Introduction and overview of applicable law

The success of the upcoming launch of Level 3 (highly automated) vehicles in Germany, targeted for year of 2020, will depend not only on technologically flawless equipment, but also compliance with product liability and safety standards. This briefing provides an overview of a manufacturer’s obligations under product liability, and corresponding tortious producer liability, law in Germany.

Within the framework of manufacturer's liability for defective products, there are various regulations under which the manufacturer is liable for any damage incurred. The most important civil law principles here are (1) product liability under the Product Liability Act and (2) tortious producer liability under the German Civil Code. In summary:

  • Due to the high-risk potential posed by Level 3 vehicles, the safety requirements for manufacturers are high, both in terms of technical design and user instructions.
  • Constructive measures take precedence over instructions and warnings to the user. Only if constructive equipment measures are technically non-feasible or economically unreasonable may the manufacturer fall back on information to the drivers on the use of the technology.
  • Manufacturers are expected to exclude particularly dangerous misuse by the driver, which is likely to occur to the extent it is technically possible and economical.
  • Any information given to the driver must be noticed by the same, so it is advisable to include important information not only in the operating manual but to display an abridged version somewhere on the vehicle itself, such as the dashboard display; and, if possible, to obtain the driver's confirmation that he or she read the instructions.

Liability Risk No. 1: Fault in construction of the product

Under both product liability law and in the context of tort liability, technology design defects constitute the most prevalent liability potential for manufacturers of automated vehicles. As noted above, constructive solutions, in principle, take precedence over instructions and notes, and a manufacturer cannot relieve itself of liability exposure for a design defect simply by attaching warnings to the product. For automated vehicles in particular, it may also be expected that the courts will require manufacturers to comply with higher design safety standards than has been the case with conventional vehicles.

A construction fault exists if the design of the product falls short of the required safety standard or does not offer the level of safety that can reasonably be expected, taking all circumstances into account. It is not the safety expectations of the injured party that is decisive on the issue of reasonableness; objective criteria are used to determine whether a product defect exists from the perspective of an average product user. In a nutshell, the product should be suitable and sufficient to prevent damage according to the state-of-the-art, science- and technology-wise, at the time it is placed on the market.

The AV system should take into account the behavior of other road users and adapt its own driving strategy accordingly. The system must be able to (1) identify other vehicles, pedestrians and road signs; (2) take into consideration their predicted movement; and (3) make an appropriate decision based on the traffic situation (e.g., continue driving, change lanes, brake, yield, etc.)

Automated vehicles will be expected to be placed on the market only if they comply with the standards currently applicable to them (or even yet to be defined). If a vehicle is subsequently classified as safe, however, such an assessment only constitutes a minimum standard. For manufacturers of automated vehicles, it should be noted that there are currently no specific technical standards for automated driving, and such standards will continuously further develop.

German road traffic regulations explicitly require the use of vehicle-specific light and sound signals on the side of the vehicle for many traffic situations. The requirement to exercise caution that is embedded in the law must be observed. It may be necessary for the vehicle to communicate with other road users, in particular with vulnerable road users.

The automated vehicle must monitor its own condition for possible system failures and performance limitations; and manufacturers must ensure that, in the event of a loss of power or malfunction, the driver (or an operator) has sufficient time to react to the system failure and take immediate manual control of the vehicle while in motion.

With regard to self-learning software, safety expectations are particularly significant within the framework of design requirements. In every case, the software must be tested before it is placed on the market and the testing must be repeated until the risks posed by the system are reduced to an acceptable level. It is the manufacturer's responsibility to carry out cost-intensive control and test procedures, particularly for products with a high hazard and risk potential, until the error rate has fallen below a certain limit value. How this limit value is to be determined is currently still an open question.

"Dilemma situations" are ones in which the self-learning software has to weigh the cost of protecting one legal asset over another (there is no win-win alternative). With automated vehicles, designing a crash-optimization algorithm for dilemma situations is a legal challenge. The use of such an algorithm, as well as the complete absence of such a program, could justify a design error, but it needs to comply with German and European ethical rules. The system is not allowed to balance the safety of one human being against another.

The technology has to comply with the state of the art in science and technology, which may exceed the technical standards customary in the industry or at the manufacturer. The manufacturer does not, however, have to apply general safety concepts that have not yet been fully developed or are still in a test phase.

The safety standard to be observed by the manufacturer is also limited by the criterion of "reasonableness." The reasonableness of the constructive safety measures depends on the degree of hazard. Since automated vehicles can pose risks to the life and health of persons, courts judging reasonableness are more likely to require manufacturers to take more far-reaching design measures than they would in the case of potential infringement of, or minor impairment to, property.

We do expect that constructive measures will have to address all kinds of particularly serious risks. Particularly dangerous are foreseeable uses that make it impossible for a driver to resume manual control if necessary or to recognize the necessity of such a takeover – such as leaving the driver’s seat or adjusting the seat to the lying (sleeping) position.

While it may be true that a manufacturer does not have to address every conceivable misuse with safety measures, but can counter certain extremely remote, albeit foreseeable, misuse with warnings, manufacturers must make a special effort to address any foreseeable use that is close to the intended use of the product and the risks of which are not readily apparent to the user. In the event of a liability incident, there is a risk that a court might consider the warnings to be inadequate and see a design defect in the absence of specific, reasonable safety features.

Liability Risk No. 2: Faults in instructions to drivers

The second greatest source of errors relevant to manufacturers of automated vehicles involves the instructions for use. In principle, it remains the case that constructive safety measures take precedence over manufacturers' instructions. However, comprehensive operating instructions and hazard statements directed at the buyer and other potential vehicle users, such as friends and relatives of the buyer, are essential to avoid or minimize risks.

If design measures to prevent misuse are technically unreasonable or not feasible, but the vehicle is being placed on the market anyway, the manufacturer must instruct the product purchaser accordingly, providing instructions on how to operate and use the product in as risk-free a manner. The manufacturer that fails to fully inform a product purchaser about the safety-relevant properties of the product, in particular about its correct use, violates its instruction obligations. Also, since automated vehicles are also to be sold to private end customers, driver instructions must be understandable to the customer with the lowest level of prior knowledge and risk awareness. Manufacturer dealing with conventional vehicles could expect end users to have some prior knowledge of driving and technology. This is not the case with autonomous driving technologies and the danger resulting from it. Therefore, the considerable potential for damage resulting from improper operation requires that the product user must be informed about (1) the specific application for which the automated vehicle is suitable, (2) the way in which the system must be configured and operated, (3) the extent to which the system must be monitored during the journey, (4) how to react to a system failure while driving, and (5) the necessary maintenance of the system.

The obligation to inform includes foreseeable misuse, so it is also necessary to provide information as to which actions the driver must refrain from (or design the technology in a way that does not allow the respective action), e.g. allowing a child to occupy the driver’s seat or engaging in activities demanding a high level of concentration, such as involving a laptop (it being understood that, under the new laws regulating HAVs, side activities such as writing emails or watching movies shall be permitted for the driver as long as the system is activated and properly working). The manufacturer must seek to prevent such abuses by identifying probable, inappropriate uses and informing the user of their consequences. The manufacturer should also decide on an efficient presentation of the warning content. In this respect, it should be mindful of studies showing that the effectiveness of warnings is inversely related to frequency.

The content and scope of instruction obligations depend on (1) the magnitude of the danger and (2) the endangered legal asset. As the improper use of automated vehicles is associated with particularly serious risks, relevant safety information should be highlighted visually and not buried in longer texts or instructions for use. The instructions for use must be easy to understand and clearly indicate the degree of danger and the behavioral changes called for. In addition to the instructions for use, it may be necessary to display the instructions on the vehicle itself, for example, when starting the vehicle, have them appear in the dashboard display.

Additionally, manufacturers must ensure that the product description is correct when presenting the product to the market. The name as well as accompanying advertising messages can lead to false expectations of product safety on the part of buyers and influence their handling of the product. Incorrect advertising information can trigger product and producer liability in this context. For example, only vehicles that are truly self-driving should be described as "autonomous." And video ads should not depict any excluded uses or risky occupant behavior, such as sleeping or leaving the driver seat while the car is in operation.

Product-observation errors and recall obligations

Germany's product liability law imposes but does not define product observation obligations. Within the framework of manufacturer liability pursuant to tort law, AV manufacturers are obligated to monitor products already on the market (in field operation) to identify imminent or new dangers, and to inform users of such dangers. Manufacturers must not limit their observation to investigating complaints submitted to them (i.e., passive product monitoring), but must also, on their own initiative, systematically monitor all products in the market and record and evaluate potential hazards (i.e., active product monitoring). Moreover, product monitoring does not only cover one's own product, but also similar vehicles by other manufacturers and possible interactions between one's own product and other manufacturers' products or accessories. If hazards are identified during product observation, the manufacturer is further obligated to take measures to reduce risk. This can range from halting  production or marketing, to modifying instructions, warnings or even hard- and software, to issuing a product recall. In the worst of all possible events the German Federal Motor Transport Authority will issue a recall of the vehicle or even an administrative order to no longer use the vehicle on public roads.

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