Technology and Autonomous Vehicles

Mobile App Terms and Conditions Decision Clarifies Best Practices in App Designs to Support Enforcement of Contract ProvisionsThe Second Circuit issued a decision of interest to every company that utilizes a mobile app to interact with its customers. In Meyer v. Kalanick, the court enforced the mandatory arbitration provision in the Uber app. The court considered the app from the perspective of a “reasonably prudent smartphone user” and discussed parameters supporting enforceability of contract terms for mobile apps. The Second Circuit enforced the arbitration provision because the Uber app gave the user reasonably conspicuous notice of the Terms of Service (which included the arbitration provision), and the user gave unambiguous (albeit not express) consent to arbitration in light of the objectively reasonable notice of the terms.

Due to the ubiquity of smartphones and smartphone apps, the Second Circuit analyzed the Uber app from the standpoint of a reasonably prudent smartphone user who would understand the use of hyperlinks. Uber’s “uncluttered” payment screen contained the warning that “By creating an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY.” The court explained that the “capitalized phrase is bright blue and underlined and contains a hyperlink to a third screen containing a button that, when clicked displays the current version of Uber’s Terms of Service and Privacy Policy. The text, including the hyperlinks to the Terms and Conditions and Privacy Policy, appears directly below the buttons for registration.” The entire screen, including the notice of the Terms of Service, was visible without scrolling. The court noted that the sentence is in small font, but “the dark print contrasts with the bright white background, and the hyperlinks are in blue and underlined.” The court appreciated the simplicity of the payment screen, which included only credit card fields, buttons to register for a user account or to connect pre-existing accounts to the Uber account, and the warning with the hyperlink.

The court explained that a reasonably prudent smartphone user would understand that text that is highlighted in blue and underlined is hyperlinked to another webpage with additional information, and found the screen design and text reasonably conspicuous, thus giving the user constructive notice of its terms. The court also described the payment screen and Terms of Service as “temporally coupled” because Uber provides the Terms of Service during enrollment. The court concluded that “a reasonably prudent smartphone user would understand that the terms were connected to the creation of a user account.”

The court distinguished the Uber screen from the Amazon screen in Nicosia v. Amazon.com, Inc., because the Nicosia screen contained much more information and several buttons, and the notice of terms and conditions was not adjacent to the consent button: “This presentation differs sharply from the screen we considered in Nicosia, which contained, among other things, summaries of the user’s purchase and delivery information, ‘between fifteen and twenty-five links,’ ‘text . . . in at least four font sizes and six colors,’ and several buttons and advertisements.  Nicosia, 834 F.3d at 236-37. Furthermore, the notice of the terms and conditions in Nicosia was ‘not directly adjacent’ to the button intended to manifest assent to the terms, unlike the text and button at issue here.  Id. at 236.”

The Uber app decision provides useful guideposts for designing user interfaces for smartphone apps that include contractual terms, such as arbitration clauses: (1) implement a simple design with minimal text and few buttons; (2) ensure the visibility of the entire screen, including the hyperlink to the contract terms, without scrolling; (3) expressly warn that by creating an account, the user is agreeing to be bound by the linked terms; and (4) require agreement to the contract terms during enrollment (ideally before completing enrollment, but not later than simultaneously with enrollment).  Although the Uber app did not do so, smartphone apps can also require the user to scroll through the governing terms and conditions before accepting them to further support enforceability of those terms and conditions.

self driving carIf you weren’t already convinced, this Drive.ai video of a self-driving system demonstrating an extended drive, at night, in rainy conditions, without human intervention, shows how close we may be as a society in which human driving is a luxury activity.

Drive.ai is far from the only company developing and testing AV systems. Waymo, Alphabet’s AV subsidiary, logged more than 635,000 autonomous miles driven on California public roads in 2016 (all other competitors combined logged 20,286 autonomous miles in California). Recently, Ford announced plans to develop a Society of Engineers (SAE) Level 4 AV (no steering wheel, accelerator, or brake pedal) for use in a commercial application (such as ride-hailing of package delivery) by 2021. General Motors, which, along with Ford, strongly supported legislation to allow AV testing and deployment in Michigan beginning this March announced that it will begin production of its AV line early this year. Tesla’s Autopilot option, an advanced driver-assist feature that Tesla describes as offering “full self‑driving capability” but requires driver monitoring has logged over 200 million miles since it was released in 2015.  Tesla estimates that fully autonomous driving could be technically feasible in two years, even if the regulatory framework is not developed enough to allow fully AV yet.

The Regulatory Hurdle

With major industry players fully engaged, Tesla predicts that AV will be technically feasible for a wide-scale deployment in two years.  The adoption of AV regulations in all fifty states may take several years, but, given the potential increases in safety (an estimated 90% of accidents are caused by human error) and the substantial backing of the auto industry, implementing the regulatory framework is likely only a matter of time.  While the National Highway Traffic Safety Administration’s (NHTSA) AV Policy only provides voluntary guidelines for AV manufacturers and a model policy for state regulation of driverless technology, NHSTA affirmed that it intends to pursue an “ambitious approach to accelerate the highly automated vehicle revolution.”

Common Industry Terminology

NHTSA’s AV Policy adopted AV terminology from SAE, which categorizes vehicles by levels of human control.  Level 0 vehicles require constant human control, while Level 5 vehicles will need no help from humans. Level 3 vehicles utilize “conditional automation” in which “the human driver will respond appropriately to a request to intervene.”

Policyholder Impact

AV’s impact on the auto insurance industry – and by extension, commercial auto insurance – is not fully known. While most accidents are caused by human error, the rise of AV introduces a new source of error: misjudgments by the underlying AV system. Experts cannot yet draw any statistically significant conclusions about the safety of AV due to the relatively small sample size (experts estimate that it will take billions of vehicle miles to draw accurate conclusions). Uber is aggressively pursuing AV, but faced criticism when one of its AVs ran a traffic light in San Francisco. Uber blamed the incident on the human driver, who failed to intervene, rather than on the AV system itself. A NHTSA report following a fatal crash involving a Tesla with the Autopilot feature engaged, revealed that after Tesla introduced the Autopilot feature, the number of crashes dropped by 40%.

Assuming that Tesla’s Autopilot data reflects a true decrease in automobile accidents for AV, we might expect insurance premiums for all cars to drop. However, some experts contend that Level 3 AV (similar to Tesla’s Autopilot feature) may present more safety concerns than complete human control or Level 5 AV. Nidhi Kalra, co-director of the Rand Center for Decision Making Under Uncertainty, testified during a recent U.S. congressional hearing that “[t]here’s evidence to suggest that Level 3 may show an increase in traffic crashes . . . I don’t think there’s enough evidence to suggest that it should be prohibited at this time, but it does pose safety concerns.”  Experts question whether inattentive humans may fail to intervene quickly enough, causing the AV to take no action in a dangerous situation because it expects intervention, or the inattentive human may intervene and make the situation worse because of a lack of situational awareness. If this holds true, we might expect premiums to come down only for Level 5, and not for Level 3 or 4 AV.

In addition to the premium question, AV will likely also impact current coverage forms. In the United Kingdom, the Centre for Connected and Autonomous Vehicles recommended new regulations requiring auto insurance policies to include a separate coverage grant for AV. While the UK motor-vehicle insurance scheme is driver-specific rather than vehicle-specific, the authorized driver provision in U.S. policies poses similar questions for insureds. Commercial Auto Policy standard ISO form language for the “Who Is An Insured” provision defines “‘insureds’: [as] a. You for any covered ‘auto’. b. Anyone else while using with your permission a covered ‘auto’ you own, hire, or borrow except […] c. Anyone liable for the conduct of an ‘insured’ describe above but only to extent of that liability.” The standard ISO form defines “insured” as “any person or organization qualifying as an insured in the Who Is An Insured provision of the applicable coverage.” Insurers must determine whether AV falls within this definition of an “insured” and whether to revise or endorse the standard ISO form to capture AV exposure.  In addition, insurers must assess the impact of AV on the omnibus provision c., which defines as an “insured” “[a]nyone liable for the conduct of an “insured” described above but only to the extent of that liability.” This provision extends liability coverage to anyone vicariously liable for the actions of an insured; its impact on AV must be determined.

The Future of AV and Commercial Auto Coverage

For the foreseeable future, commercial auto policies will remain critical components of every commercial insured’s policy portfolio. Accidents will continue to occur, and insureds will need legal representation in any ensuing litigation, which implicates auto insurers’ duty to defend. Insureds will also need comprehensive and collision insurance to repair damaged vehicles.  Many insureds may drive a variety of vehicles, including Level 0 vehicles fully controlled by the driver, and will need traditional permissive-driver liability protection.

Numerous liability questions may arise in accidents involving Level 4 and 5 AV vehicles, including:

  • Who will be responsible for any liability? The passenger sitting in the driver’s seat but not driving? The product manufacturer? A third-party purportedly causing or contributing to the accident?
  • Will insurers use vehicle ratings for property damage coverage but use different metrics for liability coverage?
  • Will insureds see less frequency of claims on their business auto liability coverage, resulting in lower premiums and impacting insurance company premium volume?
  • And, of course, will standard and manuscript insurance policies change in response to this new world?