system of carpools and cabbies that managed to charge rates comparable to Montgomery’s own municipal system. 260 260. Id. × And so it was that America’s first ridesharing network was born. 261 261. More precisely, the first large-scale ridesharing network making use of automobiles. ×

Fast forward some sixty years to the present and the connections between transportation, innovation, and civil rights are again on full display. Nowadays, the networking system pioneered by Montgomery’s protestors is among the hottest tickets in tech. Newly minted startups launching “ridesharing platforms,” “carsourcing software,” “delivery sharing networks,” “bikesharing” offerings, “carpooling apps,” and “scooter sharing” schemes are a seemingly daily fixture of the news. And just as was true during the Civil Rights Movement, discrimination continues to be a hot-button issue.

Industry leaders such as Uber, Amazon, and Waze have garnered widespread acclaim for successfully combatting discriminatory barriers to transportation that stubbornly persist in modern America. 262 262. See infra Part I. × But alongside this well-deserved praise has come a new set of concerns. Indeed, a growing number of studies have uncovered troubling racial disparities in wait times, ride cancellation rates, and service availability in the likes of Uber, Lyft, Task Rabbit, Grubhub, and Amazon Delivery. 263 263. See infra Part I(A). × The weight of the evidence suggests a cautionary tale: The same technologies capable of combatting modern discrimination also appear capable of producing it.

Surveying the methodologies employed by these reports reveals a subtle, but vitally important, commonality. All of them measure discrimination at a statistical—not individual—scale. 264 264. See infra Part I(A). ×

As a structural matter, this isn’t coincidental. Uber, Amazon, and a host of other technology leaders have transformed traditional brick-and-mortar business models into data-driven ones fit for the digital age. Yet in doing so, they’ve also taken much discretion out of the hands of individual decision-makers and put it into hands of algorithms. 265 265. See infra Part II(D). × This transfer holds genuine promise of alleviating the kinds of overt prejudice familiar to Rosa Parks and her fellow activists. But is also means that when discrimination does occur, it will manifest—almost by definition—at a statistical scale.

This piece discusses the implications of this fast-approaching reality for one of our most canonical civil rights statutes, Title II of the Civil Rights Act of 1964. 266 266. Civil Rights Act of 1964, tit. II, 42 U.S.C. § 2000a (2018). × Today, a tentative consensus holds that certain of our civil rights laws recognize claims of “discriminatory effect” based in statistical evidence. But Title II is not among them. 267 267. See infra Part II(B). Major courts have recently taken up the issue tangentially, but uncertainty still reigns. × Indeed, more than a quarter century after its passage, it remains genuinely unclear whether the statute encompasses disparate effect claims at all.

This essay explores the implications of this doctrinal uncertainty in a world where statistically-based claims are likely to be pressed against data-driven companies with increasing regularity. Its goals are twofold. First, it seeks to build upon adjacent scholarship 268 268. Of particular note is a groundbreaking piece by Nancy Leong and Aaron Belzer, The New Public Accommodations: Race Discrimination in the Platform Economy, 105 Geo. L. J. 1271 (2017). × by fleshing out the specific structural features of emerging business models that will make Title II’s cognizance of disparate effect claims so urgent. In doing so, it argues that it is not the “platform economy,” per se, that poses a threat to the civil rights law but something deeper. The true threat, to borrow Lawrence Lessig’s framing, is architectural in nature. 269 269. Lawrence Lessig, The Law of the Horse: What Cyberlaw Might Teach, 113 Harv. L. Rev. 501, 509 (1999) (describing “architecture,” “norms,” “law,” and “markets” as the four primary modes of regulation). × It is the algorithms underlying emerging platform economy businesses that are of greatest doctrinal concern—regardless of whether such businesses operate inside the platform economy or outside it. 270 270. And, needless to say, there will be a great many more companies that operate outside of it. ×

Second, this essay joins other scholars in calling for policy reforms focused on modernizing our civil rights canon. 271 271. See, e.g., Leong & Belzer supra note 14; Andrew Selbst, Disparate Impact in Big Data Policing, 52 Georgia L. Rev. 109 (2017) (discussing disparate impact liability in other civil rights contexts). × It argues that our transition from the “Internet Society” to the “Algorithmic Society” will demand that Title II receive a doctrinal update. 272 272. See Jack Balkin, Free Speech in the Algorithmic Society: Big Data, Private Governance, and New School Speech Regulation, 51 U.C. Davis L. Rev. 1149, 1150 (noting that society is entering a new post-internet phase he calls the “Algorithmic Society”). × If the statute is to remain relevant in the years and decades ahead, Title II must become Title 2.0.

I.          The Rise of Data-Driven Transportation

Today, algorithms drive society. They power the apps we use to skirt traffic, the networking systems we use to dispatch mobility services, and even the on-demand delivery providers we use to avoid driving in the first place.

For most Americans, paper atlases have been shrugged. Algorithms, of one variety or another, now govern how we move. And far from being anywhere near “peak” 273 273. Gil Press, A Very Short History of Digitization, Forbes (Dec. 27, 2015), https://www.forbes.com/sites/gilpress/2015/12/27/a-very-short-history-of-digitization/#1560b2bb49ac (describing digitization technologies in terms of “peak” adoption). × levels of digitization, society’s embrace of algorithms only appears to be gaining steam. With announcements of new autonomous and connected technologies now a daily fixture of the media, all signs suggest that we’re at the beginning of a long road to algorithmic ubiquity. Data-driven transportation might rightly be described as pervasive today. But tomorrow, it is poised to become the de facto means by which people, goods, and services get from Point A to B.

Many have high hopes for this high-tech future, particularly when it comes to combatting longstanding issues of discrimination in transportation. Observers have hailed the likes of Uber and Lyft as finally allowing “African American customers [to] catch a drama-free lift from point A to point B.” 274 274. E.g., Latoya Peterson, Uber’s Convenient Racial Politics, Splinter News (Jul. 23, 2015), https://splinternews.com/ubers-convenient-racial-politics-1793849400. × They’ve championed low-cost delivery services, such as Amazon and Grubhub, as providing viable alternatives to transit for individuals with disabilities. 275 275. See, e.g., Winnie Sun, Why What Amazon Has Done For Medicaid And Low-Income Americans Matters, Forbes (Mar. 7, 2018), https://www.forbes.com/sites/winniesun/2018/03/07/why-what-amazon-has-done-for-medicaid-and-low-income-americans-matters/#7dbe2ff1ac76; Paige Wyatt, Amazon Offers Discounted Prime Membership to Medicaid Recipients, The Mighty (Mar. 9, 2018), https://themighty.com/2018/03/amazon-prime-discount-medicaid/. × And they’ve even praised navigation apps, like Waze, for bursting drivers’ “very white, very male, very middle-to-upper class” bubbles. 276 276. E.g., Mike Eynon, How Using Waze Unmasked My Privilege, Medium (Oct. 2, 2015), https://medium.com/diversify-tech/how-using-waze-unmasked-my-privilege-26 355a84fe05. × It is through algorithmic transportation, in other words, that we’re beginning to glimpse a more equitable America—with our mobility systems finally exorcised of the types of discrimination that stubbornly persist today, some fifty years after the passage of modern civil rights legislation.

A.         Out With the Old Bias, In With the New?

As with seemingly all significant technological breakthroughs, however, algorithmic transportation also gives rise to new challenges. And discrimination is no exception. Already, multiple studies have revealed the potential for racial bias to infiltrate the likes of Uber, Lyft, Grubhub, and Amazon. 277 277. See infra notes 14 – 28. See also, e.g., Jacob Thebault-Spieker et al., Towards a Geographic Understanding of the Sharing Economy: Systemic Biases in UberX and TaskRabbit, 21 ACM Transactions on Computer-Human Interaction (2017). × The National Bureau of Economic Research’s (“NBER”) groundbreaking study revealing a pattern of racial discrimination in Uber and Lyft services is one such exemplar. 278 278. Yanbo Ge, et al., Racial and Gender Discrimination in Transportation Network Companies, (2016), http://www.nber.org/papers/w22776. × After deploying test subjects on nearly 1,500 trips, researchers found that black riders 279 279. Or riders with black-sounding names. × experienced significantly higher wait times and trip cancellations than their white counterparts.

The NBER’s piece was preceded—months earlier—by a similarly provocative report from Jennifer Stark and Nicholas Diakopoulus. 280 280. See Jennifer Stark & Nicholas Diakopoulus, Uber Seems to Offer Better Service in Areas With More White People. That Raises Some Tough Questions., Wash. Post (Mar. 10, 2016), https://www.washingtonpost.com/news/wonk/wp/2016/03/10/uber-seems-to-offer-better-service-in-areas-with-more-white-people-that-raises-some-tough-questions/. × Using a month’s worth of Uber API data, the scholars found a statistical correlation between passenger wait times and neighborhood demographic makeup. The upshot? That Uber’s patented “surge pricing algorithm” resulted in disproportionately longer wait times for people of color, even after controlling for factors such as income, poverty, and population density.

Another example comes from Bloomberg, which reported in 2017 that Amazon’s expedited delivery services tended to bypass areas composed of predominantly black residents. 281 281. See David Ingold & Spencer Soper, Amazon Doesn’t Consider the Race of Its Customers. Should It?, Bloomberg (Apr. 21, 2016), https://www.bloomberg.com/graphics/2016-amazon-same-day/. × Bloomberg’s findings were subsequently buttressed by a Washington Post piece revealing that the “delivery zones” of services such as Grubhub, Door Dash, Amazon Restaurants, and Caviar appeared highly limited in low-income, minority-majority areas. 282 282. Tim Carman, D.C. has never had more food delivery options. Unless you live across the Anacostia River., Wash. Post (Apr. 2, 2018), https://www.washingtonpost.com/news/food/wp/2018/04/02/dc-has-never-had-more-food-delivery-options-unless-you-live-across-the-anacostia-river/?utm_term=.dead0dca9e8a. ×

B.         Discrimination’s Digital Architecture

While the patterns and practices uncovered by these reports vary dramatically, they share one commonality whose importance cannot be overstated. Each of them measures racial bias at a statistical—not individual—scale.

As a structural matter, this observation is in some sense unavoidable. When discrimination occurs in traditional brick-and-mortar contexts, it generally does so out in the open. It is difficult to turn someone away from Starbucks, 283 283. This example is pulled from an all-too-recent headline. See Rachel Adams, Starbucks to Close 8,000 U.S. Stores for Racial-Bias Training After Arrests, N.Y. Times (Apr. 17, 2018), https://www.nytimes.com/2018/04/17/business/starbucks-arrests-racial-bias.html. × after all, without them being made aware of the denial, even if the precise rationale is not clear.

But as the means by which Americans secure their transportation, food, and lodging goes increasingly digital, the “architecture” 284 284. See Lessig, supra note 15. × of discrimination will take on a different face. Our interactions with cab companies, public transportation providers, and delivery services will be mediated by algorithms that we neither see nor necessarily understand. And face-to-face interactions with service providers, meanwhile, will become a thing of the past.

In countless respects, this transition is cause for celebration. A society driven by algorithms is one that holds genuine hope of eliminating the types of overt discrimination that drove civil rights reforms of past eras. But in its stead, an emerging body of evidence suggests that subtler forms of discrimination may persist—ones that could challenge the doctrinal foundations on which our civil rights laws currently rest.

II.         When Blackletter Civil Rights Law Isn’t Black and White

When it comes to holding private entities that provide our transportation, food, and lodging accountable for racial discrimination, the usual suspect is Title II of the Civil Rights Act. Title II sets forth the basic guarantee that “[a]ll persons [are] entitled to the full and equal enjoyment of the goods, services, facilities, privileges, advantages, and accommodations of any place of public accommodation. . . without discrimination or segregation on the ground of race, color, religion, or national origin.” 285 285. Civil Rights Act of 1964, 42 U.S.C. § 2000a(a) (2018). × The statute defines “public accommodation” broadly as essentially any “establishment affecting interstate commerce.” 286 286. See id (with the exception of a few carve outs—private clubs being one such example). ×

Pursuing a Title II claim requires, first, establishing a prima facie case of discrimination. To do so, claimants must show they: (1) are members of a protected class; (2) were denied the full benefits of a public accommodation; and (3) were treated less favorably than others 287 287. Id (specifically, “. . . treated less favorably than others outside of the protected class” who are similarly situated). × outside of the protected class. 288 288. Having established a prima facie case, the burden of persuasion then shifts to the defendant. For simplicity’s sake, this piece strictly analyzes prima facie claims and does not delve into the complexities of burden shifting and justifying legitimate business decisions under modern antidiscrimination law. ×

A.         The Intent Requirement and the Man of Statistics

At first blush, establishing these prima facie elements using the types of evidence documented by the reports noted in Part I(A) may seem straightforward. But there’s just one tiny detail standing in the way. As it turns out, no one knows whether Title II actually prohibits the kinds of racial disparities uncovered by the studies.

Not all civil rights laws, after all, allow claimants to use statistically-disparate impacts as evidence of discrimination. Title VI, for example, does not, whereas Title VII does.

This distinction owes, in large part, to the antidiscrimination canon’s “intent requirement,” which draws a doctrinal dividing line between acts exhibiting “discriminatory intent” and those, instead, exhibiting “discriminatory effects.” 289 289. See Implementation of the Fair Housing Act’s Discriminatory Effects Standard, 78 Fed. Reg. 11,460 (Feb. 15, 2013) (codified at 24 C.F.R. § 100.500(1) (2014)). × To oversimplify, acts of intent can be understood as overt, “invidious acts of prejudiced decision-making.” 290 290. Susan Carle, A New Look at the History of Title VII Disparate Impact Doctrine, 63 Flo. L. Rev. 251, 258 (2011). × Acts of effect, meanwhile, are those that “actually or predictably . . . result[] in a disparate impact on a group of persons” even when the explicit intent behind them is not discriminatory. 291 291. See Implementation of the Fair Housing Act’s Discriminatory Effects Standard, supra note 35. ×

Ask Rosa Parks to give up her seat for a white passenger? The civil rights claim filed in response will likely take a narrow view of the interaction, examining the discrete intent behind it. Systematically route buses in such a way that they bypass Rosa Parks altogether? Under the right circumstances, this could be evidence of discrimination equally as troubling as in the former scenario. But the civil rights claim it gave rise to would likely entail a far wider view of the world—one that couched its arguments in statistics. 292 292. Title VII offers plaintiffs a “disparate impact” framework under which they may prove unlawful discrimination alongside the more traditional “disparate treatment” model. 42 U.S.C. § 2000e-2(k)(l)(A) (1994). ×

Today, a tentative consensus holds that theories involving discriminatory effects are available under the Fair Housing Act, the Age Discrimination and Employment Act, certain Titles of the Americans With Disabilities Act, and Title VII of the Civil Rights Act. When it comes to Title II, however, the jury is still out. Neither the Supreme Court, a major circuit court, nor a federal administrative body has resolved the issue to date, and “there is a paucity of cases analyzing it.” 293 293. Hardie v. Nat’l Collegiate Athletic Ass’n, 97 F. Supp. 3d 1163, 1163 (S.D. Cal. 2015), aff’d, 861 F.3d 875 (9th Cir. 2017), and superseded by, 876 F.3d 312 (9th Cir. 2017). ×

B.         Hardie’s Open Question

Uncertainties surrounding Title II’s scope most recently came to a head in Hardie v. NCAA. The case involved a challenge to the collegiate association’s policy of banning convicted felons from coaching certain tournaments. The plaintiff, Dominic Hardie, alleged that the policy disparately impacted blacks, putting the question of Title II’s “discriminatory effect” liability at center stage.

The court of first impression ruled against Hardie, finding that Title II did not cognize such claims. But on appeal, the case’s focal point changed dramatically. In a surprise turn of events, the NCAA abandoned its structural argument against disparate impact liability outright. Instead, it conceded that Title II did, in fact, recognize statistical effects but asserted that the NCAA’s policy was, nonetheless, not a violation. 294 294. See id. (“On appeal, the NCAA does not challenge Hardie’s argument that Title II encompasses disparate-impact claims. . . . Instead, the NCAA asks us to affirm entry of summary judgment in its favor on either of two other grounds advanced below, assuming arguendo that disparate-impact claims are cognizable under Title II.”). ×

Thus, when the case came before the 9th Circuit, the question of whether Title II encompassed discriminatory effects was, essentially, rendered moot. The court ruled in favor of the NCAA’s narrower argument but went out of its way to emphasize that it had not decided the question of discriminatory effect liability. And no other major appeals court has addressed the issue since.

C.         Title II’s Fair Housing Act Moment

It was not long ago that another civil rights centerpiece—the Fair Housing Act of 1968 (FHA)—found itself at a similar crossroads. The FHA makes it illegal to deny someone housing based on race. But a half century after the statute’s passage, the question of whether it prohibited disparate effects had not been tested in our highest court.

By 2015, the Supreme Court had twice taken up the issue in two years. 295 295. See Gallagher v. Magner, 619 F.3d 823, (8th Cir. 2010), cert. dismissed, 565 U.S. 1187, 132 S.Ct. 1306 (2012); Mt. Holly Gardens Citizens in Action, Inc. v. Twp. of Mt. Holly, 658 F.3d 375 (3rd Cir. 2011), cert. dismissed, 571 U.S. 1020, 134 S.Ct. 636 (2013). × And twice, the cases had settled in advance of a ruling.

Then came Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, alleging that a state agency’s allocation of tax credits disparately impacted the housing options of low-income families of color. 296 296. Tex. Dep’t of Hous. & Cmty. Affairs v. Inclusive Cmtys. Project, Inc., 135 S. Ct. 2507, 2514 (2015) [hereinafter “Inclusive Communities”]. × This time, there was no settlement. And the ruling that followed was subsequently described as the “most important decision on fair housing in a generation.” 297 297. Kristen Capps, With Justice Kennedy’s Retirement, Fair Housing Is in Peril, Citylab (Jun. 28, 2018), https://www.citylab.com/equity/2018/06/what-justice-kennedys-retirement-means-for-fair-housing/563924/. ×

Writing for the 5-4 majority, Justice Kennedy affirmed that the FHA extended to claims of both discriminatory intent and effect. 298 298. But his ruling, according to some commenters, took a troublingly narrow view of viable disparate impact claims. × Kennedy was careful to note that the FHA’s passage occurred at a time when explicitly racist policies—such as zoning laws, racial covenants, and redlining—were the norm. But the Justice, nonetheless, stressed that more modern claims alleging racially disparate impacts were also “consistent with the FHA’s central purpose.” 299 299. See Inclusive Communities supra note 42. ×

D.        The New Back of the Bus

Much like the FHA, Title II arrived on the scene when discriminatory effect claims were far from the leading concern among civil rights activists. As Richard Epstein writes:

“Title II was passed when memories were still fresh of the many indignities that had been inflicted on African American citizens on a routine basis. It took little imagination to understand that something was deeply wrong with a nation in which it was difficult, if not impossible, for African American citizens to secure food, transportation, and lodging when traveling from place to place in large sections of the country. In some instances, no such facilities were available, and in other cases they were only available on limited and unequal terms.” 300 300. Richard A. Epstein, Public Accommodations Under the Civil Rights Act of 1964: Why Freedom of Association Counts as a Human Right, 66 Stan. L. Rev. 1241, 1242 (2014). ×

The paradigmatic act of discrimination, in other words, was intentional, overt, and explicitly racial.

Today, however, we are heading toward a world in which this paradigm is apt to turn on its head. Gone will be the days of racially explicit denials of service such as the well-documented phenomena of “hailing a cab while black,” “dining while black,” “driving while black,” or “shopping while black.” 301 301. See, e.g., Matthew Yglesias, Uber and Taxi Racism, Slate (Nov. 28, 2012), http://www.slate.com/blogs/moneybox/2012/11/28/uber_makes_cabbing_while_black_easier.html; Danielle Dirks & Stephen K. Rice in Race and Ethnicity: Across Time, Space, and Discipline 259 (Rodney Coates ed., 2004). × But as an increasing body of evidence suggests, inequality will not simply disappear as a consequence. Rather, discrimination will go digital. And when it does occur, it will likely manifest not as a discrete act of individual intent but instead as a statistically disparate effect.

With this future in view, forecasting the consequences for Title II requires little speculation. Absent the ability to bring statistically-based claims against tomorrow’s data-driven establishments, Title II could be rendered irrelevant. 302 302. In effect, this means that the greatest threat to the statute may not be the doctrinal uncertainty posed by “platform economy businesses,” per se. Instead, it could be the algorithmic “architecture” that drives such companies, regardless of whether they adopt a “platform” business model. ×

If America is to deliver on its guarantee of equal access to public accommodations, its civil rights laws must reach the data-driven delivery services, transportation providers, and logistics operators that increasingly move our society. 303 303. No matter one’s ideological view, the dismantling of legislation through mere technological obsolescence would be a troubling outcome. × Failing to do so simply because these business models were not the norm at the time of the statute’s passage could lead to tragic results. As Oliver Wendell Holmes, Jr. wrote more than a century ago:

“It is revolting to have no better reason for a rule of law than that it was laid down in the time of Henry IV. It is still more revolting if the grounds upon which it was laid down have vanished long since, and the rule simply persists from blind imitation of the past.” 304 304. See Holmes supra note 1 at 469. ×

To save one of our antidiscrimination canon’s most iconic statutes from such a fate, all signs now suggest it will need a doctrinal update. Title II, in software parlance, must become Title 2.0.

III.       A Policy Roadmap for Title 2.0

With the foregoing analysis in our rearview mirror, it is now possible to explore the road ahead. The policy challenges of applying Title II to a data-driven society appear to be at least threefold. Policymakers should establish: (1) whether Title II cognizes statistically-based claims; (2) what modern entities are covered by Title II; and (3) what oversight mechanisms are necessary to detect discrimination by such entities? The following sections discuss these three challenges, as well as the steps policymakers can take to address them through judicial, legislative, or regulatory reform.

A.         Statistically-based Claims in a Data-Driven Society

The first, and most obvious, policy reform entails simply clarifying Title II’s cognizance of statistically based claims. Such clarification could come at the judicial or regulatory level, as occurred with the FHA. Or it could come at the legislative level, as occurred with Title VII.

Though the question of whether litigants can sustain statistical claims under Title II may seem like an all-or-nothing proposition, recent experience shows this isn’t actually true. Short of directly translating Title VII theories to Title II, there exist numerous alternatives. Justice Kennedy himself noted as much in Inclusive Communities when he remarked that “the Title VII framework may not transfer exactly to [all other] context[s].” 305 305. See Inclusive Communities, supra note 42. ×

Nancy Leong and Aaron Belzer convincingly argue that one framing might involve adopting a modern take on discriminatory intent claims. The scholars assert that even if intent is deemed essential under Title II, statistically based claims could nevertheless satisfy the requirement. 306 306. See Leong & Belzer supra note 14, at 1313. × In their telling, the intent requirement could manifest through a company’s “decision to continue using a platform design or rating system despite having compelling evidence that the system results in racially disparate treatment of customers.” 307 307. See id. × Under this view, the claim would then be distinguishable from unintentional claims because “once the aggregated data is known to reflect bias and result in discrimination,” its continued use would constitute evidence of intent. 308 308. See id. Indeed, this argument may become especially compelling in a world where improved digital analytics enable much more customized targeting of individuals or traits. With more fine-grained control over data-driven algorithms, it may become much more difficult to justify the use of those that appear to perpetuate bias against protected groups. ×

Not only would this approach countenance Kennedy’s admonition in Inclusive Communities “that disparate-impact liability [be] properly limited,” 309 309. See Inclusive Communities, supra note 42. × it may also offer an elegant means of addressing the concerns raised by dissenting opinions that Title II claims demonstrate a defendant’s discriminatory “intent.” 310 310. See, e.g. id. (Justice Alito’s dissent highlighted Title II’s “because of” language). × Policymakers should, therefore, take this line of analysis into consideration when clarifying Title II’s scope.

B.         Public Accommodations in a Data-Driven Society

Although this essay has thus far presumed that large-scale algorithmic transportation services like Uber and Amazon are covered by Title II, even that conclusion remains unclear. As enacted, Title II is actually silent as to whether it covers conventional cabs, much less emerging algorithmic transportation models. 311 311. See, e.g., Bryan Casey, Uber’s Dilemma: How the ADA Could End the On Demand Economy, 12 U. Mass. L. Rev. 124, 134 (citing Ramos v. Uber Techs., Inc., No. SA-14-CA-502-XR, 2015 WL 758087, at *11 (W.D. Tex. Feb. 20, 2015)). × A second policy reform, therefore, would entail clarifying whether Title II actually covers such entities in the first place.

Here, understanding the origins of the Civil Rights Act of 1964 is again useful. The statute lists several examples of public accommodations that were typical of America circa 1960. 312 312. Civil Rights Act of 1964, tit. II, 42 U.S.C. § 2000a(b) (2018). × Some courts have suggested that this list is more or less exhaustive. 313 313. See Leong & Belzer supra note 14, at 1296. × But that view is inconsistent with the law’s own language. 314 314. Civil Rights Act of 1964, tit. II, 42 U.S.C. § 2000a(a) (2018) (prohibiting discrimination in “establishment[s] affecting interstate commerce”). × And numerous others have taken a broader view of the term “public accommodations,” which extends to entities that were not necessarily foreseen by the statute’s original drafters. 315 315. See, e.g., Miller v. Amusement Enters., Inc., 394 F.2d 342, 349 (5th Cir. 1968) (“Title II of the Civil Rights Act is to be liberally construed and broadly read.”). ×

Policymakers in search of analogous interpretations of public accommodations laws need look no further than the Americans With Disabilities Act (ADA). Like Title II, the ADA covers places of public accommodation. And, again like Title II, its drafters listed specific entities as examples—all of which were the types of brick-and-mortar establishments characteristic of the time. But in the decades since its passage, the ADA’s definition has managed to keep pace with our increasingly digital world. Multiple courts have extended the statute’s reach to distinctly digital establishments, including popular websites and video streaming providers. 316 316. See Nat’l Ass’n of the Deaf v. Netfix, Inc., 869 F Supp. 2d 196, 200-02 (D. Mass. 2012) (holding the video streaming service constitutes a “public accommodation” even if it lacks a physical nexus); National Federation of the Blind v. Scribd Inc., 97 F. Supp. 3d 565, 576 (D. Vt. 2015) (holding that an online repository constitute a “public accommodation” for the purpose of the ADA). But see Tara E. Thompson, Comment, Locating Discrimination: Interactive Web Sites as Public Accommodations Under Title II of the Civil Rights Act, 2002 U. Chi. Legal F. 409, 412 (“The courts, however, have not reached a consensus as to under what circumstances ‘non-physical’ establishments can be Title II public accommodations.”); Noah v. AOL Time Warner Inc., 261 F Supp. 2d 532, 543-44 (E.D. Va. 2003) (holding that online chatroom was not a “public accommodation” under Title II). ×

Policymakers should note, however, that Uber and Lyft have fiercely resisted categorization as public accommodations. 317 317. See Casey, supra note 57. The Department of Justice and numerous courts have expressed skepticism of this view. But, to date, there has been no definitive answer to this question—due in part to the tendency of lawsuits against Uber and Lyft to settle in advance of formal rulings. × In response to numerous suits filed against them, the companies have insisted they are merely “platforms” or “marketplaces” connecting sellers and buyers of particular services. 318 318. See id. × As recently as 2015, this defense was at least plausible. And numerous scholars have discussed the doctrinal challenges of applying antidiscrimination laws to these types of businesses. 319 319. See generally id.; Leong & Belzer supra note 14. × But increasingly, companies like Uber, Lyft, and Amazon are shifting away from passive “platform” or “marketplace” models into more active service provider roles. 320 320. See Bryan Casey, A Loophole Large Enough to Drive an Autonomous Vehicle Through: The ADA’s “New Van” Provision and the Future of Access to Transportation, Stan. L. Rev. Online (Dec. 2016), https://www.stanfordlawreview.org/online/loophole-large-enough/ (describing Uber’s and Lyft’s efforts to deploy autonomous taxi fleets). Other platform companies in different sectors are acting similarly. See, e.g., Katie Burke, Airbnb Proposes New Perk For Hosts: A Stake in The Company, San Francisco Bus. Times (Sept. 21, 2018), https://www.bizjournals.com/sanfrancisco/news/2018/09/21/airbnb-hosts-ipo-sec-equity.html. × All three, for example, now deploy transportation services directly. And a slew of similarly situated companies appear poised to replicate this model. 321 321. See Casey, supra note 66(noting the ambitions of Tesla, Google, and a host of others to deploy similar autonomous taxi models). × For most such companies, passive descriptors like “platform” or “marketplace” are no longer applicable. Our laws should categorize them accordingly.

C.         Oversight in a Data-Driven Society

Finally, regulators should consider implementing oversight mechanisms that allow third parties to engage with the data necessary to measure and detect discrimination. In an era of big data and even bigger trade secrets, this is of paramount importance. Because companies retain almost exclusive control over their proprietary software and its resultant data, barriers to accessing the information necessary even to detect algorithmic impacts often can be insurmountable. And the ensuing asymmetries can render discrimination or bias effectively invisible to outsiders.

Another benefit of oversight mechanisms is their ability to promote good corporate governance without the overhead of more intrusive command-and-control regulations. Alongside transparency, after all, comes the potential for extralegal forces such as ethical consumerism, corporate social responsibility, perception bias, and reputational costs to play meaningful roles in checking potentially negative behaviors. 322 322. See Bryan Casey, Amoral Machines; Or, How Roboticists Can Learn to Stop Worrying and Love the Law, 111 Nw. U. L. Rev. Onlineat 1358. There was, for example, a happy ending to the recent revelations regarding racial disparities in Amazon delivery services. See Spencer Soper, Amazon to Fill All Racial Gaps in Same-Day Delivery Service, Bloomberg (May 6, 2016), https://www.bloomberg.com/news/articles/2016-05-06/amazon-to-fill-racial-gaps-in-same-day-delivery-after-complaints. × By pricing externalities through the threat of public or regulatory backlash, these and other market forces can help to regulate sectors undergoing periods of rapid disruption with less risk of chilling innovation than traditional regulation. 323 323. As importantly, this encourages proactive antidiscrimination efforts as opposed to retroactive ones. See Mark Lemley & Bryan Casey, Remedies for Robots, U. Chi. L. Rev. (forthcoming 2019). Without meaningful oversight, the primary risk is not that industry will intentionally build discriminatory systems but that “[biased] effects [will] simply happen, without public understanding or deliberation, led by technology companies and governments that are yet to understand the broader implications of their technologies once they are released into complex social systems.” See Alex Campolo et. al, AI Now 2017 Report (2017). ×

Some scholars have proposed federal reforms—akin to those put forward by the Equal Employment Opportunity Commission, 324 324. 29 C.F.R. § 1602.7 (1991). × the Department of Housing and Urban Development, 325 325. 24 C.F.R. §§ 1.6, 1.8 (1996). × and the Department of Education 326 326. 34 C.F.R. § 100.6 (1988). × —as a means of implementing oversight mechanisms for Title II. 327 327. See Leong and Belzer supra note 14. × But state-level action, in this instance, may be more effective. A multi-fronted push that is national in scope provides a higher likelihood of successful reform. And much like the “Brussels Effect” documented at an international level, intra-territorial policies imposed on inter-territorial entities can have extra-territorial effects within the U.S. 328 328. See Anu Bradford, The Brussels Effect, 107 Nw. U. L. Rev. 1 (2012). × As the saying goes: “As goes California, so goes the nation.” 329 329. This saying is equally applicable to numerous other populous states. ×

As a parting note, it cannot be stressed enough that mere “disclosure” mechanisms are not necessarily enough. 330 330. See Andrew Selbst & Solon Barocas, The Intuitive Appeal of Explainable Machines, Fordham L. Rev. (forthcoming 2019). × For oversight to be meaningful, it must be actionable—or, in Deirdre Mulligan’s phrasing, “contestable.” 331 331. Dierdre Mulligan, et al., Privacy is an Essentially Contested Concept: A Multi-Dimensional Analytic For Mapping Privacy, 374 Phil. Trans. R. Soc. 1, 3 (2016), https://www.law.berkeley.edu/wp-content/uploads/2017/07/Privacy-is-an-essentially.pdf. × That is, it must allow downstream users to “contest[] what the ideal really is.” 332 332. See id. × Moreover, if oversight is to be accomplished through specific administrative bodies, policymakers must ensure that those bodies have the technical know how and financial resources available to promote public accountability, transparency, and stakeholder participation. Numerous scholars have explored these concerns at length, and regulators would do well to consider their insights.

Conclusion

Following any major technological disruption, scholars, industry leaders, and policymakers must consider the challenges it poses to our existing systems of governance. Will the technology meld? Must our policies change?

Algorithmic transportation is no exception. This piece examines its implications for one of America’s most iconic statutes: Title II of the Civil Rights Act of 1964. As algorithms expand into a vast array of transportation contexts, they will increasingly test the doctrinal foundations of this canonical law. And without meaningful intervention, Title II could soon find itself at risk of irrelevance.

But unlike policy responses to technological breakthroughs of the past, those we have seen so far offer genuine hope of timely reform. As Ryan Calo notes, unlike a host of other transformative technologies that escaped policymakers’ attention until too late, this new breed “has managed to capture [their] attention early [] in its life-cycle.”

Can this attention be channeled in directions that ensure that our most important civil rights laws keep pace with innovation? That question, it now appears, should be on the forefront of our policy agenda.


Legal Fellow, Center for Automotive Research at Stanford (CARS); Affiliate Scholar of CodeX: The Center for Legal Informatics at Stanford and the Stanford Machine Learning Group. The author particularly thanks Chris Gerdes, Stephen Zoepf, Rabia Belt, and the Center for Automotive Research at Stanford (CARS) for their generous support.

By David Redl

Cite as: David Redl, The Airwaves Meet the Highways
2019 J. L. & Mob. 32.

I applaud and congratulate the University of Michigan for launching the Journal of Law and Mobility. The timing is perfect. The information superhighway is no longer just a clever metaphor. We are living in an era where internet connectivity is a critical part of making transportation safer and more convenient.

Internet connectivity has powered the U.S. and global economies for years now. In the early stages, dial-up connections enabled users to access a vast store of digital information. As the internet and its usage grew, so did the demand for faster broadband speeds. Finally, wireless networks untethered the power of broadband Internet so consumers could have fast access when and where they want it.

We are now seeing technology advances in the automotive sector begin to better align with what has occurred in the communications space. The possibilities for what this means for human mobility are truly exciting. Challenges abound, however, with questions around the security and safety of self-driving vehicles and how to create the infrastructure and policies needed for vehicle connectivity. While many of these will be sorted out by the market, policy levers will also play a role.

In the late 1990s, the Federal Communications Commission (FCC) agreed to set aside radio frequencies for intelligent transportation systems (ITS), persuaded that emerging advances in communications technologies could be deployed in vehicles to increase safety and help save lives. 333 333. Amendment of Parts 2 and 90 of the Commission’s Rules to Allocate the 5.850-5.925 GHz Band to the Mobile Service for Dedicated Short Range Communications of Intelligent Transportation Services, Report and Order, 14 FCC Rcd. 18221 (Oct. 22, 1999). × Specifically, the FCC allocated the 75 megahertz of spectrum between 5850-5925 MHz (5.9 GHz band) for ITS. 334 334. Id. × The automobile industry’s technological solution was to rely primarily on a reconfiguration of IEEE Wi-Fi standards 335 335. The Working Group for WLAN Standards, IEEE 802.11 Wireless Local Area Networks, http://www.ieee802.org/11/ (last visited Oct. 31, 2018). × suitable for ITS (802.11p) so vehicles could “talk” to one another and to roadside infrastructure. 336 336. Accepted nomenclature for these communications include vehicle-to-vehicle (V2V), vehicle-to-infrastructure (V2I), or more generally vehicle-to-x (V2X). Other applications include vehicle-to-pedestrian. × The FCC in turn incorporated the Dedicated Short Range Communications (DSRC) standards into its service rules for the 5.9 GHz band. 337 337. Amendment of the Commission’s Rules Regarding Dedicated Short-Range Communication Services in the 5.850-5.925 GHz Band (5.9 GHz Band), 19 FCC Rcd. 2458 (Feb. 10, 2004). ×

The National Telecommunications and Information Administration (NTIA), by statute, is the principal advisor to the President of the United States on information and communications policies, including for the use of radiofrequency spectrum. NTIA also is responsible for managing spectrum use by federal government entities. As such, NTIA seeks to ensure that our national use of spectrum is efficient and effective. Over the past two decades, innovations in wireless technologies and bandwidth capacity have completely changed what is possible in connected vehicle technology. 2G wireless evolved to 3G, and then 4G LTE changed the game for mobile broadband. 5G is in the early stages of deployment. Meanwhile, Wi-Fi not only exploded in usage but in its capability and performance. Many vehicles in the market today are equipped with wireless connectivity for diagnostic, navigation and entertainment purposes. Yet DSRC as a technology remains largely unchanged, notwithstanding recent pledges from proponents to update the standard. 338 338. See IEEE Announces Formation of Two New IEEE 802.11 Study Groups, IEEE Standards Association (June 5, 2018), https://standards.ieee.org/news/2018/ieee_802-11_study_groups.html. × This stasis persists despite the technological leaps of advanced driver assistance systems, enhanced by innovations in vehicular radars, sensors and cameras.

This situation is not new or novel as traditional industries continue to grapple with the pace of technological change in the wireless sector.  In fact, the automotive sector has faced the challenge of wireless technological change before, struggling to adapt to the sunset of the first generation of analog wireless networks.  This leads to the question of whether, as some promise, DSRC effectively broadens a vehicle’s situational awareness to beyond line-of-site as the industry creeps toward autonomous driving – or has innovation simply left DSRC behind? The answer is important to the question of whether it makes sense to continue with DSRC for V2X communications.  Regardless of how the question is answered, we must address who should answer it.

One distinction between V2X communications for safety applications and most other communications standards choices is that a fragmented market could have drastic consequences for its effectiveness, given that vehicles must be able to talk to each other in real time for the entire system to work. This is why the National Highway Transportation Safety Administration (NHTSA) initially proposed a phased-in mandate of DSRC beginning with cars and light trucks. 339 339. See Federal Motor Vehicle Safety Standards; V2V Communications, 82 Fed. Reg. 3854 (Jan. 12, 2017). ×

This question of whether to mandate DSRC has also been complicated by inclusion in 3GPP standards of a cellular solution (C-V2X), first in Release 14 for 4G/LTE, 340 340. Dino Flore, Initial Cellular V2X Standard Complete, 3GPP A Global Initiative (Sept. 26, 2016), http://www.3gpp.org/news-events/3gpp-news/1798-v2x_r14. The updates to the existing cellular standard are to a device-to-device communications interface known as the PC5, the sidelink at the physical layer, for vehicular use cases addressing high speed and high density scenarios. A dedicated band is used only for V2V communications. × and continuing with Release 15 and especially Release 16 for 5G, targeted for completion in December 2019. 341 341. Release 16, 3GPP: A Global Initiative (July 16, 2018), https://www.3gpp.org/release-16. × It raises the legitimate question of whether leveraging the rapid innovation and evolution in wireless communication technology is the right way to ensure automotive safety technology benefits from the rapid pace of technological change, and what role the federal government should play in answering these questions.

Despite the federal government’s legitimate interest in vehicle safety, as is true in most cases I question whether the federal government should substitute its judgement for that of the market. A possible solution that strikes a balance between legitimate safety needs and technological flexibility are federal performance requirements that maintain technological neutrality.

Moreover, because the spectrum environment has changed drastically since the 1990s many are questioning whether protecting this 75 megahertz of mid-band spectrum for ITS use is prudent. The 5.9 GHz band is adjacent to spectrum used for Wi-Fi 342 342. Table of Frequency Allocations, 47 C.F.R. § 2.106 (2018). × , which makes it unsurprising that some are calling for access to 5.9 GHz spectrum as a Wi-Fi expansion band. Other still question whether V2V safety communications require protected access to all 75 megahertz. NTIA, the FCC, and the Department of Transportation continue to study the feasibility of whether and how this band might be shared between V2V and Wi-Fi or other unlicensed uses and remain committed to both the goal of increased vehicle safety and the goal of maximum spectrum efficiency.

While I am optimistic that wireless technologies will bring a new level of safety to America’s roadways, a number of other policy and legal issues, including user privacy and cybersecurity, will persist as challenges despite being addressed in current solutions. If we are to see the kind of adoption and reliance on V2X safety applications and realize the systemic improvements in safety they portend, Americans must have trust in the security and reliability of these technologies.

The marriage of communications technology with transportation will help define the 21st century, and potentially produce enormous benefits for consumers. A lot of work remains, however, to ensure we have the right laws, regulations and policy frameworks in place to allow private sector innovation to flourish. This forum can play an important role in moving the dialogue forward.


David Redl is the Assistant Secretary for Communications and Information at the U.S. Department of Commerce, and Administrator of the National Telecommunications and Information Administration.

Cite as: Kyle D. Logue, The Deterrence Case for Comprehensive Automaker Enterprise Liability, 2019 J. L. & Mob. 1.

I.         Introduction

Automobiles are much safer today than they used to be. Perhaps the best illustration of this fact is the decades’ long decline in the number of auto-related deaths per-mile-driven. 343 343. General Statistics: Fatality Facts, INS. INST. FOR HIGHWAY SAFETY: HIGHWAY LOSS DATA INST., https://www.iihs.org/iihs/topics/t/general-statistics/fatalityfacts/over view-of-fatality-facts (last visited Nov. 13, 2018) (showing motor vehicle crash deaths per 100 million miles driven has declined from 3.35 in 1976 to 1.18 in 2016). × And yet motor vehicles—including cars, trucks, and SUVs— continue to be among the most dangerous products sold anywhere. Automobiles pose a larger risk of accidental death than any other product, except perhaps for opioids. 344 344. In 2016, which is the most recent year for which the Centers for Disease Control has final data as of the time of this writing, there were 58,335 deaths attributable to accidental poisoning, which includes accidental deaths from drug overdose (which, of course, includes accidental opioid overdose). JIAQUAN XU ET AL., CTRS. FOR DISEASE CONTROL & PREVENTION, NATIONAL VITAL STATISTICS REPORTS 34 (vol. 67, no. 5 July 26, 2018) [henceforth, CDC, 2016 Final Death data]. The CDC estimates that roughly 42,000 deaths in 2016 were attributable to opioids, the vast majority of which would presumably be considered accidental deaths. Drug Overdose Death Data, CTRS. FOR DISEASE CONTROL & PREVENTION, https://www.cdc.gov/drugoverdose/data/statedeaths .html (last visited Nov. 13, 2018). Note also that firearms are involved in more deaths per year than motor vehicles, but the vast majority of those deaths are caused intentionally, either suicide (22,938 deaths in 2016) or homicide (14,415). The other leading causes of accidental deaths that year included the following: falls (34,673), firearms (495), and drowning (3,786). CDC, 2016 Final Death data, at 50. × Annual auto-crash deaths in the United States have never fallen below 30,000, reaching a recent peak of roughly 40,000 in 2016. 345 345. For 2016, there were 40,327 motor-vehicle-related accidental deaths. CDC, 2016 Final Death data, at 52. × In addition to these tens of thousands (internationally, millions 346 346. Internationally, the number of annual fatalities attributable to motor vehicle accidents is in the millions. Number of Road Traffic Deaths, WORLD HEALTH ORG., http://www.who.int/gho/road_safety/mortality/number_text/en/ (last visited Nov. 13, 2018) (estimating worldwide auto accident deaths in 2013 to be roughly 1.25 million). × ) of deaths attributable to motor-vehicle crashes, there are many other social costs. Victims of serious auto accidents, for example, often incur extraordinary medical expenses both to provide treatment immediately after the accident and, sometimes, to provide treatment for the rest of their lives. 347 347. LAWRENCE BLINCOE ET AL., NAT’L HIGHWAY TRAFFIC SAFETY ADMIN., THE ECONOMIC AND SOCIETAL IMPACT OF MOTOR VEHICLE CRASHES, 2010 (REVISED) 5 (May 2015) (finding medical costs responsible for $23.4 billion of the total economic cost of motor vehicle crashes in 2010). × Those crash victims whose injuries render them unable to work can experience weeks, months, even years of lost income, which, from their employers’ perspective, is lost productivity. 348 348. Id. (finding $77.4 billion in lost productivity as a result of motor vehicle crashes in 2010). × Auto accidents also cause non-trivial amounts of property damage, mostly to the automobiles themselves though also occasionally to highways, bridges, or other elements of transportation infrastructure. Finally, serious motor vehicle accidents often cause severe noneconomic injuries—that is, severe “pain and suffering”—as a result of accident victims’ painful and debilitating physical injuries. According to some estimates, such noneconomic harms, in the aggregate, amount to more than twice the magnitude of the aggregate economic damages caused by auto accidents. 349 349. DANIEL SMITH, NAT’L HIGHWAY TRAFFIC SAFETY ADMIN., OVERVIEW OF NHTSA PRIORITY PLAN FOR VEHICLE SAFETY AND FUEL ECONOMY, 2015 TO 2017 at 2 (June 2015) (“In addition to the terrible personal toll, these crashes have a huge economic impact on our society with an estimated annual cost of $242 billion, which is an average of $784 for every person in the United States. These crashes also result in $594 billion in societal harm from loss of life and the pain and decreased quality of life due to injuries.”). ×

All of this may be about to change. According to many auto-industry experts, the eventual transition to driverless vehicles will drastically lower the economic and noneconomic costs of auto accidents. 350 350. See, e.g., Adrienne LaFrance, Self-Driving Cars Could Save 300,000 Lives Per Decade in America, THE ATLANTIC (Sept. 29, 2015), https://www.theatlantic.com/ technology/archive/2015/09/self-driving-cars-could-save-300000-lives-per-decade-in-america/407956/ (“Researchers estimate that driverless cars could, by midcentury, reduce traffic fatalities by up to 90 percent.”). × Why might this be so? Because humans are so bad at driving. When it comes to operating motor vehicles, people have bad judgment, slow reflexes, inadequate skills, and short attention spans. They drive too fast. They drive while intoxicated. They drive while sleepy. They drive while distracted. In fact, according to the National Highway Traffic Safety Administration, roughly 94 percent of auto accidents today are attributable to “driver error.” 351 351. NAT’L HIGHWAY TRAFFIC SAFETY ADMIN., CRITICAL REASONS FOR CRASHES INVESTIGATED IN THE NATIONAL MOTOR VEHICLE CRASH CAUSATION SURVEY 2 (Mar. 2018), https://crashstats.nhtsa.dot.gov/Api/Public/ViewPublication/812506. Another 2 percent of accidents are attributable to vehicle component failure, 2 percent to environmental conditions (such as slick roads), and 2 percent to “unknown.” Id. What precisely these statistics mean, however, is not entirely clear. Specifically, it is not obvious how NHTSA’s statistical categories (such as “vehicle component failure”) would relate to analogous legal concepts (such as “defective product”). × Computers can do better. At least that is the hope: that machine-learning computer algorithms, in combination with state-of-the-art sensors and advanced robotics, will be better—much better—drivers than humans are. 352 352. For an extended argument for why driverless cars are better drivers than humans, see, e.g., HOD LIPSON & MELBA KURMAN, DRIVERLESS: INTELLIGENT CARS AND THE ROAD AHEAD (MIT Press 2016). × Whether this will in fact be true is still unproven, but is most likely to be true with respect to so-called fully driverless “Level 5” vehicles, 353 353. See infra note 12. Level 5 vehicles are also sometimes called autonomous vehicles, though that use of the term ignores the distinction between connected vehicles and truly autonomous vehicles. This Article will larger ignore that distinction as well. × which are those autonomous or connected vehicles that are capable of operating on any road and under any conditions that a human driver can handle but with no input from a human passenger other than the choice of destination. 354 354. It is these Level 5 vehicles that hold the real promise for substantial accident-risk reduction. 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 (explaining levels 0, no autonomous features, through level 5, where a computer is “operating the vehicle on-road anywhere that a typically skilled human driver can reasonably operate a conventional vehicle”). This is in large part because Level 5 vehicles do not have the “handoff problem,” which occurs at that moment (with levels 1 through 4) when control of the vehicle must be transferred from the algorithm to the human driver. Alex Davies, The Very Human Problem Blocking the Path to Self-Driving Cars, WIRED (Jan. 1, 2017), https://www.wired.com/2017/01/human-problem-blocking-path-self-driving-cars/ (discussing how existence of handoff problem led Google, in 2012, and other companies more recently, to commit to developing level 5 autonomy). × Level 5 vehicles, because they would not suffer from the problems that plague human decision making in the driving context, do hold the promise to be substantially safer than the fully or even partially human-driven alternative. 355 355. One can certainly imagine the possibility of driving algorithms going haywire or sensors failing in ways that cause terrible accidents. But presumably, regulators will not permit Level 5s to be sold until they prove themselves in large numbers of test miles to be substantially safer than human drivers. Some commentators have suggested that regulators not approve Level 5s unless and until they are shown to be twice as safe as human drivers. Mark A. Geistfeld, A Roadmap for Autonomous Vehicles: State Tort Liability, Automobile Insurance, and Federal Safety Regulation, 105 CALIF. L. REV. 1611, 1653 (2017). ×

As promising as a world of highways filled with computer-driven vehicles might be, from an accident-reduction perspective, 356 356. If the advent of autonomous and connected vehicles means more vehicles on the road, it could be bad news for efforts to combat climate change and improve air quality. × such a high-tech world is still only a possibility. And even if it happens, it will not be for a number of years. There continue to be major technological hurdles, as well as potential consumer resistance to actually riding in a driverless vehicle. 357 357. American Drivers Grow More Afraid of Driverless Vehicles, INS. J. (May 22, 2018), https://www.insurancejournal.com/news/national/2018/05/22/490014.htm (noting that 73% of American drivers report being too afraid to ride in a fully automated vehicle). × Therefore, the introduction, spread, and eventual dominance of Level 5s will take some time. 358 358. Many experts think consumers will not even be able to purchase fully autonomous vehicles for another decade. Justin Gerdes, Not So Fast. Fully Autonomous Vehicles are More than a Decade Away, Experts Say, GREEN TECH MEDIA (Feb. 6, 2018), https://www.greentechmedia.com/articles/read/fully-autonomous-vehicles-decade-away-experts (reporting results of informal poll of 300 industry experts). × During that transition, most automobiles will continue to be driven mostly by humans. Indeed, even in the long run, when Level 5 vehicles have been perfected and are available to the general public either through individual purchases and leases or through some ride-sharing arrangement (via Uber or Lyft or some similar web-based platform), we should still expect to see a substantial number of fully or partially human-driven vehicles traveling alongside them. 359 359. See, e.g., Background On: Self-Driving Cars and Insurance, INS. INFO. INST. (July 30, 2018), https://www.iii.org/article/background-on-self-driving-cars-and-insurance (“According to the Insurance Institute for Highway Safety, it is anticipated that there will be 3.5 million self-driving vehicles on U.S. roads by 2025, and 4.5 million by 2030. However, the institute cautioned that these vehicles would not be fully autonomous, but would operate autonomously under certain conditions.”). ×

If I am right about this picture of the automotive future, what should the role of auto tort law be, now and going forward? More specifically, if we conceive of auto tort law—including both automaker product liability and driver negligence liability (and the insurance that covers both types of liability)—as a system of ex post auto-crash deterrence, what would the optimal or efficient auto tort/insurance regime look like? 360 360. For this Article, I assume that the primary role of auto tort law is efficient deterrence. That means, creating incentives that induce all relevant parties—drivers, automakers, even pedestrians—to take efficient or cost-justified steps to minimize the probability and severity of accidents. On this view, the goal is not necessarily zero accidents, because the cost of accident avoidance eventually renders additional investments in accident prevention inefficient and socially undesirable. This is a standard type of normative analysis of accident law. It is, of course, not the only way to evaluate an accident law regime. For example, if the primary function of auto tort law were instead merely compensation for the harms caused by auto accidents, or were to achieve corrective justice (in the sense of reversing wrongfully caused harms), some system other than the one proposed in this Article might make more sense. × Further, how should such an optimally designed auto tort/insurance regime take into account the emergence of Level 5 vehicles?

These questions are the subject of this Article. Specifically, this Article lays out the potential (at this point purely theoretical) deterrence benefits of replacing our current auto tort regime (including auto products liability law, driver-based negligence claims, and auto no-fault regimes) with a single, comprehensive automaker enterprise liability system. 361 361. The term “enterprise liability” has long been used to stand for the idea that “business enterprises ought to be responsible for losses resulting from products they introduce into society.” George L. Priest, The Invention of Enterprise Liability: A Political History of The Intellectual Foundations of Modern Tort Law, 14 J. LEGAL STUD. 461, 463 (1985) (describing intellectual history of enterprise liability idea). See also Gregory C. Keating, The Theory of Enterprise Liability and Common Law Strict Liability, 54 VAND. L. REV. 1285, 1287 (2001) (“[E]nterprise liability expresses the maxim that those who profit from the imposition of risk should bear the costs of the accidents that are a price of their profits.”). The concept of enterprise liability was much discussed in the 1980s and 1990s among tort scholars. See, e.g., Priest, supra; James A. Henderson Jr. The Boundary Problems of Enterprise Liability, 41 MD L. REV. 659 (1982) (discussing line-drawing issues that arise in connection with adopting enterprise liability regimes); and Kenneth S. Abraham & Paul C. Weiler, Enterprise Medical Liability and the Evolution of the American Health Care System, 108 HARV. L. REV. 381 (1994) (applying enterprise liability concepts to medical system). I, together with my colleagues and friends Jon Hanson and Steve Croley, started writing about enterprise liability around this time. See, e.g., Jon D. Hanson & Kyle D. Logue, The First-Party Insurance Externality: An Economic Justification for Enterprise Liability, 76 CORNELL L. REV. 129 (1990); and Steven P. Croley & Jon D. Hanson, Rescuing the Revolution: The Revived Case for Enterprise Liability, 91 MICH. L. REV. 683 (1993). × This new regime would apply not only to Level 5 vehicles, but to all automobiles made and sold to be driven on public roads. 362 362. For a more recent proposal to create a special auto-manufacturer responsibility regime, which has similarities to the one I am describing here, but that—critically—would be limited to accidents involving fully automated vehicles, see Kenneth S. Abraham & Robert L. Rabin, Automated Vehicles and Manufacturer Responsibility for Accidents: A New Legal Regime for a New Era, 105 VA. L. REV. (forthcoming 2019). × Because such a system would make automakers unconditionally responsible for the economic losses resulting from any crashes of their vehicles, it would in effect make automakers into auto insurers as well, although such a change will likely lead to some restructuring in how automobiles are insured and sold. Or so I will argue.

My basic argument is that a comprehensive automaker enterprise liability regime may have previously unexplored, or at least forgotten, deterrence benefits. 363 363. In an article published in 1985, Professor Howard Latin outlined an automaker enterprise liability proposal similar to the one I am describing in this Article. Howard A. Latin, Problem-Solving Behavior and Theories of Tort Liability, 73 CAL. L. REV. 677 (1985). That article, brought to my attention by Professor Stephen Sugarman, also makes a deterrence case for adopting an automaker enterprise liability regime, emphasizing some (though not all) of the same arguments I make here. See also Bryant Walker Smith, Regulation and the Risk of Inaction, in AUTONOMOUS DRIVING 584 (Markus Maurer, et al. eds., 2016), https://link.springer.com/chapter/10.1007/978-3-662-48847-8_27 (exploring (very briefly) the idea of using auto enterprise liability as a means of encouraging automotive safety innovation). × First, it could greatly simplify our existing auto tort regime by replacing all of automaker liability law (including product design defect claims) and driver liability law (as well as existing no-fault regime) with a single enterprise liability regime under which all auto-accident victims could seek recovery. Second, it could encourage automakers to design and manufacturer safer vehicles, whether that means safer human-driven vehicles (with automated features) or Level 5 vehicles. Third, it could incentivize automakers to provide better warnings and instructions with their vehicles, including better ways to deal with the “hand off” problem that occurs when vehicles switch from semi-self-driving mode to human-driven mode. 364 364. Steven Ashley, Level 3 “Hand Off” is Challenging AI Researchers, SAE INT’L (Jan. 17, 2017), https://www.sae.org/news/2017/01/sae-level-3-hand-off-is-challenging-ai-researchers. × Fourth, enterprise liability could result in automobile prices that better reflect the actual costs of driving, leading to more optimal levels of auto sales and miles driven. Fifth, enterprise liability could induce auto companies to coordinate (in a way they are not presently coordinating) with the one industry that has more information than the auto companies have about how the specific driving patterns of individual human drivers affect the risk of auto accidents: namely, the auto insurance industry. Finally, a comprehensive automaker enterprise liability regime would provide an implicit subsidy for the development and deployment of driverless technology, but only to the extent that automakers actually expect such technology to reduce accident costs. All of these points will be developed below.

The argument will proceed as follows. Part II evaluates existing auto tort law—including automaker liability law and driver liability law—from the perspective of optimal deterrence. Part III outlines one plausible version of a comprehensive automaker enterprise liability regime and summarizes the primary deterrence advantages of such a regime. Part IV briefly concludes with a discussion of caveats, concerns, and a list of questions for future research.

II.         Evaluating the Deterrence Implications of Current Auto Tort Law

Automaker Liability Law

To understand the deterrence benefits of an auto enterprise liability regime, it is necessary first to understand the deterrence consequences of the current auto tort regime. To that end, this Part describes the current auto tort system—both automaker liability law and driver liability law—and, drawing on well-known insights from deterrence theory and economic analysis of liability rules, explores what the general deterrence consequences of that regime might be. This is an entirely theoretical discussion. The ultimate question—which auto tort regime comes closes to minimizing the costs of auto accidents—can of course only be answered with empirical research that is beyond the scope of this short paper.

Current automaker liability law, like manufacturer liability law generally, is primarily a negligence-based regime, by which I mean the following: Under current law in most U.S. jurisdictions, individuals who suffer harm caused in an automobile crash can recover from the automaker in tort if they can prove that the harm resulted from negligence (or a lack of reasonable care) on the part of the automaker in designing or constructing the vehicle. 365 365. See, e.g., Larsen v. GM, 391 F.2d 495, 504 (1968) (holding, among other things, that auto manufacturers have a duty to use reasonable care in design and construction of vehicles). × Alternatively, auto accident victims can invoke modern products liability doctrine and argue that a “defect” in the vehicle’s design, manufacturing process, or warnings caused the harm. 366 366. RESTATEMENT (THIRD) TORTS: PROD. LIAB. §§1 & 2 (AM. LAW INST. 1998) (setting forth general rules for liability resulting from product defects). × This latter approach also typically requires some showing of automaker negligence. This is because, in the bulk of U.S. jurisdictions, important aspects of the product defect law are equivalent to negligence law. 367 367. A majority of jurisdictions apply a risk-utility version of the design defect test, which is similar to the common cost-benefit formulations of negligence. RESTATEMENT (THIRD) TORTS: PROD. LIAB., §2, cmt. D (AM. LAW. INST. 1998). Moreover, the adequacy of product warnings is often evaluated according to a negligence-based reasonableness test. RESTATEMENT (THIRD) TORTS: LIABILITY FOR PHYSICAL AND EMOTIONAL HARM, § 3 (AM. LAW. INST. 1998). Also, in the jurisdictions that define design defect according to “reasonable consumer expectations,” there is an obvious reliance on negligence-based principles as well, such as the concept of reasonableness. Current products liability law with respect to warnings is also essentially a negligence-based regime. RESTATEMENT (THIRD) TORTS: PROD. LIAB., §2, cmt. I (AM. LAW. INST. 1998). (“Commercial product sellers must provide reasonable instructions and warnings about risks of injury posed by products.”). × For this reason, auto products-liability, despite sometimes being labeled a form of “strict liability,” 368 368. For an example of lawyers characterizing auto products liability generally, including design defect and warning defect claims, as a form of “strict liability,” see, e.g., DEREK H. SWANSON & LIN WEI, MCGUIREWOODS, UNITED STATES AUTOMOTIVE PRODUCTS LIABILITY LAW 7 (2009), https://www.mcguirewoods.com/news-resources/publications/us-automotive-products-liability.pdf. × is in fact largely a form of negligence liability. 369 369. I am of course not the first person to observe that modern “strict” products liability operates in practice largely as a negligence regime. See, e.g., DAVID G. OWEN, PRODUCTS LIABILITY LAW 38 (3rd ed. 2015) (“These two propositions—that manufacturers must guard against risks only if they are foreseeable, and that manufacturers must guard against those risks only with precautions that are reasonable—are the two major pillars of modern products liability law in America.”). This is not to say that there are no aspects of strict liability in the current auto products liability system. For example, manufacturing defect cases approximate true strict liability. That is, when the product’s design satisfies the risk-utility standard (or is, in a sense, reasonable or non-negligent) but the particular product that caused the harm in the case did so as a result of some sort of malfunction in the vehicle that is not a result of negligent maintenance on the part of the vehicle owner (e.g., the brakes or the steering mechanism simply fails), the automaker is strictly liable. With respect to Level 5 vehicles, presumably a much higher percentage of the accidents would be a result of vehicular malfunction than is the case with human-drive vehicles; thus, there would be a much larger domain of true strict liability if existing product liability doctrine were applied to Level 5 accidents than is currently the case with automaker liability cases. Further, in design defect jurisdictions that apply a consumer expectations test, strict liability also seems likely, assuming courts conclude that consumers reasonably expect Level 5s not to crash. Still, there would be some negligence-based liability with respect to the design of the vehicles and the algorithm that drives them. See, e.g., Bryant Walker Smith, Automated Driving and Product Liability, 2017 MICH. ST. L. REV. 1 (2017) (noting that, applying existing law, automaker liability for Level 5 accidents will likely turn on some version of “unreasonable performance” by the vehicle, which sometimes will approximate strict liability and sometimes negligence); and Mark A. Geistfeld, A Roadmap for Autonomous Vehicles: State Tort Liability, Automobile Insurance, and Federal Safety Regulation, 105 CAL. L. REV. (forthcoming 2018) (observing that applying existing products liability law to Level 5s will sometimes result in strict liability and sometimes negligence-based liability). ×

A negligence-based automaker liability regime can in theory have certain deterrence advantages, if one makes particular assumptions. Those assumptions, however, are keys to the analysis—and do not always apply. For starters, a negligence-based automaker liability regime can create efficient incentives with respect to automaker care levels. Automaker “care levels” are the precautions taken by automakers—in the design, production, and warnings with respect to their vehicles—that reduce the probability or severity of auto accidents. 370 370. See generally STEVEN SHAVELL, ECONOMIC ANALYSIS OF ACCIDENT LAW 73–85 (1987) (comparing theoretical deterrence benefits of negligence liability rule and strict liability rule, in terms of care levels and activity levels); WILLIAM M. LANDES & RICHARD A. POSNER, THE ECONOMIC STRUCTURE OF TORT LAW 54–84 (1987) (same); and A. MITCHELL POLINSKY, AN INTRODUCTION TO LAW AND ECONOMICS 113–123 (3rd ed. 2003) (discussing choice of optimal products liability rules in particular). × Efficient automaker care levels occur when the automaker has made all available investments in care—in crash-risk reduction—that reduce expected auto-accident costs by more than the marginal costs of the additional care. 371 371. Put differently, when an automaker is investing efficiently in care, there are no additional investments in accident reduction that could be made that would reduce expected accident costs by more than the costs of accident avoidance. × Thus, an efficient negligence-based tort liability rule would hold an automaker liable for the harms resulting from a given auto accident only if that automaker failed to take efficient care. For example, if there was an alternative automotive design or alternative warning that the automaker could have used that would have reduced expected accident costs by more than the marginal costs of that design or warning change, failing to deploy that alternative design or warning in their vehicles would constitute negligence on the part of the automaker, and would therefore be potential grounds for tort liability. 372 372. The plaintiff must also demonstrate causation. ×

This sort of efficient negligence-based liability rule would induce automakers to take efficient care if we assume the following to be true: (a) that automakers are aware of the law and respond rationally to it, and (b) that courts applying a negligence-based automaker liability rules perform a thorough and accurate cost-benefit analysis (for example, judges and juries do not tend to make systematic errors in their determinations regarding what constitutes automaker negligence or what counts as a design defect). Under those assumptions, the negligence-based regime would incentivize efficient automaker care levels. Why? Because automakers would under those assumptions realize that they can avoid negligence-based liability entirely if they merely make all cost-justified investments in auto safety (e.g., all cost-justified design and warning changes). Knowing this, they would have a strong legal and financial incentives to do just that. 373 373. This insight is simply an application of a standard conclusion regarding the effects on injurer care levels of a perfectly applied negligence rule. See generally supra sources cited in note 28. ×

In addition, a negligence-based automaker liability regime can also create incentives for efficient driver care-levels—incentives for drivers to drive reasonably carefully—even in the absence of a defense of contributory negligence or comparative fault. 374 374. See generally supra sources cited in note 28. × This is because a negligence-based regime, by its nature, leaves accident costs on victims and their insurers when the automaker is not negligent. That fact will induce drivers to drive carefully, so as to minimize their own risk of uncompensated accident losses. Again, however, this conclusion holds only if certain key assumptions are also true. Specifically, we must assume the following: a) that drivers, like automakers, are knowledgeable about tort law and respond rationally to the potential of tort rules to apply to their future conduct; and b) that drivers actually bear these costs and do not externalize them to someone else.

To put all of this together, according to standard deterrence theory, an efficiently and accurately applied negligence-based automaker liability rule can produce efficient incentives for both automakers and drivers to take care to avoid auto accidents. 375 375. See generally supra sources cited in note 28. This conclusion also assumes that automakers are well informed about and respond rationally to tort liability rules. ×

But there are obvious problems with this rosy picture. First, consider the effects on automaker care levels if we relax the assumption that courts accurately apply negligence-based standards. If judges and juries are not very good at doing the complex and information-intensive analysis necessary to determine what particular automotive designs, warnings, or instructions are cost-justified or reasonable (or not defective), the outcomes of courts’ negligence determinations become highly uncertain. This can in turn produce incentives for automakers both to over-invest and to under-invest in auto safety. 376 376. See generally Mark Grady, A New Positive Economic Theory of Negligence, 92 Yale L.J. 799 (1983); and John Calfee & Richard Craswell, Some Effects of Uncertainty on Compliance with Legal Standards, 70 Va. L. Rev. 965, 982 (1984). ×

The incentive to over-invest in auto safety can arise when manufacturers expect courts to set the standard of reasonable care (or a non-defective design) inefficiently high—that is, when manufacturers expect that courts may find a design defect notwithstanding the fact that the automaker’s design decisions were consistent with an accurate, objective, comprehensive risk-utility test. If that is the expectation, then automakers would have an incentive to satisfy the inefficiently high court- or jury-imposed design standard (or warning standard) in order to avoid liability. The incentive to under-invest in safety can arise if courts rely too much on custom within the industry as their source for what constitutes reasonable care, or a non-defective design or warning. This is because industry custom can (famously) lag behind what is truly efficient levels of safety. 377 377. The T.J. Hooper, 60 F.2d 737 (2d Cir. 1937) (“a whole calling may have unduly lagged in the adoption of new and available devices”). In product liability design defect cases, of course, courts do not generally permit compliance with industry custom to be totally exculpatory; however, it can be considered relevant to the risk-utility negligence-based balancing test. See, e.g., Carter v. Massey-Ferguson, Inc., 716 F.2d 344 (5th Cir. 1983). However, if a defendant in a negligence-based product liability regime has adopted a design that is the safest in use at the time of manufacturing, it may be difficult for the plaintiff to prevail. See RESTATEMENT (THIRD) TORTS: PROD. LIAB., §2, cmt. D (AM. LAW. INST. 1998). × It is not a surprise, then, that commentators have argued that custom-based standards of care, like those that currently apply to automaker liability, can inhibit innovation. 378 378. See, e.g., Gideon Parchomovsky & Alex Stein, Tort and Innovation, 107 Mich. L. Rev. 285 (2008). ×

A second problem with a negligence-based auto products liability regime has to do with driver care levels. For a negligence-based regime to efficiently incentivize drivers to drive carefully (by imposing on drivers the risk of accidents that are not cost-justifiably preventable by the manufacturer), recall that we assumed that drivers are well informed of both accident risks and how those risks are allocated according to the specific rules of auto tort law. Those assumptions are obviously unrealistic. Drivers simply are not aware of the tort law rules that apply to them or the product liability rules that apply to automakers. Moreover, even when drivers do know about accident risks and legal rules, there are reasons to believe (discussed below) 379 379. See infra, discussion at notes 44–48 and 51. × either that drivers will not respond rationally to that information or that they will externalize those risks to insurance companies. If I am right about that—about drivers’ lack of information about driving risk and auto tort law, and about their cognitive biases and cost-externalization—then the ability of a negligence-based auto products liability regime to optimize driver care levels is substantially undermined. Legally imposing costs on drivers would not, or at least may not, have the desired deterrence effect on driver care levels. 380 380. By contrast, the assumption that automobile manufacturers—with their teams of expert engineers, lawyers, and accountants—are fully informed of the torts liability regime in which they operate and how those rules are likely to affect them. This claim—that auto manufacturers are likely to be better informed (both about the risks of auto accidents and about the relevant liability rules) and more classically rational in their decision-making than drivers—is not new. See, e.g., Latin, supra note 21, at 692–93 (arguing that, because drivers are much less likely to know about and respond rationally to having auto-accident losses imposed on them than auto manufacturers are, a regime of auto-manufacturer enterprise liability could produce an overall improvement in social welfare, through a reduction in overall auto accidents). ×

The final deterrence problem with a negligence-based auto products liability regime would exist even if judges and juries were good (accurate and unbiased) at applying risk-utility or cost-benefit standards. In fact, this problem results because automakers would expect accurate application of the negligence-based rules. The problem involves the effect of a negligence-based automaker liability rule on the number of vehicles sold, or, in the language of deterrence, the effect on automaker “activity levels.” 381 381. See supra sources cited in note 28. × Even an efficiently safe car (one with no defects whatsoever) that is driven carefully by its human or algorithmic driver poses some residual or irreducible risk of crashing. This residual risk will have a tendency to be ignored or externalized by automakers under a negligence-based product liability regime because automakers can virtually insulate themselves against liability by merely complying with the liability standard. 382 382. See supra sources cited in note 28. Of course, this automaker activity level effect is mitigated to some extent when automakers except to be held liable by courts despite having taken reasonable care. These effects are unlikely, however, to be perfectly offsetting. × The result of this externality is that the scale of operation in the auto industry—the number of cars sold—may be higher than the social-welfare maximizing level, even ignoring the effect of automobile emissions on the environment, because the price of vehicles does not include this cost of unpreventable auto accidents.

To summarize, given how our current negligence-based automaker liability regime is applied in practice, there are reasons to be concerned that automaker and driver care levels may be too low and activity levels too high. What’s more, this concern would apply not only to human-driven vehicles, but to Level 5 vehicles as well. That is, there is nothing about the nature of Level 5 vehicles that would suggest these problems are less likely to be present than would be the case for human-driven vehicles. 383 383. With Level 5 vehicles, if there were a problem with “driver care levels,” it would be a problem automaker care levels. That is, with Level 5s, driver care levels are, by definition, included as a part of manufacturer care level. × This activity-level inefficiency associated with current automaker liability law has been totally ignored by those who have argued in favor of applying existing product liability standards, or revised but still negligence-based versions of existing product liability standards, to Level 5 vehicles.

Driver Liability Law

In a majority of states in the U.S., if someone is injured or suffers property damage as a result of a driver’s negligent operation of an automobile, rather than as a result of automaker negligence, the victim may recover from the negligent driver under standard common-law principles of tort. 384 384. For a summary of emergence of fault-based and no-fault auto liability/insurance systems, see JAMES M. ANDERSON, PAUL HEATON, SEPHEN J. CARROLL, THE U.S. EXPERIENCE WITH NO-FAULT AUTOMOBILE INSURANCE: A RETROSPECTIVE 19–61 (2010), https://www.rand.org/content/dam/rand/pubs/monographs/2010/RAND_MG8 60.pdf. × The victim must demonstrate that the harm to her was a result of the driver’s failure to do something that a reasonable driver would have done under the circumstances, or the drivers’ doing something that a reasonable driver under the circumstances would not have done. 385 385. RESTATEMENT (SECOND) OF TORTS § 284 (defining negligent conduct in terms of what reasonably prudent person would do or not do); see also RESTATEMENT (THIRD) OF TORTS: LIABILITY FOR PHYSICAL AND EMOTIONAL HARM, § 3 cmt. h (Am. Law. Inst. 1998) (“Many cases say that negligence consists of “the failure to do something which a reasonably careful person would do, [or] the doing of something which a reasonably careful person would not do.”“) (citations omitted). × Accident victims who can recover include pedestrians, cyclists, passengers, or other drivers—anyone who is harmed as a result of driver negligence.

Because driver liability is also a negligence-based regime, it has similar potential to provide efficient deterrence as does a negligence-based automaker liability regime. Specifically, negligence-based driver liability law can have beneficial deterrence effects on driver care levels, if we make the following assumptions:

  • Drivers are well informed about accident risks (and how their behavioral changes affect those accident risks),
  • Drivers are well-informed about the rules of tort law,
  • Drivers internalize those risks (do not externalize them to insurers, for example), and
  • Drivers process the information about those risks rationally (without any systematic cognitive biases), and we assume again that
  • Courts are good at applying cost-benefit-type negligence-based liability rules.

If all of those assumptions are true, then, for the same reason that automakers would be incentivized by a negligence-based automaker liability regime, drivers too would be incentivized to drive with efficient care—in terms of driving speed, safe braking and passing practices, smart-phone usage (or non-usage), and the like. This is so because, by taking efficient care in driving, drivers would avoid liability for the accidents that nevertheless occur. Again, under a negligence-based regime, driving with efficient care can be seen as a type of insurance for drivers, a fact that—if all of the above-listed assumptions are true—would incentivize safe driving.

The reasons that this vision of negligence-based driver liability law do not describe reality should be clear at this point. The assumptions listed above on which the analysis depends almost certainly do not hold in the real world. While drivers may be generally aware of the broad outlines of the driver liability regime in their state (whether it is fault-based or no-fault), they likely do not understand what the precise implications of that fact are on their chances of being found liable in court for unsafe driving. What’s more, the average driver, while generally and vaguely cognizant of the risks of driving, is almost certainly uneducated about the precise levels of risk associated with various aspects of driving—for example, precisely how much the chance of a crash is increased by texting while driving or changing lanes abruptly with no signal. In fact, there is a good chance that most drivers underestimate those risks.

Why would drivers tend to underestimate such risks? First, there is the long list of well-documented cognitive biases that affect how individuals process information generally. 386 386. The sources here are many. A decent place to start would be the classic essay by Amos Tversky & Daniel Kahneman, Judgment Under Uncertainty: Heuristics and Biases, in JUDGMENT UNDER UNCERTAINTY. HEURISTICS AND BIASES 3 (Daniel Kahneman, Paul Slovic, & Amos Tversky eds., 1982). More recent summaries of the literature include DANIEL KAHNEMAN, THINKING, FAST AND SLOW (2011); and RICHARD H. THALER, MISBEHAVING: THE MAKING OF BEHAVIORIAL ECONOMICS (2015). A classic article summarizing the application of behavioral insights to law and economics is Christine Jolls, Cass R. Sunstein & Richard H. Thaler, A Behavioral Approach to Law and Economics, 50 STAN. L. REV. 1471 (1998). × One famous example is the tendency of individuals to ignore the risk of very low probability events and underestimate the likelihood of some high probability events. 387 387. For a summary of the relative behavioral literature as it relates to products liability, see Jon D. Hanson & Douglas A. Kysar, Taking Behavioralism Seriously: the Problem of Market Manipulation, 74 N.Y.U. L. REV. 630, 643–87 (1999). For early applications of behavioral insights to products liability law, see Latin, supra note 21; and Howard A. Latin, “Good” Warnings, Bad Products, and Cognitive Limitations, 41 UCLA L. REV. 1193, 1194–95 (1994). For a discussion of the findings on very low probability and high probability events, see Hanson & Kysar, supra note 45, at 716–20. Note that there is also research showing that consumers sometimes overestimate the risks of merely “low probability” events—those that fall between very low probability and high probability. Id. (discussing research summarized in Enterprise Responsibility for Personal Injury, 1 A.L.I. 230 (1991)). × Auto-crash risks may similarly be ignored or underestimated. 388 388. Whether auto risks are more likely to be very low, merely low, or high probability events is not entirely clear. However, the most important insight of the Hanson & Kysar article is that, because product manufacturers—including automakers–have considerable influence over how consumers perceive the risk of their products (and because product manufacturers—including automakers–have a strong market incentive to ensure that consumers underestimate the risks of their products), there is every likelihood that consumers on balance underestimate the risks of auto accidents. Id. Moreover, Hanson & Kysar, in a follow up article, provide considerable anecdotal evidence of actual market manipulation of consumer risk perceptions by manufacturers. Jon D. Hanson & Douglas A. Kysar, Taking Behavioralism Seriously: Some Evidence of Market Manipulation, 112 HARV. L. REV. 1420, 1466 (1999). × Also, drivers are especially prone to overestimating their own driving ability and thus their own ability to avoid crashes. 389 389. This finding has proven robust over many years. See, e.g., Ola Svenson, Are We All Less Risky and More Skillful Than Our Fellow Drivers?, 47 ACTA PSYCHOLOGICA 143 (1981); Timo Lajunen & Heikki Summala, Driving experience, personality, and skill and safety-motive dimensions in drivers’ self-assessments 19 PERSONALITY AND INDIVIDUAL DIFFERENCES. 307 (1995); A.F. Williams, Views of US drivers about driving safety 34 J. SAFETY RES. 491 (2003). See also Jolls et al., supra, at 1537–38 (discussing problem of “overoptimisim” among drivers); Hanson & Kysar, Taking Behavioralism Seriously: A Response to Market Manipulation, 6 ROGER WILLIAMS L. REV. 259, 354–55 (1999) (same). × Moreover, drivers not only underestimate their own likelihood of a crash relative to the average driver (which they do), they also overestimate their own likelihood of a crash relative to the actual probability. 390 390. Christine Jolls, Behavioral Economics Analysis of Redistributive Legal Rules, 51 VAND. L. REV. 1653, 1660 (citing Richard J. Arnould & Henry Grabowski, Auto Safety Regulation: An Analysis of Market Failure, 12 BELL J. ECON. 27, 34–35 (1981) and Colin F. Camerer & Howard Kunreuther, Decision Processes for Low Probability Events: Policy Implications, 8 J. POLY. ANALYSIS & MGMT. 565, 566 (1989)). × For all of these reasons, a negligence-based driver liability regime, which relies on assumptions of informed and rational drivers to produce optimal driver care levels, may not produce the deterrence benefits that are predicted by deterrence theory. 391 391. The evidence on whether negligence-based driver liability law reduces auto accidents, or the harms resulting from auto accidents, is probably best characterized as inconclusive. See generally Nora Freeman Engstrom, An Alternative Explanation of No-Fault’s Demise, 61 DEPAUL L. REV. 303, 332–333 (2012) (“[R]oughly half of the studies published thus far claim that no-fault coverage increases fatal accidents, while the other half find no effect, and the notion that no-fault reduces fatalities has been seemingly put to rest.”) (footnotes omitted). The hope that a shift away from a negligence-based driver-liability regime would not substantially reduce auto accidents, along with the overall desire to lower auto insurance rates, was one of the original justifications for the movement towards auto no-fault regimes in the 1970s and 1980s. Id. × In addition, it is commonly argued that drivers have many powerful incentives to drive carefully even in the absence of a negligence-based regime that left on them the uninsured costs of auto accidents, incentives such as the desire to avoid a traffic fines or, more importantly, a crash that could be painful or even fatal to them or their loved ones. 392 392. Latin, supra note 21, at 690–91; Engstrom, supra note 49, at 330. ×

How does this pessimistic picture of driver liability law as a system of incentivizing good driving change if we introduce auto insurance? The answer to that question turns out to be complicated. On one hand, automobile insurance has the potential to correct some of these deterrence-related problems. 393 393. See generally Omri Ben-Shahar & Kyle D. Logue, Outsourcing Regulation: How Insurance Reduces Moral Hazard, 111 MICH. L. REV. 197 (2012) (discussing ways that insurance companies help insureds reduce risk). × Here’s why. Auto insurers are, unlike most drivers, extremely well informed about the intricacies of accident law. They employ teams of lawyers whose job is to understand how driver liability laws in each state affect the liability risks of their customers. Indeed, their profitability and their survival as going concerns depend on this expert understanding of the auto liability laws of all sorts. In addition, auto insurers have unparalleled access to enormous amounts of detailed information regarding the crash-risk characteristics of millions of drivers and automobiles. This is the result of decades of experience providing auto insurance coverage to hundreds of millions of drivers and vehicles, which in turn means pricing millions of auto insurance policies and adjusting millions of auto-crash claims over the years. No other institution or organization would have the same amount of driver-specific, automobile-specific data, as would the auto insurance industry.

In addition, recent innovations in “telematics” (which combines telecommunications, data science, and automotive technology) have increased auto insurers’ ability to gather and analyze risk-relevant driver and vehicle data. 394 394. Background On: Pay-As-You-Drive Auto Insurance (Telematics), INS. INFO. INST., https://www.iii.org/article/background-on-pay-as-you-drive-auto-insurance-tele matics (last visited Nov. 21, 2018). × With this new and emerging technology, not only do insurers have access to information regarding how drivers’ past auto-claims and traffic-ticket histories affect their riskiness as drivers; they also have the ability to gather information on the effects of a range of specific driving behaviors on auto-crash risks. 395 395. Id. See also Ben-Shahar & Logue, supra note 51. × For example, a number of insurers currently gather information about drivers’ braking, acceleration, speeding, turning, and cornering behaviors and then send that information back to the insurers for analysis. 396 396. Yuanjing Yao, Evolution of Insurance: A Telematics-Based Personal Auto Insurance Study, U. CONN. HONORS SCHOLAR THESES, 590, 598 (2018), https://opencommons.uconn.edu/srhonors_theses/590/. × Once this driver-specific data is combined with data gather by insurers and others (including NHTSA) about what factors cause auto accidents generally, it becomes possible for auto insurers to link specific driving behaviors of particular drivers with premium discounts. 397 397. Id. ×

All of this information is to varying degrees already being taken into account by many auto insurance companies in the pricing of their insurance policies. For example, policy discounts are offered to drivers with good safety records 398 398. Most auto insurers give discounts for being accident free for a given period of time. Car Insurance Discounts, VALUEPENGUIN, https://www.valuepenguin.com/car-insurance-discounts (last visited Nov. 21, 2018). See also Yao, supra note 54 (discussing use of behavioral driving discounts among insurers). × as well as for vehicles with particular safety features. 399 399. One survey of the leading car insurers, found the following additional vehicle-safety-related discounts: passive restraint (25% to 30%), new car (10%), daytime running lights (around 3%). Id. Some insurers are starting to offer discounts for semi-autonomous features such as adaptive cruise control, collision avoidance systems, and lane departure warnings. Cherise Threewitt, What Car Insurance Discounts Can I Get?, U.S. NEWS & WORLD REP. (June 29, 2018), https://cars.usnews.com/cars-trucks/car-insurance/car-insurance-discounts. × In addition, insurers are now offering discounts if drivers will improve their driving ability—for example, if they will take defensive driving classes. 400 400. Car Insurance Discounts, supra note 56 (reporting insurers giving discounts of 10% to 15% for completion of defensive driving courses). × Because of telematics revolution, auto insurers are even able to adjust premiums on the basis of the specific driving behavior of individual drivers. For example, some insurers give discounts for a range of driver-care-level factors such as wearing seatbelts, driving at moderate speeds, limiting late night trips, and avoiding aggressive braking. 401 401. Id. See also Barbara Marquand, Comparing Drivewise, Snapshot and Other Usage-Based Insurance Plans, NERDWALLET (Feb. 8, 2016), https://www. nerdwallet.com/blog/insurance/comparing-drivewise-snapshot-usage-based-insurance/. × Also, the advances in telematics have made “pay as you go” auto insurance, under which premiums are a function of the number of miles driven, more accurate—and thus more prevalent—than ever before. 402 402. Usage-Based Insurance and Telematics, NAT’L ASS’N OF INS. COMMISSIONERS (July 26, 2018), https://www.naic.org/cipr_topics/topic_usage_based_insurance.htm. × Driving-behavior-sensitive auto insurance premiums—which could take into account both good and bad driving choices (i.e., driver care levels) and, critically, the number of miles driven (i.e., driver activity levels)—hold the promise of incentivizing risk-reducing driving behavior in a way that even the most sophisticated government regulator could not hope to do. 403 403. See generally Ben-Shahar & Logue, supra note 51 (discussing potential risk reducing benefits of high-tech auto-insurance pricing); Hanson & Logue, supra note 19, at 192–93 (suggesting reasons why auto insurance is better at risk-segregating than other types of first-party insurance). What little empirical research has been done on the subject tends to confirm that incentive-based insurance pricing tends to alter driving behavior in a risk-reducing direction. See Mark Stevenson et al., The effects of feedback and incentive-based insurance on driving behaviours: study approach and protocols, 24 INJ. PREVENTION, 89, 93 n. 27–30 (2018), https://injuryprevention.bmj.com/content/24/1/89; see also Telematics Helps Reduce collisions and Claims, AUTOMOTIVE FLEET (Nov. 10, 2017), https://www.automotive-fleet.com/157806/telematics-helps-reduce-collisions-and-claims. ×

But here is the problem: Under current law and given existing market conditions, auto insurers do not have strong incentives to make full use of their comparative advantage at gathering risk-relevant information and pricing their insurance on the basis of that information, or at least there is reason to be concerned about their incentives to do so. The reason for concern is that the amount of coverage currently being provided by auto insurers presently represents only a fraction (in many cases a small fraction) of the total risks of auto crashes. This is true of first-party auto insurance coverage, which tends to cover only a fraction of the accident risks that any driver faces. 404 404. This assertion requires some explanation. There are no good studies on this particular question. So my claim is derived from circumstantial evidence of a sort. First, note that, whereas all states require some amount of liability insurance coverage for anyone who drives on public roadways, only a small minority of states require drivers to purchase auto insurance that provides any sort of first-party medical or disability benefits. See, e.g., Background on: Compulsory Auto/Uninsured Motorists, INS. INFO. INST. (April 16, 2018), https://www.iii.org/article/background-on-compulsory-auto-uninsured-motorists. What’s more, even when there is mandated medical or disability coverage, the amount of required coverage is almost always far less than would potentially be recoverable under an auto tort claim, whether it be an automaker liability claim or a driver liability claim, and far less than the potentially enormous total costs (in the millions) of any given auto accident. Id. (for example, noting mandatory amounts of bodily injury liability coverage ranging from $15,000 to $50,000 per person). Karl Eisenhower, Personal Injury Protection: How PIP Insurance Works in Your State, WALLET HUB (Jan. 9, 2015), https://wallethub.com/edu/pip-insurance/9248/ (noting PIP mandates ranging from $2000 per person in Utah to $50,000 in New York.) The only state that requires unlimited PIP coverage is Michigan. Id. Further, even when drivers do purchase first-party medical or disability coverage through their auto-insurance policy, that coverage is often secondary to the victims’ other forms of first-party health or disability insurance. For example, in some states requiring PIP coverage in auto policies, the insured can elect to make auto PIP coverage secondary to other first-party health and disability insurance. This is sometimes called the “coordination” option. MICH. DEPART. INS. & FIN. SERV., YOUR GUIDE TO AUTOMOBILE INSURANCE: FOR MICHIGAN CONSUMERS 10 (Sept. 2017), https://www.michigan.gov/documents/ difs/Auto_Insurance_Guide_448003_7.pdf. Because making auto health insurance secondary lowers the insured’s auto insurance premiums, and has little or no effect on her first-party health and disability insurance premiums, most insureds choose the coordination option, which means most insureds choose to make their non-auto first-party insurers primary. In sum, most auto health and disability risks end up being borne by non-auto first-party insurers—such as health insurers and disability insurers. × It is also true of auto liability coverage, owing in part to the fact that the mandatory minimum amounts in most states are far less than the maximum harm threatened by an auto accident that results in even one serious injury or death. 405 405. State mandated minimums for liability coverage for personal injuries to a single person range from a low of $10,000 (Florida) to a high of $50,000 (Alaska and Maine), and by for the most common minimum is $25,000. Car Insurance Laws by State, FINDLAW, https://injury.findlaw.com/car-accidents/car-insurance-laws-by-state.html (last visited Nov. 19, 2018) (gathering links to state laws). A single accident resulting in serious bodily injury or death could easily produce economic losses alone in excess of $1 million. × As a result, many of the costs of auto accidents are currently being externalized to non-auto first-party health and disability insurers who—unlike auto insurers in the telematics age—do not tailor premiums at all based on their insureds’ driving decisions. 406 406. Most first-party health and disability insurers make no effort to price their coverage in a way that reflects the riskiness of insureds’ driving choices—such as how they drive, how much they drive, or even what type of vehicle they drive. See generally Hanson & Logue, supra note 19 (using fact that most non-auto first-party insurers do not price-differentiate on basis of consumer product use to argue for enterprise liability for product accident risks). There is a perfectly sensible reason for this fact: the risks of auto-related health or disability claims are only a small fraction of the overall health and disability risks covered by any given first-party health or disability insurer. It is not worth the insurers’ while to tailor their insurance premiums on the basis of any particular behavioral choice of their insureds, other than perhaps the choice to smoke or not. The result of all this: that portion of auto crash risks that are ultimately born by non-auto first-party insurers get externalized (or largely ignored) by drivers, with obvious deterrence consequences. × Moreover, to the extent auto insurers do attempt to charge individualized, behaviorally- and risk-adjusted auto insurance rates (which, as I noted above, they are increasingly trying to do), this incentive is undermined by the fact that auto insurers cover only a fraction of the risks of auto accidents. 407 407. Because auto insurers do not bear all of the risks of auto accidents, the premium discounts they are willing to offer to induce safer driving habits may not be adequate. The point can be illustrated with a simple example. Suppose there was some investment in driver care that cost $50 but would reduce expected accident costs by $80. Say it would reduce a chance of a $200,000 loss from .001 to .0006. If the auto insurer bore the full $200,000 risk, it would have an incentive to offer a premium discount to cover the cost of driver care, with an additional discount perhaps up to a total just short of the $80 saved by the additional investment in driver care. But what if the auto-insurer bore only, say, $40,000 of the $200,000 potential loss? Then the largest discount it could offer without losing money would be $16, which would be the amount of the savings in going from a .001 to a .0006 risk of, now, $40,000 in covered losses. But that discount would not be enough to induce the consumer to make the investment in care, assuming the other $160,000 in expected accident cost is externalized either because of drivers’ under-estimation of risk or because of non-adjusting non-auto first-party insurance coverage. ×

It should also be noted, however, that there are important ways in which the allocation of auto-accident risks to non-auto first-party insurers has cost-reducing advantages. This may seem incongruous with the argument in the previous paragraph, but it is not: While auto insurers are in a good position, through premium discounts, to help optimize driver care and activity levels, auto insurers are not necessarily in a good position to minimize some other costs associated with providing insurance benefits. For example, primary health care coverage provided through auto insurance companies is almost certainly much more expensive than primary health care provided through regular non-auto first-party health insurers. This would be because, although auto insurers, in a sense, specialize increasingly in reducing driver ex ante moral hazard, it is non-auto health insurance companies who specialize in reducing ex post medical moral hazard—that is, excessive or wasteful use of the healthcare system. 408 408. The claim that first-party health insurers specialize in trying to hold down health care costs may seem controversial, at least for fee-for-service policies. My claim is only that health insurers—especially ones that use managed care tools—are probably better at holding down ex post health care costs than are auto insurers. This is one of the reasons that auto no-fault regimes which make auto PIP coverage primary over non-auto first-party health coverage are so expensive, and why auto-no-fault regimes have not led to the cost savings that were expected. See Engstrom supra note 49. Professor Engstrom notes that “[m]edical insurers . . . reduce costs via discounts and fee schedules, and the limit patient treatment using any number of mechanism, including deductibles, co-payments, utilization controls, and medical protocols . . . , [a]uto insurers . . . tend to pay almost any bills that a victim incurs . . . dramatically increasing . . . the cost of care. Id. at 341 (citations omitted). × My point here is only that the current division of auto-accident costs, allocating so little to auto insurers, may be non-optimal, given auto insurers potential ability to incentivize better (and less) driving. 409 409. In Part III below, I suggest that, by adopting an automaker enterprise liability regime, automakers will have an incentive to strike the efficient balance between amount of auto-crash costs allocated to auto insurers and amount allocated to non-auto insurers. ×

To summarize, because of drivers’ lack of accident-risk information and understanding of auto tort law and their susceptibility to cognitive biases, and because of the presence of cost-externalizing insurance coverage, there is reason to be doubtful that the current negligence-based auto tort laws—automaker liability laws as well as driver liability laws—work to optimize driver care and activity levels. As discussed in the next Part, the adoption of an auto enterprise liability regime could in theory create incentives for automakers, together with auto insurers, to provide better driver-side incentives, as well as better automaker safety incentives.

III.         The Automaker Enterprise Liability Alternative 410 410. The arguments in this section draw on prior work done by me and a number of other scholars on the deterrence benefits of enterprise liability in various contexts. See, e.g., Hanson & Logue, supra note 19; Steve P. Croley & Jon D. Hanson, Rescuing the Revolution: The Revived Case for Enterprise Liability, 91 MICH. L. REV. 683 (1993); Kyle D. Logue & Jon D. Hanson, The Costs of Cigarettes: The Economic Case for Ex Post Incentive-Based Regulation, 107 YALE L.J. 1163 (1998); and Jon D. Hanson & Douglas A. Kysar, Taking Behavioralism Seriously: Some Evidence of Market Manipulation, 112 YALE L.J. 1420, 1553 (1999). In addition, as mentioned in an earlier footnote, the argument here has some overlap with a proposal made by Howard Latin. See generally Latin, supra note 21 (making a deterrence case of automaker enterprise liability). ×

The Basic Proposal

As an alternative to our current negligence-based auto tort regime, consider the possibility of a comprehensive automaker enterprise liability regime. Under such a regime, anyone who suffers a physical injury or property damage in an automobile accident—whether driver, passenger, or pedestrian—would be legally entitled to recover, from the manufacturer of the vehicle involved, compensation for the losses sustained as result of the accident. 411 411. This could be done through the existing court system or through specialized courts or agencies set up to handle auto-crash disputes. × Thus, to recover under this enterprise liability regime, accident victims would not be required to show negligence on the part of manufacturer or anyone else. Nor would accident victims have to prove that the automobiles, or any of the warnings or instructions accompanying the automobiles, are in anyway defective or unreasonably dangerous. Rather, crash victims would need only to prove that the harms for which they seek compensation “arose out of the use of” a vehicle that was designed and built by the manufacturer from whom compensation is sought. Each automaker, therefore, would be financially responsible for the losses resulting from any crash arising out of the use of that automaker’s vehicles. 412 412. The “arising out of the use of” analysis would replace a causation determination. This phrase is used now in standard auto insurance policies. Thus, an automaker enterprise liability regime would be a particular type of cause-based no-fault compensation regime, modeled after similar programs that have been adopted outside of the auto context, such as workers’ compensation laws at the state level or the vaccine compensation program at the federal level. See generally Jon D. Hanson, Kyle D. Logue & Michael S. Zamore, Smokers’ Compensation: Toward a Blueprint for Federal Regulation of Cigarette Manufacturers, 22 S. ILL. L.J. 519 (1998) (discussing deterrence benefits of cause-based no-fault compensation regimes). In the Workers’ Compensation context, claims against employers are limited to injuries or illness that “arise out of the course of employment.” Professors Abraham and Rabin have proposed a similar regime—that would also use the “arising out of” standard—but that would apply exclusively to accidents involving Level 5 automated vehicles. Rabin & Abraham, supra note 20. My idea is to make such a regime comprehensive, to apply to all motor vehicles, subject to transition rules discussed below. Some scholars have expressed concern about the use of enterprise liability regimes that rely on boundary-maintaining doctrines such as the “arising out of” concept used in workers’ compensation regimes, among other places. See, e.g., Henderson, supra note 19. This is of course a reasonable concern, although the evidence suggests that programs such as workers’ compensation have found relatively effective ways to police the borders of their programs. DON DEWEES, DAVID DUFF & MICHAEL TREBILCOCK, EXPLORING THE DOMAIN OF ACCIDENT LAW: TAKING THE FACTS SERIOUSLY 393-394 (1996) (reporting administrative costs for workers’ compensation regimes that are low relative to those of the tort system). ×

That is the most basic picture of the proposal. Now consider a few possible details of such a program. One important initial question is who exactly would fall within the class of “automakers” to whom the enterprise liability regime would apply. The most obvious class of defendants/payers would be the original equipment manufacturers (OEMs) of the vehicles involved in the crash. They are the ones who generally make the key automotive design choices, have control over the manufacturing processes, and decide on the terms of any warning or instruction manual; and they are also the ones with the greatest expertise on such questions. Auto manufacturers also determine the pricing of their vehicles and the number of them to produce, subject of course to the constraints of supply and demand. Given that manufacturer care levels and activity levels are key auto-accident deterrence variables, making OEMs responsible for the auto-crash costs associated with their vehicles has obvious deterrence benefits, discussed further below.

Liability under an enterprise liability regime, however, would not necessarily be limited to auto manufacturers. Liability could also be extended, on a joint and several basis (or on a several basis), to a range of other enterprises that fall within the design, production, sale, and distribution chain of any given vehicle. 413 413. Thus the concept of “automaker” in an automaker enterprise liability regime could be similar to the concept of a “seller” in existing products liability law. × In most cases, it is likely that the crash victim would bring the claim against the manufacturer, and then the manufacturer would either implead the other parties in the chain of production into that suit or would sue them separately in a contribution action. Precisely how the responsibility for the costs of any accident would be allocated among the various parties on the automaker side of the ledger is beyond the scope of this Article. That allocation of responsibility, however, would presumably be determined mostly by contracts among the counter-parties, which contracts should be enforced so long as the cost of auto accidents is not allocated to parties who are insolvent or judgment proof, which if permitted would undermine the deterrence benefits of the regime. 414 414. See Steven Shavell, The Judgment Proof Problem, 6 INT’L REV. OF L. & ECON. 45 (1986) (explaining how presence of insolvent defendants undermines incentive effects of liability law). ×

The types and amount of compensation recoverable under an automaker enterprise liability regime would probably be limited to economic losses—medical expenses, lost income, and property damage. There is of course a deterrence argument for including noneconomic or pain-and-suffering damages as well, since failing to include noneconomic damages could produce a serious externality. 415 415. Noneconomic damages are generally not covered by first-party insurance policies, which means, insofar as drivers (and consumers generally), because of the cognitive biases already discussed, ignore or underestimate the risks of auto accidents, they will externalize noneconomic damages as well. Including noneconomic damages, therefore, has the potential to improve care levels and activity levels. See Hanson & Logue, supra note 19, at 186–89 (describing the “unambiguous deterrence benefits of nonpecuniary-loss damages”). × However, some have argued that individuals do not desire to purchase insurance against non-economic losses (as evidenced by the dearth of pain-and-suffering insurance observed in the marketplace), and therefore should not be forced to purchase such coverage through a mandatory compensation regime. 416 416. Examples of this sort of argument can be found in George L. Priest, The Current Insurance Crisis and Modern Tort Law, 96 YALE L.J. 1521, 1546–47; and Alan Schwartz, Proposals for Products Liability Reform: A Theoretical Synthesis, 97 YALE L.J. 353, 362–67 (1988). For a powerful set of counter arguments, providing arguments why consumers might—and evidence that they in fact do—demand insurance for noneconomic losses, see Steven P. Croley & Jon D. Hanson, The Nonpecuniary Costs of Accidents: Pain-and-Suffering Damages in Tort Law, 108 HARV. L. REV. 1785 (1995). × In any event, limiting compensation to economic losses, and thus not providing compensation for noneconomic harms, is a common and reasonable political compromise that is often made when no-fault cause-based compensation regimes are adopted. 417 417. See generally Hanson, Logue & Zamore, supra note 66, at 556–62 (reviewing arguments for limiting damages in no-fault cause based compensation regimes to economic damages). ×

It is worth emphasizing again that the compensation regime I am imagining is a comprehensive automaker enterprise liability regime. In other words, it would apply to all automobiles (sold after the effective date of the enacting legislation), whether driven by humans, computer algorithms, or any combination of the two. Thus, unlike some other proposals for manufacturer-funded vehicle compensation regimes, my proposal would not apply exclusively to Level 5 vehicles. 418 418. For an interesting proposal to create a special enterprise liability-type regime, similar to the one I am describing, but that would be limited to accidents involving automated vehicles, see Abraham & Rabin, supra note 20. × Which is not to say that the regime would not have special rules for autonomous and connected vehicles. For example, whereas Level 5s may be in fewer accidents, or fewer accidents involving serious physical injuries or deaths (that’s the hope anyway), Level 5 vehicle accidents may involve much higher auto-repair costs than accidents involving human-driven vehicles, because of the expense of repairing high-tech sensors as well as computer hardware and software. 419 419. Because of the higher repair costs, some in the auto insurance industry have proposed mandatory minimum auto repair coverage for self-driving vehicles. TRAVELERS INSTITUTE, INSURING AUTONOMY: HOW AUTO INSURANCE CAN ADAPT TO CHANGING RISKS 11 (2018), https://www.travelers.com/iw-documents/travelers-institute/Final-Digital-2018-0710-AV-White-Paper-No-SAE.pdf. Under enterprise liability, of course, there would indeed be mandatory minimum auto repair coverage, as well as mandatory minimum personal injury coverage, but the coverage mandate would be imposed on automakers instead of auto purchasers. ×

If an automaker enterprise liability regime were adopted, there would be no need for either the existing automaker liability laws (i.e., products liability as applied to automobiles), driver liability laws, or state auto no-fault laws. All of those auto tort regimes would be replaced by a single comprehensive automaker enterprise liability regime. 420 420. Tort liability for non-economic and potentially punitive damages could be retained for especially egregious behavior, such as recklessness or intentionally harmful actions, on the part of defendants. × Further, if a motor-vehicle crash were to involve two or more vehicles made by different auto manufacturers, the enterprise liability regime would handle the accident as follows: First, the victims would simply file claims for their covered economic losses, naming the automakers of all of the vehicles involved in the accident. After a factual determination was made of whether in fact all of the named vehicles contributed in some way to the accident, the victims’ crash costs would be split between or among the automakers (or the auto insurers covering the losses for each automaker). The split among the automakers could either be equal (each vehicle manufacturer bearing its pro rata share of the crash costs) or according to any other reasonable allocation formula that the industry agrees upon. 421 421. The deterrence benefit for automaker and driver care and activity levels would largely remain, without the need for individualized fault determinations in multi-vehicle crashes. The crash data gathered from all the payouts under the program would provide information as to which types of vehicles and which drivers tended to be in accidents, how much damage resulted from those accidents, and under what circumstances. This information would be combined with the data gathered by automakers and auto insurers regarding individual vehicle and driver behavior in contexts not involving accidents. There would be little additional deterrence benefit to investing in the costly judicial determination of which driver, if any, was at fault or which vehicle, if any, was defective. ×

One result of the adoption of a comprehensive automaker enterprise liability regime would be an increase in the apparent (and the experienced or internalized) price of most newly purchased automobiles, relative to vehicles purchased before the effective date of the enacting legislation. 422 422. This assumes that the new law would have a grandfather provision exempting vehicles built and sold before new law’s effective date. As discussed in the conclusion, such complete grandfathering is not the only conceivable approach to handling the transition to the new regime. × This would happen because the cost of auto accidents that had been hidden in non-auto first-party insurance coverage prior to the enterprise liability regime would, with the adoption of the new system, be brought into the open through increases in automobile and auto-insurance prices. Because such a shift would be a significant change in the automotive marketplace, it would probably be prudent (and politically necessary) to institute a delayed effective date and/or an extended phase-in period over which the law would take effect. 423 423. If there is indeed deterrence value to shifting these costs from non-auto first-party insurers to automakers, as argued in the next section, then the overall price of vehicles (including the costs covered by various forms of first-party non-auto-specific insurance) should eventually go down, especially if the pace of the transition to driverless technology is hastened. Indeed, a significant result of adopting a comprehensive automaker enterprise liability regime is that Level 5 vehicles, if they provide as big an advance in safety as many are expecting, would be substantially less expensive overall than conventional human-driven vehicles. Cf. Bryant Walker Smith, Automated Driving and Product Liability, 2017 MICH. ST. L. REV. 1 (2017) (discussing the potentially massive reduction in overall vehicle prices resulting from the shift to automated vehicles under existing product liability law). A bigger concern with the price increase is the effect on low-income drivers. I address this concern briefly in Part IV below, though the cost of mobility generally is a topic worthy of special consideration. ×

The Theoretical Deterrence Benefits

Under a comprehensive automaker enterprise liability regime, because automakers would be responsible for all of the economic costs of auto accidents associated with their vehicles, they would be forced to internalize those costs. As a result, there would be beneficial deterrence consequences for automaker, and potentially driver, care and activity levels. This section explores those consequences.

First, automakers would have a strong legal and financial incentive to develop and implement cost-justified auto-safety innovations, whatever those might be. That is, if an automaker determined that there was some new brake design (such as a new computer-assisted automatic braking system) or some new guided cruise control mechanism that would reduce overall accident costs relative to its costs of development and implementation, then enterprise liability would reward them implementing those innovations, and punish them for not doing so. What’s more, there would be no inefficient incentive to stick with existing industry customs or consumer expectations if such customs or expectations were lagging behind proven safety innovations. Likewise, there would be no incentive to over-invest in safety features that are likely to impress a court or jury in a negligence-based lawsuit (such as a design defect lawsuit) but that, in actuality, provide less additional accident-risk reduction than they cost to produce. 424 424. Obviously, automakers already have some incentives to develop such safety technology, in part because of consumer tastes for safer vehicles and perhaps because of the threat of potential liability under existing tort law. See, e.g., Press Release, NHTSA, NHTSA-IIHS Announcement on AEB, (Dec. 21, 2017), https://www.nhtsa.gov/press-releases/nhtsa-iihs-announcement-aeb (“Twenty automakers pledged to voluntarily equip virtually all new passenger vehicles by September 1, 2022, with a low-speed AEB system that includes forward collision warning technology proven to help prevent and mitigate front-to-rear crashes.”). Consistent with this fact, it is common knowledge that safety innovation has been happening for decades without the presence of an automaker enterprise liability regime. My argument is that, according to a nuanced application of standard deterrence theory, safety-enhancing automotive innovations would be more likely to be adopted and would be adopted more quickly under an automaker enterprise liability regime. See, e.g., Latin, supra note 21, at 691 (making similar argument with respect to airbags, suggesting that adoption of automaker enterprise liability would have hastened the industry’s move to include airbags). ×

Second, enterprise liability would force the price of automobiles to reflect the full-expected costs of auto accidents. That cost-internalization, in turn, could result in a scale of automotive manufacturing and sales that would be closer to the social optimum than is currently the case, as drivers would—in deciding whether to purchase a vehicle—be more likely to take into account something closer to the full social costs of that decision. In other words, auto enterprise liability could push us in the direction of optimal manufacturer activity levels: the optimal number of vehicles being sold. If that were to happen, it would be a clear improvement—in terms of overall efficiency—over the existing negligence-based automaker liability regime.

It is worth pausing here to emphasize the potential effects of a comprehensive automaker enterprise liability regime on the development of and transition to Level 5 vehicles. Because it to would be a comprehensive regime, it would apply to both driverless and human-driven vehicles. Assuming automakers expect Level 5s to bring a dramatic reduction in expected accident costs relative to human-driven vehicles, then Level 5s, when they eventually are available for sale to consumers, would have a substantially lower enterprise liability “tax” relative to human-driven vehicles made and produced after the new regime is adopted, since the human-drive vehicles would have much higher expected accident costs. 425 425. For now, I am assuming that “old” vehicles, produced before the enactment of the new regime, would be totally grandfathered and thus exempt from the new law. I return to this assumption in the conclusion. × As a result, there would be a natural enterprise liability subsidy in favor of the production of Level 5 vehicles; and this subsidy, in effect, would be funded by a relatively high enterprise liability tax on human-driven vehicles, again, assuming such vehicles are not nearly as safe as Level 5s. Thus, the adoption of a comprehensive automaker liability regime would, under present assumptions, strongly incentivize and reward auto manufacturers to proceed, as quickly as is feasible, with the development and distribution of Level 5 vehicles. By contrast, if a special liability regime were adopted just for Level 5s, that increased their potential accident liability relative to human-driven vehicles, there would be a disincentive to move to Level 5s in the absence of a separate subsidy regime, perhaps funded by federal income taxes. 426 426. Abraham and Rabin make such a proposal, including the need for a subsidy for Level 5 vehicles. Abraham & Rabin, supra note 20, at 45. ×

There are efficiency reasons to prefer a Level 5 vehicle subsidy that is funded through an enterprise liability tax on auto sales, with the amount of the cross-subsidy depending on the relative risk of vehicles (and drivers), over a subsidy funded by federal income taxes. The main advantage has to do with information. Under the direct subsidy, the regulator—or whatever government body would be asked to determine the amount and structure of the subsidy—would have to determine which particular safety technologies to subsidize and which not to subsidize and how much the subsidy should be. This would require an enormous amount of information and expertise that is not within the government’s comparative advantage relative to the auto industry. By contrast, under the subsidy structure inherent in a comprehensive enterprise liability regime, it is the auto industry who would calculate the appropriate amount of the subsidy ex ante, based on their educated guesses about (a) the amount of costs to be imposed on them under the regime for accidents involving human-driven vehicles, (b) the amount of costs that would be imposed on them if they make the investment necessary to develop and implement Level 5 vehicles, and (c) the R&D, design, manufacturing, marketing, training, and other costs that would be necessary to get Level 5s fully up and running. 427 427. It is at least possible that the expected accident costs associated with Level 5 vehicles will not be, overall, a lot less than that of human-driven vehicles, once the cost of repairing the vehicles is taken into account. That is, while Level 5s are expected to reduce frequency collisions and the number of auto-related deaths and serious bodily injuries, they may result in increased repair costs, due to the expense of repairing or replacing the damaged technology in a Level 5 vehicle. In that sense, we might be trading one sort of cost for another, which of course can be socially desirable. This fact, however, might counsel in favor of including at least some noneconomic (or pain-and-suffering) damages in the enterprise liability regime, to make sure that such costs get included in the enterprise liability subsidy for Level 5 vehicles. ×

If an enterprise liability regime is likely to have deterrence benefits on the automaker side, what about its deterrence effects on driver behavior? How an auto-enterprise liability regime would affect the driving behavior of human drivers is of course an especially important question, given that, with non-Level 5 vehicles, human drivers make most of the important operational decisions. In fact, enterprise liability could actually help with driver care and activity levels in a number of ways. First, enterprise liability would create strong legal and financial incentives for automakers to develop and adopt the most cost-effective ways of warning drivers about crash risks and of instructing drivers about how best to avoid certain types of accidents. 428 428. It is a standard conclusion of deterrence theory that enterprise liability would provide strong incentives for manufacturers to develop effective warnings. Croley & Hanson, supra note 68, at 786–792. × This effect flows from the fact that enterprise liability makes automakers’ responsible for all the economic costs of their vehicles’ accidents: If an automaker could actually reduce the frequency or severity of accidents in its vehicles by altering the wording, design, or placement of warnings or instructions, it would have an incentive to do so. On the other hand, if some new or revised warning would be more likely to confuse or annoy drivers than to educate them, the automaker would be incentivized under enterprise liability not to add that sort of unhelpful warning—even if it would have gotten the automaker “off the hook” under a more traditional negligence-based warning-defect standard. Automakers would do whatever works best to reduce accident costs, which would redound to their benefit as reduced auto-accident claim payouts over time.

In addition, enterprise liability could incentivize automakers to restructure the ways that automobiles are insured and sold in order to improve driver care and activity levels. First, consider how an enterprise liability regime might affect how auto insurance is provided. Note that under an enterprise liability regime automakers would have an incentive to shift contractually much of the expected costs of auto accidents to auto insurers. This somewhat counterintuitive result flows from the fact that auto insurers’ have a comparative advantage with respect to monitoring and regulating driver care- and activity-levels. If automakers could get auto insurers to take on somewhat more of the risk of auto accidents, the insurers would have a strong incentive to help drivers reduce expected accident costs. That is, because of competition for customers in the insurance industry, auto insurers would be incentivized to use the tools at their disposal—including individualized, driving-behaviorally-sensitive, risk-adjusted insurance premiums—in ways that would tend to encourage better driving habits and perhaps less driving, especially by high risk drivers. 429 429. Ben-Shahar & Logue, supra note 51, at 220–223. ×

What does this mean for how auto insurance would be sold? Auto insurance under an enterprise liability regime might be sold in the same way that it is today. An individual auto purchaser, in other words, might pay the automaker one price for the vehicle itself and then purchase a separate auto insurance policy at the same time from a separate auto insurance company. However, given that automakers would be ultimately responsible legally (through the doctrine of subrogation) for the auto-accident losses paid by the auto insurers, there would be strong incentives for contractual coordination between automakers and auto insurers. Individual auto manufacturers might even be induced to partner with particular auto insurers in an effort to offer the best, most competitively priced, combined product of vehicle and vehicle-insurance coverage. 430 430. Why are automakers and auto insurers not incentivized now, without the adoption of enterprise liability, to coordinate in the way described in the text? This is a fair question, one that I have put to representatives of both industries and to which I have yet to get a good answer. I suspect that under current legal rules and market conditions, those incentives are dampened. Automakers can largely avoid liability by complying with the largely negligence-based product liability rules, and auto insurers make profits from insuring the residual accident risk. Neither industry—car makers or car insurers—are being forced to bear the full losses of auto accidents. In addition, because much of the risk of auto accidents are externalized by drivers to their non-auto first-party insurers, as discussed above, there is little demand-side incentive for either industry to coordinate with the other. ×

Another way that enterprise liability could improve driver care and activity levels is through its effect on how automobiles are sold. For example, the introduction of an enterprise liability regime might push the automotive industry in the direction of lease transactions rather than outright sales. This is because leasing would make it easier for automakers to enforce the terms of the auto insurance policies, which again might be sold by an insurer who was contractually partnered with the automaker. Under a lease arrangement, for example, if a driver became uninsurable (because of bad driving behavior and/or increased claim payouts), or if the driver simply stopped paying her premiums, there might be a provision in the lease empowering the automaker to reclaim the vehicle.

In addition to favoring leasehold arrangements, the introduction of enterprise liability might create market pressure on auto manufacturers to sell vehicles to commercial purchasers rather than individual consumers. That is, automakers under enterprise liability might be incentivized to sell to commercial entities—fleet operators—who would agree contractually to indemnify the manufacturer for any enterprise liability payments made to victims harmed by vehicles in their fleets. These commercial purchasers, in turn, would either lease the vehicles to individual drivers or perhaps make them available through ride-share arrangements. Automakers in turn could be incentivized to choose commercial purchasers who are financially responsible and would be incentivized to purchase efficient auto insurance contracts to cover the enterprise liability payouts. Such a trend toward commercial fleets would be consistent with already existing market trends towards ride-sharing companies, which trends are expected to accelerate with the advent of Level 5 vehicles. 431 431. Andrew G. Simpson, If They Try It, They’ll Like It: How Ridesharing, Autonomous Cars Will Win Over the Public, INSURANCE JOURNAL (Jan. 23, 2018), https://www.insurancejournal.com/news/national/2018/01/23/478073.htm. ×

I am not suggesting that comprehensive automaker enterprise liability would necessarily result in auto lease arrangements replacing individual sales, or ride sharing replacing driving. Rather, the point is that, once automakers are made legally responsible for the cost of auto accidents (or for most of those costs), they will have an incentive (and the ability) to structure automobile distribution markets in ways that are closer the social optimal.

IV.         Caveats, Concerns, and Conclusions

The description I have given here of an automaker enterprise liability regime is necessarily only a rough outline of an idea, a jumping off point for further discussion. The actual design of such a program would require empirical research into a range of topics, including whether shifting to enterprise liability would actually, and not just theoretically, produce substantial deterrence benefits. Among the other questions that would need to be answered include the following:

Under any real-world version of an automaker enterprise liability regime, there is the question of how long the automakers’ responsibility for insuring their vehicles would remain in effect. Would it be for the useful life of the vehicle or for some set period of time, say, ten years? If for some set period of time, who then would be responsible for covering the accidents arising out of the use of the vehicle? Also, what would the precise relationship be between an automaker enterprise liability regime and state mandatory insurance/financial responsibility laws? Presumably, rescission of coverage by the insurer due to excessive accident experience or failure to pay premiums would result in a suspension of driving privileges, but how would that be enforced? All good questions.

Similarly, if an auto enterprise liability regime were adopted, would it in fact have a grandfather provision perhaps exempting all vehicles manufactured and sold before a given date, as suggested above? Or would older vehicles made before the new law goes into effect be transitioned into the new regime over time? If older vehicles were fully exempted from (or grandfathered out of) the new regime, how would we deal with the resulting, potentially large, price differential between new vehicles (which would be priced with full accident costs internalized into the purchase price) and used vehicles (which would not be)? What role could increased mandatory minimum levels of auto insurance play in assisting with that transition? 432 432. An alternative to a comprehensive automaker enterprise liability regime would be simply to increase auto insurance mandates to provide coverage closer to what would be provided under an enterprise liability regime. Such a regime could be made comprehensive, in the sense that it would apply both to human-driven and computer-driven vehicles, with perhaps higher repair cost minimum coverage for Level 5 vehicles. A comprehensive mandatory auto insurance regime could also replace all of existing automaker liability and driver liability law in much the same way as I propose for auto enterprise liability and would also likely result in contractual coordination between the automakers and the auto insurers to provide the best combination of auto safety and auto-crash risk coverage. A full discussion of this auto-insurance-mandate alternative to automaker enterprise liability is of course beyond the scope of this Article. ×

There is also a whole range of question regarding how an automaker enterprise liability regime would deal with the threat of auto crashes (or stolen or destroyed data) resulting from criminal hacking of a connected system. Existing and growing markets in cyber insurance coverage might be able to handle the risks of posed to data stored in the vehicles, but the market may have more difficulty covering cyber risks to life, limb, and property. 433 433. Most cyber polices include exclusions for physical damages to persons or property. John Buchanan, Dustin Cho, and Patrick Rawsthorne, When Things Get Hacked: Coverage for Cyber Physical Risks, 2018 A.B.A. LITIG. SEC., INS. COVERAGE LITIG. COMM. HOT TOPICS FOR ICLC’S 40TH—THE COVERAGE BATTLES OF 2028 TUCSON, ARIZONA—MARCH 3, 2018, 2. × Solutions range from expanding the role of the federal government as a reinsurer of last resort to limiting liability for cyber-related physical risks to the amount of mandatory liability insurance coverage. All of these details, and many others, would need to be addressed before any comprehensive automaker enterprise liability regime could seriously be considered.

The final concern raised by the idea of an automaker enterprise liability regime involves the cost. The concern is not that the “experienced” price of autos would rise, although that would certainly be true in the short run. As already noted, such a price increase would be the source of much of the deterrence benefit of an enterprise liability regime, the mechanism through which deterrence would work, incentives for accident-avoidance optimized. Rather, the concern has to do with the problem of affordability. For some households, owning an automobile is already unaffordable, which is a source of hardship and an obstacle to social mobility. For those households, a program that raised the price of autos, even in an effort to make them safer, may not be a welcome change without some form of compensating subsidy. My own view is that some type of taxpayer funded transportation subsidies for the low-income drivers may indeed be desirable (from a social justice perspective), whether or not an automaker enterprise liability regime were adopted. But that topic too must await another day.


   Douglas A. Kahn Collegiate Professor of Law, University of Michigan Law School. Professor Logue received helpful suggestions on the ideas in this Article from numerous participants at a conference on Traffic Accident Liability and the Future of Autonomous Vehicles held at Wake Forest University School of Law and from his Michigan Law colleagues at a Fawley Lunch Workshop in Ann Arbor. Thanks also to Bryant Walker Smith for his comments and notes.

 

Cite as: Daniel A. Crane, The Future of Law and Mobility, 2018 J. L. & Mob. 1.

Introduction

With the launch of the new Journal of Law and Mobility, the University of Michigan is recognizing the transformative impact of new transportation and mobility technologies, from cars, to trucks, to pedestrians, to drones. The coming transition towards intelligent, automated, and connected mobility systems will transform not only the way people and goods move about, but also the way human safety, privacy, and security are protected, cities are organized, machines and people are connected, and the public and private spheres are defined.

Law will be at the center of these transformations, as it always is. There has already been a good deal of thinking about the ways that law must adapt to make connected and automated mobility feasible in areas like tort liability, insurance, federal preemption, and data privacy. 434 434. See, e.g., Daniel A. Crane, Kyle D. Logue & Bryce Pilz, A Survey of Legal Issues Arising from the Deployment of Autonomous and Connected Vehicles, 23 Mich. Tel. & Tech. L. Rev. 191 (2017). × But it is also not too early to begin pondering the many implications for law and regulation arising from the technology’s spillover effects as it begins to permeate society. For better or worse, connected and automated mobility will disrupt legal practices and concepts in a variety of ways additional to the obvious “regulation of the car.” Policing practices and Fourth Amendment law, now so heavily centered on routine automobile stops, will of necessity require reconsideration. Notions of ownership of physical property (i.e., an automobile) and data (i.e., accident records) will be challenged by the automated sharing economy. And the economic and regulatory structure of the transportation network will have to be reconsidered as mobility transitions from a largely individualistic model of drivers in their own cars pursuing their own ends within the confines of general rules of the road to a model in which shared and interconnected vehicles make collective decisions to optimize the system’s performance. In these and many other ways, the coming mobility revolution will challenge existing legal concepts and practices with implications far beyond the “cool new gadget of driverless cars.”

Despite the great importance of the coming mobility revolution, the case for a field of study in “law and mobility” is not obvious. In this inaugural essay for the Journal of Law and Mobility, I shall endeavor briefly to make that case.

I. Driverless Cars and the Law of the Horse

A technological phenomenon can be tremendously important to society without necessarily meriting its own field of legal study because of what Judge Frank Easterbrook has described as “the law of the horse” problem. 435 435. Frank H.Easterbrook,Cyberspace and the Law of the Horse, 1996 U. Chi. Legal F. 207, 207-16. × Writing against the burgeoning field of “Internet law” in the early 1990s, Easterbrook argued against organizing legal analysis around particular technologies:

The best way to learn the law applicable to specialized endeavors is to study general rules. Lots of cases deal with sales of horses; others deal with people kicked by horses; still more deal with the licensing and racing of horses, or with the care veterinarians give to horses, or with prizes at horse shows. Any effort to collect these strands into a course on “The Law of the Horse” is doomed to be shallow and to miss unifying principles. 436 436. Id. ×

Prominent advocates of “Internet law” as a field rebutted Easterbrook’s concern, arguing that focusing on cyberlaw as a field could be productive to understanding aspects of this important human endeavor in ways that merely studying general principles might miss. 437 437. Lawrence Lessig, The Law of the Horse: What Cyberlaw Might Teach, 113 Harv. L. Rev. 501 (1999). × Despite Easterbrook’s protestation, a distinct field of cyberlaw has grown up in recent decades.

“The law of the horse” debate seems particularly apt to the question of law and mobility since the automobile is the lineal successor of the horse as society’s key transportation technology. Without attempting to offer a general solution to the “law of the horse” question, it is worth drawing a distinction between two different kinds of disruptive technologies—those in which the technological change produces social changes indirectly and without significant possibilities for legal intervention, and those in which law is central to the formation of the technology itself.

An example of the first species of technological change is air conditioning. The rise of air conditioning in the mid-twentieth century had tremendous effects on society, including dramatic increases in business productivity, changes in living patterns as people shifted indoors, and the extension of retail store hours and hence the growing commercialization of American culture. 438 438. Stan Cox, Losing Our Cool: Uncomfortable Truths About Our Air-Conditioned World (and Finding New Ways to Get Through the Summer) (2012). × The South’s share of U.S. population was in steady decline until the 1960s when, in lockstep with the growth of air conditioning and people’s willingness to settle in hot places, the trend abruptly reversed and the South’s share grew dramatically. 439 439. Paul Krugman, Air Conditioning and the Rise of the South, New York Times March 28, 2015. × The political consequences were enormous—from Richard Nixon through George W. Bush, every elected President hailed from warm climates.

One could say, without exaggeration, that the Willis Carrier’s frigid contraption exerted a greater effect on American business, culture, and politics than almost any other invention in the twentieth century. And, yet, it would seem silly to launch a field of study in “law and air conditioning.” Air conditioning’s social, economic, and political effects were largely indirect—the result of human decisions in response to the new circumstances created by the new technology rather than an immediate consequence of the technology itself. Even if regulators had foreseen the dramatic demographic effects of air conditioning’s spread, there is little they could have done (short of killing or limiting the technology) to mediate the process of change by regulating the technology.

Contrast the Internet. Like air conditioning, the Internet has had tremendous implications for culture, business, and politics, but unlike air conditioning, many of these effects were artifacts of design decisions regarding the legal architecture of cyberspace. From questions of taxation of online commercial transactions, 440 440. See, e.g., John E. Sununu, The Taxation of Internet Commerce, 39 Harv. J. Leg. 325 (2002). × to circumvention of digital rights management technologies, 441 441. See, e.g., David Nimmer, A Rif on Fair Use in the Digital Millenium Copyright Act, 148 U. Pa. L. Rev. 673 (2000). × to personal jurisdiction over geographically remote online interlocutors, 442 442. Note, No Bad Puns: A Different Approach to the Problem of Personal Jurisdiction and the Internet, 116 Harv. L. Rev. 1821 (2003). × and in countless other ways, a complex of legal and regulatory decisions created the modern Internet. From the beginning, law was hovering over the face of cyberspace. Al Gore may not have created the Internet, but lawyers had as much to do with it as did engineers.

The Internet’s legal architecture was not established at a single point in time, by a single set of actors, or with a single set of ideological commitments or policy considerations. Copyright structures were born of the contestation among one set of stakeholders, which was distinct from the sets of stakeholders contesting over tax policy, net neutrality, or revenge porn. And yet, the decisions made in separate regulatory spheres often interact in underappreciated ways to lend the Internet its social and economic character. Tax policy made Amazon dominant in retail, copyright policy made Google dominant in search, and data protection law (or its absence) made Facebook dominant in social media—with the result that all three have become antitrust problems.

Whether or not law students should be encouraged to study “Internet law” in a discrete course, it seems evident with the benefit of thirty years of hindsight that the role of law in mediating cyberspace cannot be adequately comprehended without a systemic inquiry. Mobility, I would argue, will be much the same. While the individual components of the coming shift toward connectivity and automation—i.e., insurance, tort liability, indemnification, intellectual property, federal preemption, municipal traffic law, etc.—will have analogues in known circumstances and hence will benefit from consideration as general questions of insurance, torts, and so forth, the interaction of the many moving parts will produce a novel, complex ecosystem. Given the potential of that ecosystem to transform human life in many significant ways, it is well worth investing some effort in studying “law and mobility” as a comprehensive field.

II. An Illustration from Three Connected Topics

It would be foolish to attempt a description of mobility’s future legal architecture at this early stage in the mobility revolution. However, in an effort to provide some further motivation for the field of “law and mobility,” let me offer an illustration from three areas in which legal practices and doctrines may be affected in complex ways by the shift toward connected and automated vehicles. Although these three topics entail consideration of separate fields of law, the technological and legal decisions made with respect to them could well have system-wide implications, which shows the value of keeping the entire system in perspective as discrete problems are addressed.

A. Policing and Public Security

For better or for worse, the advent of automated vehicles will redefine the way that policing and law enforcement are conducted. Routine traffic stops are fraught, but potentially strategically significant, moments for police-citizen interactions. Half of all citizen-police interactions, 443 443. Samuel Walker, Science and Politics in Police Research: Reflections on their Tangled Relationship, 593 Annals Am. Acad. Pol. & Soc. Sci. 137, 142 (2004); ATTHEW R. DUROSE ET. AL., U.S. DEP’T OF JUSTICE, OFFICE OF JUSTICE PROGRAMS, BUREAU OF JUSTICE STATISTICS, CONTACTS BETWEEN POLICE AND THE PUBLIC, 2005, 1 (2007). × more than forty percent of all drug arrests, 444 444. David A. Sklansky,Traffic Stops, Minority Motorists, and the Future of the Fourth Amendment, 1997SUP. CT. REV. 271, 299. × and over 30% of police shootings 445 445. Adams v. Williams, 407 U.S. 143, 148 n.3 (1972). × occur in the context of traffic stops. Much of the social tension over racial profiling and enforcement inequality has arisen in the context of police practices with respect to minority motorists. 446 446. Ronnie A. Dunn, Racial Profiling: A Persistent Civil Rights Challenge Even in the Twenty-First Century, 66 Case W. Res. L. Rev. 957, 979 (2016) (reporting statistics on disproportionate effects on racial minorities of routine traffic stops). × The traffic stop is central to modern policing, including both its successes and pathologies.

Will there continue to be routine police stops in a world of automated vehicles? Surely traffic stops will not disappear altogether, since driverless cars may still have broken taillights or lapsed registrations. 447 447. See John Frank Weaver, Robot, Do You Know Why I Stopped You?. × But with the advent of cars programmed to follow the rules of the road, the number of occasions for the police to stop cars will decline significantly. As a general matter, the police need probable cause to stop a vehicle on a roadway. 448 448. Whren v. U.S., 517 U.S. 806 (1996). × A world of predominantly automated vehicles will mean many fewer traffic violations and hence many fewer police stops and many fewer police-citizen interactions and arrests for evidence of crime discovered during those stops.

On the positive side, that could mean a significant reduction in some of the abuses and racial tensions around policing. But it could also deprive the police of a crime detection dragnet, with the consequence either that the crime rate will increase due to the lower detection rate or that the police will deploy new crime detection strategies that could create new problems of their own.

Addressing these potentially sweeping changes to the practices of policing brought about by automated vehicle technologies requires considering both the structure of the relevant technology and the law itself. On the technological side, connected and automated vehicles could be designed for easy monitoring and controlling by the police. That could entail a decline in privacy for vehicle occupants, but also potentially reduce the need for physical stops by the police (cars that can be remotely monitored can be remotely ticketed) and hence some of the police-citizen roadside friction that has dominated recent troubles.

On the legal side, the advent of connected and automated vehicles will require rethinking the structure of Fourth Amendment law as required to automobiles. At present, individual rights as against searches and seizures often rely on distinctions between drivers and passengers, or owners and occupants. For example, a passenger in a car may challenge the legality of the police stop of a car, 449 449. Brendlin v. California, 551 U.S. 249 (2007). × but have diminished expectations of privacy in the search of the vehicle’s interior if they are not the vehicle’s owners or bailees. 450 450. U.S. v. Jones, 565 U.S. 400 (2012). × In a mobility fleet without drivers and (as discussed momentarily) perhaps without many individual owners, these conceptions of the relationship of people to cars will require reconsideration.

B. Ownership, Sharing, and the Public/Private Divide

In American culture, the individually owned automobile has historically been far more than a transportation device—it has been an icon of freedom, mobility, and personal identity. As Ted McAllister has written concerning the growth of automobile culture in the early twentieth century:

The automobile squared perfectly with a distinctive American ideal of freedom—freedom of mobility. Always a restless nation, with complex migratory patterns throughout the 17th, 18th, and 19thcenturies, the car came just as a certain kind of mobility had reached an end with the closing of the frontier. But the restlessness had not ended, and the car allowed control of space like no other form of transportation. 451 451. Ted v. McAllister, Cars, Individualism, and the Paradox of Freedom in a Mass Society. ×

Individual car ownership has long been central to conceptions of property and economic status. The average American adult currently spends about ten percent of his or her income on an automobile, 452 452. Máté Petrány, This Is How Much Americans Spend on their Cars. × making it by far his or her most expensive item of personal property. The social costs of individual automobile ownership are far higher. 453 453. Edward Humes, The Absurd Primacy of the Automobile in American Life; Robert Moor, What Happens to the American Myth When You Take the Driver Out of It?. ×

The automobile’s run as an icon of social status through ownership may be ending. Futurists expect that the availability of on-demand automated vehicle service will complete the transition from mobility as personal property to mobility as a service, as more and more households stop buying cars and rely instead on ride sharing services. 454 454. Smart Cities and the Vehicle Ownership Shift. × Ride sharing companies like Uber and Lyft have long been on this case, and now automobile manufacturers are scrambling to market their vehicles as shared services. 455 455. Ryan Felton, GM Aims to Get Ahead of Everyone with Autonomous Ride-Sharing Service in Multiple Cities by 2019. × With the decline of individual ownership, what will happen to conceptions of property in the physical space of the automobile, in the contractual right to use a particular car or fleet of automobiles, and in the data generated about occupants and vehicles?

The coming transition from individual ownership to shared service will also raise important questions about the line between the public and private domains. At present, the “public sphere” is defined by mass transit whereas the individually owned automobile constitutes the “private sphere.” The public sphere operates according to ancient common carrier rules of universal access and non-discrimination, whereas a car is not quite “a man’s castle on wheels” for constitutional purposes, 456 456. See Illinois v. Lidster, 540 U.S. 419, 424 (2004) (“The Fourth Amendment does not treat a motorist’scaras hiscastle.”). × but still a non-public space dominated by individual rights as against the state rather than public obligations. 457 457. E.g., Byrne v. Rutledge, 623 F.3d 46 (2d Cir. 2010) (holding the motor vehicle license plates were nonpublic fora and that state’s ban on vanity plates referencing religious topic violated First Amendment). × As more and more vehicles are held and used in shared fleets rather than individual hands, the traditional line between publicly minded “mass transit” and individually minded vehicle ownership will come under pressure, with significant consequences for both efficiency and equality.

C. Platform Mobility, Competition, and Regulation

The coming transition toward ride sharing fleets rather than individual vehicle ownership described in the previous section will have additional important implications for the economic structure of mobility—which of course will raise important regulatory questions as well. At present, the private transportation system is highly atomistic. In the United States alone, there are 264 million individually owned motor vehicles in operation. 458 458. U.S. Dep’t of Energy, Transportation Energy Data Book, Chapter 8, Household Vehicles and Characteristics, Table 8.1, Population and Vehicle Profile, https://cta.ornl.gov/data/chapter8.shtml (last visited May 29, 2018). × For the reasons previously identified, expect many of these vehicles to shift toward corporate-owned fleets in coming years. The question then will be how many such fleets will operate—whether we will see robust fleet-to-fleet competition or instead the convergence toward a few dominant providers as we are seeing in other important areas of the “platform economy.”

There is every reason to believe that, before too long, mobility will tend in the direction of other monopoly or oligopoly platforms because it will share their economic structure. The key economic facts behind the rise of dominant platforms like Amazon, Twitter, Google, Facebook, Microsoft, and Apple are the presence of scale economies and network effects—system attributes that make the system more desirable for others users as new users join. 459 459. See generally DavidS.Evans& Richard Schmalensee, A Guide to the Antitrust Economics of Networks, Antitrust, Spring 1996, at 36; Michael L. Katz & Carl Shapiro, Systems Competition andNetworkEffects, 8 J. Econ. Persp. 93 (1994). × In the case of the mobility revolution, a number of features are suggestive of future scale economies and network effects. The more cars in a fleet, the more likely it is that one will be available when summoned by a user. The more cars connected to other cars in a fleet, the higher the quality of the information (on such topics as road and weather conditions and vehicle performance) available within the fleet and the steeper the machine learning curve.

As is true with other platforms, the mere presence of scale economic and network effects does not have to lead inexorably to market concentration or monopoly. Law and regulation may intervene to mitigate these effects, for example by requiring information sharing or interconnection among rival platforms. But such mandatory information sharing or interconnection obligations are not always advisable, as they can diminish a platform’s incentives to invest in its own infrastructure or otherwise impair incentives to compete.

Circling back to the “law of the horse” point raised at the outset, these issues are not, of course, unique to law and mobility. But this brief examination of these three topics—policing, ownership, and competition—shows the value of considering law and mobility as a distinct topic. Technological, legal, and regulatory decisions we make with respect to one particular set of problems will have implications for distinct problems perhaps not under consideration at that moment. For example, law and technology will operate conjunctively to define the bounds of privacy expectations in connected and automated vehicles, with implications for search and seizure law, property and data privacy norms, and sharing obligations to promote competition. Pulling a “privacy lever” in one context—say to safeguard against excessive police searches—could have spillover effects in another context, for example by bolstering a dominant mobility platform’s arguments against mandatory data sharing. Although the interactions between the different technological decisions and related legal norms are surely impossible to predict or manage with exactitude, consideration of law and mobility as a system will permit a holistic view of this complex, evolving ecosystem.

Conclusion

Law and regulation will be at the center of the coming mobility revolution. Many of the patterns we will observe at the intersection of law and the new technologies will be familiar—at least if we spend the time to study past technological revolutions—and general principles will be sufficient to answer many of the rising questions. At the same time, there is a benefit to considering the field of law and mobility comprehensively with an eye to understanding the often subtle interactions between discrete technological and legal decisions. The Journal of Law and Mobility aims to play an important role in this fast-moving space.


Frederick Paul Furth, Sr. Professor of Law, University of Michigan. I am grateful for helpful comments from Ellen Partridge and Bryant Walker Smith. All errors are my own.