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Brett Manchel

Can insurance contracts be challenged in court?

May 15, 2017 by Brett Manchel Leave a Comment

How Illinois public policy works in drivers’ favor

If you’ve ever filed an insurance claim, you know that insurance policies have provisions. In the case of American Heartland Insurance Co., one of them is this: a claim must be filed within 120 days of an accident, otherwise the insured forfeits their right to the claim.

The requirement isn’t unique to Heartland, but it was the situation in Smith v. American Heartland Insurance Co., a case in which the plaintiff, Smith, sued the insurance company for failing to make good on the money it owed stemming from a hit-and-run case.

Defending its actions, American Heartland argued Smith wasn’t entitled to receive the money because she filed her claim well after the 120-day provision. This despite Smith proving she had been hampered by extenuating circumstances, including the fact she was covered under two separate insurance policies, which caused confusion as to which policy was responsible for the liability coverage.

In the end, Smith won her case. The courted stated that she acted reasonably and that American Heartland didn’t. American Heartland appealed the ruling, and the Illinois appellate court affirmed, explaining: “the 120-day notice provision Heartland seeks to enforce against Smith is a dilution or diminution of the uninsured motorist statute and is therefore against public policy as applied to her.”

Why Smith’s case matters

To begin, what exactly is the court enforcing? Illinois state law requires every auto policy—one that insures against bodily injury—account for uninsured motorist coverage, protecting drivers from things like hit-and-run crashes. It’s a matter of public policy, according to Illinois law, meaning insurance companies can’t skirt the requirement.

As I said earlier, the Smith case arises out of a provision in American Heartland’s insurance contract that requires the accident victim to file a claim within 120 days of an accident. So why did the court rule in Smith’s favor when it was established that she notified the company after 120 days?

An insurance contract can say one thing (that the company must be notified of a claim within 120 days of a crash, for example), but it can’t account for every version of an event leading up to the deadline, which runs counter to public policy, even if the language of the contract is clear.

I’ll note that challenging a contract on public policy grounds isn’t easy. It interferes with our fundamental freedom to contract. But the concept of public policy is powerful because it works in favor of the average citizen, whereas insurance contracts typically don’t.

Essentially, Smith and her attorney made reasonable efforts to contact American Heartland under the circumstances.  The court could not justify taking away Smith’s uninsured motorist coverage for a requirement that she, through no fault of her own, couldn’t adhere to. The court rightly concluded that her insurance company’s strict interpretation of the contract was against public policy and therefore could not be enforced.

Takeaways for drivers

Smith’s case underlies a few basic principles when it comes to insurance contracts and potential lawsuits. First, read your contract from beginning to end. Second, know your coverage and the types of insurance you purchase.

Illinois-insured drivers should, at the very least, carry the same amount of uninsured motorist coverage as liability coverage; it’s state law and policy. More importantly, though, is to realize just how far some insurance companies are willing to go to pay as little on claims as possible, which could leave their policyholders stuck in years of litigation.

No recall for Tesla: Did the NHTSA miss a golden opportunity?

January 24, 2017 by Brett Manchel Leave a Comment

Tesla Model S
Tesla Model S

Last Thursday was another reminder that the National Highway Traffic Safety Administration is struggling to define what automation means for the future of the auto industry.

According to Reuters, the agency officially closed its investigation into the fatal crash that killed Joshua Brown, owner of a Tesla Model S, who set his car on autopilot as he was cruising on a highway west of Williston, Florida. The car ended up colliding with a tractor-trailer that was crossing an uncontrolled intersection.

Initial reports in May showed that the Tesla had failed to distinguish between the color of the white trailer and a bright-colored sky, therefore it did not slow its speed. Thickening the plot was the fact that Brown, 40, was reportedly watching a movie on a portable DVD player at the time of the crash.

When the NHTSA announced that it was planning to investigate further, people began to wonder if this was the start of something much more profound; part of the investigation was to determine whether Tesla’s semi-automation system — one of the few sanctioned systems being used on the road today — was defective, and whether a recall was necessary.

But after six months, the NHTSA has come to the conclusion that nothing about automation is conclusive. The final evaluation, released last week, determined that the Tesla was working in accordance with its specifications and that the company was not liable for any technical fiascos; no recalls were issued as a result.

“The Autopilot system,” as it says in the NHTSA report, “is an Advanced Driver Assistance System (ADAS) that requires the continual and full attention of the driver to monitor the traffic environment and be prepared to take action to avoid crashes.”

More from the NHTSA: “Although perhaps not as specific as it could be, Tesla has provided information about system limitations in the owner’s manuals, user interface and associated warnings/alerts, as well as a driver monitoring system that is intended to aid the driver in remaining engaged in the driving task at all times.”

While it’s hard to pin this particular crash on the Tesla automation system alone, it’s also hard to ignore that the NHTSA called out Tesla for not being “as specific as it could be …” Question is: In what respect? These are the specifics that are going to matter in the future, and it probably behooves the agency to elaborate. Looks like we’ll have to wait a little longer.

“A safety-related defect trend has not been identified at this time and further examination of this issue does not appear to be warranted,” says the concluding paragraph of the NHTSA’s investigative report. ”Accordingly, this investigation is closed. The closing of this investigation does not constitute a finding by NHTSA that no safety-related defect exists. The agency will monitor the issue and reserves the right to take future action if warranted by the circumstances.”

Given the shaky legal landscape surrounding autonomous vehicles, it’s time for the agency to go on heightened alert.

Obama administration unveils Federal Automated Vehicles Policy

September 20, 2016 by Brett Manchel Leave a Comment

white-house-logo

The road to autonomy is paved in legal regulations. So sayeth the Obama administration, which on Monday unveiled the first regulatory standards related to automated vehicles and the technology that powers them.

In a press release, the White House pointed to the Federal Automated Vehicles Policy, described as a plan to facilitate the introduction of self-driving technology into mainstream consumerism. The Department of Transportation will soon issue a federal policy guide for “the responsible testing and deployment of automated vehicles,” a package comprised of four sections. According to the release, those sections are:

Vehicle performance guidance for manufacturers, developers, and other organizations outlining a 15 point “Safety Assessment” for the safe design, development, testing, and deployment of highly automated vehicles, including a request that automakers sign and submit this safety assessment to certify that their vehicles are ready for public roads.

Model for state policy that presents a clear distinction between Federal and State responsibilities and recommends policy areas for states to consider with a goal of generating a consistent national framework for the testing and operation of automated vehicles while leaving room for learning and valuable state discretion.

Current regulatory tools that National Highway Traffic Safety Administration (NHTSA) can use to aid the safe development of automated vehicles, such as interpreting current rules to allow for appropriate flexibility in design, providing limited exemptions to allow for testing of nontraditional vehicle designs, and ensuring that unsafe automated vehicles are removed from the road.

New tools and authorities that NHTSA could consider seeking in the future to aid the safe and efficient deployment of new lifesaving technologies and ensure that technologies deployed on the road are safe. For example, NHTSA is seeking public feedback on whether to consider pre-approving novel automated vehicle technologies before they are allowed on public roads and whether to create a new Federal safety standard for revolutionary vehicle designs, such as ones that do not require a steering wheel or gas pedal.

The NHTSA also plans release a final enforcement guidance bulletin to clarify how its recall system applies to automated vehicle technologies.

The proposal is the most significant signal yet that the government has all but embraced the idea that self-driving cars will soon play an important role in the future of transportation and improving road safety. It’s also a signal that federal regulators are beginning to lay the groundwork for a system intended to keep a mild reign on the tech companies working with nascent technologies.

The White House notes that this is just “the first step” in supporting the safe and responsible development of new tech. Other topics the administration expects to tackle: Cyber Security Best Practices and a prosed rule that would mandate that all new vehicles have technologies capable of transmitting and receiving basic safety messages.

Boston inks deal to test self-driving cars. Is Chicago next?

September 14, 2016 by Brett Manchel Leave a Comment

Autonomous Vehicles

The folks in Bean-town have peered into their crystal balls and one of the things they’re seeing is self-driving cars. The Boston Globe reported this morning that the city has struck a deal with a group of unnamed tech companies and manufacturers to test autonomous vehicles, beginning in a matter of months. Coincidentally Uber is set to unleash a fleet of autonomous cars (though this particular fleet will include an actual human behind the wheel for safety reasons) on the streets of Pittsburgh later today.

More from the Globe: “If this technology is going to yield benefits for the consumer, we want to make sure it works in the city of Boston,” said Chris Osgood, the city’s chief of streets. “We want to make sure we’re doing our due diligence and understanding what the implications are. How do we set up the right policies and take the right approach to this so it’s going to have the biggest net benefit?”

Counting Pittsburgh, it seems Boston is the second major city in recent months to commit to exploratory testing. Could Chicago be the third? Here are four reasons why it might.

The mayor is a big Uber fan

His brother, Ari, is also a big investor. Back in 2014 reports started swirling that Rahm’s younger brother stood to make nearly a billion dollars from his Hollywood agency’s dealings with the popular ridesharing company, which is venturing into autonomous territory. On top of that, David Plouffe, a strategist to then-Senator Obama’s presidential campaign in 2008 and former White House mainstay, now serves as one of Uber’s most prominent strategic advisors. The mayor has also favored rideshare-friendly legislation that keeps it at a premium in the Windy City (much to the consternation of the highly regulated limousine and cab service industry). Now that Uber has unleashed self-driving cars on the roads of Pittsburgh, it’s easy to imagine the company heading further west to a place that fits its self-driving test criteria and where it’s ostensibly been feeling the love.

Chicago has one of the largest populations in the country

This goes beyond the Uber and ridesharing craze. Chicago is a major city with a major population—nearly 2.7 million people to be more precise. That’s good enough for third on the national charts, behind only Los Angeles and New York. A study in 2015 by Zen99, a resource for folks who depend on 1099s, found that Chicago ranked ninth out of 70 U.S. markets that were favorable for ridesharing users. That’s not counting the untapped potential of autonomous ridesharing either. One could assume that a city that loves alternative modes of public transportation is bound to look closer at the ways self-driving cars impact the broader economy, both commercially and otherwise.

Like a good neighbor, State Farm is here

So is Allstate, based in Northbrook. They’re two of the biggest auto insurance companies in the country and the insurance industry has been wrestling with the notion that self-driving cars may reduce crashes and potentially eliminate them altogether. That poses big questions for State Farm, Allstate, Nationwide, and others, which will soon need to figure out how they’re business plays into the bigger picture. I’m not saying that either will be making a public relations push in favor of self-driving cars, but what better opportunity to do some experimentation while the guinea pig is rummaging around in your own backyard? Let’s assume the worst: self-driving cars get into tons of accidents. Maybe a public relations push on behalf of the insurance companies isn’t so far-fetched after all.

It’s the economy, stupid

The reality is this: Autonomous cars are the future of transportation. It’s not a matter of “if” but “when.” Rahm and others like to refer to Chicago as the Silicon Valley of the Midwest. If we’re to take that declaration at face value, we need to make the most of our opportunities, which could have huge economic benefits. Tech is big business and presenting Chicago as a tech-friendly hub feeds the narrative while drawing new talent to the city. Being labeled as a pioneer of autonomous transportation and the legislation that governs it has the potential to be hugely beneficial in the long run. I can already imagine Tim Cook pulling up to Apple headquarters in the West Loop. In a self-driving car no less.

‘Your honor, I call to the stand Tesla Model X’

June 17, 2016 by Brett Manchel Leave a Comment

The Tesla Model X. Photo: Steve Jurvetson
The Tesla Model X. Photo: Steve Jurvetson

Yet another glimpse into the future

Autonomous vehicles will soon change how lawyers deal with their clients and cases, yet I’ve had trouble imagining a day when smart cars start getting subpoenaed.

The Washington Post published a story recently titled “Tesla just showed us the future of car crashes,” about the owner of a Tesla Model X, who claims the car’s autopilot system necessitated a crash by independently accelerating while his wife was behind the wheel. The car jumped over a curb and crashed into the side of a shopping center.

There’s just one problem with that scenario, according to Tesla. Data collected from a diagnostic log, which relies on multiple sensors that keep track of the car’s behavior, indicated that the gas pedal was suddenly pressed to the floor before the crash. Tesla also revealed that the car was never switched to autopilot or cruise control, which would place liability squarely on the shoulders of the driver.

The Post goes on to mention that the owner of the Model X is sticking by his story, even though the data is practically conclusive. We may have the beginnings of an ongoing case study, but the bigger takeaway is whether drivers (and manufacturers, insurers, etc.) are prepared to deal with such a fast-approaching reality. How do you disprove a computer?

Writer Brian Fung had some insightful thoughts on what the Tesla situation means for the future of driving, one of which includes keeping people honest by virtue of the nature of smart cars and how they operate:   

“Cars have reached a level of sophistication in which they can tattle on their own owners, simply by handing over the secrets embedded in the data they already collect about your driving.”

That’s a relatively impressive realization when you consider the amount of auto-related litigation that occurs in the United States alone. Outside of our ability to install dashboard cameras, collecting information from a vehicle’s computer system represents a turning point in the way automakers, insurance companies, and lawyers will soon go about their business, including the protection of consumers. Fung goes on:

“But the potential dark side is that the data can be abused. Maybe a rogue insurance company might look at it and try to raise your premiums. Perhaps it gives automakers an incentive to claim that you, the owner, were at fault for a crash even if you think you weren’t.”

As I’ve said before, we’re on the edge of a new frontier and we have to have a clear view of what’s coming.

Yikes. Driver caught snoozing while car is on autopilot

May 26, 2016 by Brett Manchel Leave a Comment

Tesla-Autopilot
Hands-free shouldn’t mean hands-off

That didn’t take long. A driver was caught napping in the driver’s seat of his Tesla Model S on Sunday while the car inched along a congested LA freeway.

There’s only one problem: The Model S is not an autonomous vehicle. Rather, Tesla’s futuristic-style cars are equipped with a semi-autopilot system designed to give drivers a smidge of hands-free liberation on a severely limited basis. That means it’s probably not a good idea to catch a few z’s, no matter how cool your car is.

The few autopilot systems that exist still require drivers to be alert at all times. Anything less likely has bad implications for you, your car, and the drivers who happen to be nearby. Motor Trend caught wind of the video and reached out to Tesla for a statement. The company was quick to reply, describing its auto system as “designed to provide a hands-on experience to give drivers more confidence behind the wheel, increase their safety on the road, and make highway driving more enjoyable.”

Proponents of autonomous vehicles have championed their cause in recent years, as the technology has advanced to a new level of sophistication. We’ve even written about the benefits of autonomous vehicles and what the future may look like down the road. But this is a perfect example of how drivers are taking a relatively fledgling luxury for granted. There’s not enough evidence to suggest that “hands-free” translates to “hands-off.”

In the same article, Motor Trend points out that owners of self-driving cars are responsible for the actions of their property, meaning the sleepy driver from the video would be liable for any crash that he or his car may cause. It’s a logical conclusion. From a legal perspective, however, the case precedence has yet to be written. There’s no telling how a case like that might play out.

The bottom line at this stage? Keep your hands on the wheel.

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