Electric cars are set to overtake petrol-powered cars by 2030, with more than 60% of vehicles sold globally being electric. And by 2050, almost all new cars sold will be electric.
All these exciting changes happening in the automotive space have a ripple effect on numerous other industries.
So what does this mean for the insurance industry in particular?
Motor vehicles and insurance have been a match made in heaven since the first policy was sold to one Gilbert. J. Loomis, all the way in 1897, and it’s a relationship that continues to grow, as evidenced by the continued growth of the insurance industry.
There’s no one-size-fits-all option regarding which insurance policy is the best.
Still, liability coverage is the most basic level of insurance protection and an excellent place to start.
The policy typically covers legal costs and payouts a client is liable for in case of a claim, injury, or damages to other people and their property.
Ultimately, the best car insurance policy provides the necessary coverage at an affordable price.
Types of Liability for Electric Cars
As electric cars continue to grow in popularity, various types of liability can arise, such as Product Liability, Charging Station Liability, and Battery-related Liability.
Manufacturers, service providers, and other stakeholders in the electric ecosystem need to be aware of these different types of liability and take the necessary precautions and steps to mitigate their risks.
This may include implementing safety protocols, investing in cybersecurity measures, and ensuring compliance with the relevant regulations and standards.
Product Liability
Refers to the legal responsibility of manufacturers and other suppliers of goods for injuries or damages caused by their products.
Charging Station Liability
Charging stations can also pose a liability risk if they aren’t properly maintained. Owners or operators of EV charging stations can be held liable for accidents or injuries that happen on their premises.
Battery-related Liability
The battery in an electric car poses a range of risks, including overheating, catching fire, or exploding. The liability for battery-related incidents might fall on the battery’s manufacturer, the car manufacturer or other parties in the supply chain, depending on the specific circumstances of the incident.
A Closer Look At Product Liability
Manufacturers promise to deliver a product free of defects, but should the product in question (in this case, an electric car) fail to meet expectations, they can be held legally and financially responsible.
In the case of electric cars, manufacturers can be held liable for defects in the car’s design, manufacturing, or labelling that result in injuries to consumers or property damage.
Electric cars and their components, like batteries and charging systems, may be subject to product liability claims if they fail to perform as intended.
The three most recognised examples of product liability are design defects, failure to warn, and manufacturing defects, with the latter being the most common.
Design defects
This refers to the product’s inherent conceptual flaws that made it unsafe from the beginning, even if the manufacturing process goes perfectly and the product is used correctly and affects every unit produced.
Issues arise when the product isn’t designed to meet the user’s needs or the design fails to account for potential hazards or risks.
Design defects in an electric car may be a battery system prone to overheating or a braking system that fails to work under specific conditions.
A product that has a design defect can be dangerous. Therefore, manufacturers are responsible for designing reasonably safe products for their intended use.
Manufacturing defects
A manufacturing defect happens when a flaw develops during the manufacturing process. If this flaw is left unaddressed, the product fails to adhere to the manufacturer’s responsibility of providing safe products.
These flaws can be caused by mere oversight or monumental error, a problem with the raw materials used in production or a mistake in the production design.
Manufacturing defects can range from minor cosmetic flaws to seriously hazardous safety issues.
Examples of manufacturing defects in electric cars might include faulty wiring, defective software that controls the car’s safety features and improperly installed battery cells.
Failure to warn
Last on the list is the failure to warn; when information is missing from the product’s label or posted warnings.
This happens when a product’s design and manufacturing are done perfectly. However, the manufacturer still fails to warn consumers about the possible dangers of using the product.
With electric vehicles, if the manufacturer’s aware of a potential safety risk associated with the battery system, for example, they’re responsible for providing consumers with a clear warning about the threat mentioned earlier and how best to avoid it.
The duty to warn requires manufacturers to provide sufficient warnings to alert the ordinary user to the potential dangers associated with the product.
The warnings must be clear, concise, understandable and prominently displayed or communicated to consumers in a way that’s likely to be noticed.
A Closer Look At Charging Station Liability
There are three levels of EV charging:
Level 1 - The most common, lower-powered charger (the charger is usually sold with the electric car). It allows charging from any standard 120/230V wall outlet, meaning you can charge your EV at home. It charges 200 kilometres in 20 hours, making it the slowest way to charge your vehicle.
Level 2 - The charger is often sold separately from the car and can either be a wall charger or a freestanding charging station. Depending on the type of charger and EV, it can charge up to 10 times faster than Level 1 but demands a 208/240V outlet. With Level 2, you’re guaranteed a full battery after charging the car overnight, even if the battery was initially empty.
Level 3 - These are also called DC fast chargers, and as the name suggests, cars are charged in almost half the time thanks to the high voltage (approximately 30 mins). The voltage is also much higher than Level 1 or 2, so you don’t see Level 3 chargers installed at home with a 480 voltage.
Charging station liability refers to the legal responsibility of a charging station operator for any harm, injury or damage caused by the station or its use.
Liability can arise in various situations; a user gets electrocuted due to faulty wiring, or there’s moisture present near the charging station.
In most cases, the Charge Point Operator (CPO) in charge of installing and maintaining charging stations will be held responsible for any harm caused, irrespective of whether they were negligent.
Damage to the vehicle can also be a standard charging station liability issue.
If a station isn’t properly grounded, there could be severe damage to the car’s electric system. If the station malfunctions during the charging process, it could affect the vehicle’s battery and other components.
And lastly, another liability case not unusual for charging stations is the issue of property damage.
For instance, if a driver’s there to charge and fails to park their car correctly and it causes damage to another vehicle or property, the CPO may be held responsible.
Similarly, suppose a driver fails to secure their vehicle while charging, and it rolls away, causing injury to a person or damage to property. In that case, the CPO may again be forced to answer for this incident and any resulting damages.
A Closer Look At Battery-Related Liability
The future of the automotive industry is very clearly electric, and while all signs point in that direction, the road to get there is not entirely a smooth course.
While the introduction of EVs has brought a lot of innovation and excitement, there’s also a wave of new dangers to look out for, such as battery-related defects and performance issues.
Battery-related liability is the legal responsibility manufacturers, and suppliers of batteries can face in the event of defects or malfunctions. The liability arises if the battery causes damage, injury or even death to a person or property.
Electric car batteries are made of lithium-ion battery packs containing a lot of energy, which can pose a fire hazard if not designed, manufactured and installed correctly.
The high-voltage batteries can produce a very intense fire, burning extremely hot and difficult to extinguish. Additionally, they are known to release high levels of toxic gases.
The lithium-ion batteries are also susceptible to degradation due to environmental and usage factors. The degradation causes decreases in the vehicle’s performance and capabilities and increases the risk of failure.
Not to mention the risk of thermal runaway, when a battery overheats and experiences an uncontrollable chemical reaction, and how it can lead to a fire or explosion.
And there can also be issues of batteries suffering from manufacturing defects and needing safety recalls.
If a battery is improperly assembled, it may fail prematurely, leading to the reduced range and performance of the car and potential fire and explosion hazards, all of which threaten drivers and their passengers.
In the case of a battery-related incident, liability can be attributed to different parties depending on the specific circumstances of the event.
The EV manufacturer and battery supplier are commonly held accountable; however, maintenance personnel may find themselves under fire should there be evidence of improper maintenance, like incorrect charging or installation of the battery pack.
Another party that could be found guilty is the actual driver of the car.
Sometimes, an incident is due to the EV’s owner or driver’s negligence or failure to maintain or operate the vehicle.
Insurance Coverage for Electric Car Liability
EV insurance provides traditional coverage, fully comprehensive, third-party and third-party fire and theft, just like regular motor vehicles but with the added protection tailored to address issues specific to electric cars.
In the case of liability, insurance coverage protects an individual from financial losses resulting in legal claims brought against them for bodily injury or property damage.
Liability coverage usually offers two options; bodily injury liability and property damage liability.
The former pays for medical expenses, lost wages, and other damages resulting from injuries sustained by another person. The latter pays for damage to another party’s property due to an accident.
It’s crucial to note that liability coverage doesn’t extend to you or your car.
You’ll need to purchase a comprehensive coverage policy to protect your car.
To determine the appropriate level of coverage for your car, you’ll have to consider numerous factors like your financial situation, your car’s value and your personal risk tolerance, just to name a few.
An insurance professional or broker can also offer expertise in helping you evaluate your specific needs and the risks associated with owning and operating an electric automobile.
They can also guide you on the appropriate coverage levels and additional options.
A good rule of thumb is to purchase enough coverage to protect your assets in case of a liability suit.
And suppose you own a newer or more expensive EV. In that case, you may want to consider a fully comprehensive policy to protect your investment in the vehicle.
Ultimately, determining the appropriate level of coverage is as personal as deciding which vehicle you want to own.
It requires careful consideration of your circumstances as well as your needs.
Final Thoughts
As electric cars continue to boom in popularity, the insurance industry has to adapt and create policies covering various liability risks like product liability, charging station liability, and battery-related liability.
Manufacturers, service providers, CPOs and other stakeholders in the EV ecosystem need to be aware of these different types of liability and take the necessary precautions to mitigate their risks.
Liability coverage can be the most basic level of car insurance protection, but it’s also the best place to start.
The best car insurance policy will provide the necessary coverage at an affordable price.
As the electric car industry continues to expand, it’s essential to keep up with the changes and ensure you’re adequately informed in order to be adequately insured.
We already know what you're going to ask and the answer is "No, we don't actually insure electric vehicles, we just like to talk about them". However, we do insure regular cars and you can get an obligation free quote HERE!
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Please Note: The information provided above is for informational purposes only; you should not construe any such information as legal or financial advice.
