Our Warehouse Robot Injured a Worker: Product Liability Insurance Covered the Claim
The Robot That Didn’t See the Human
My company manufactures autonomous robots for warehouse logistics. A worker at a client’s warehouse stepped into the robot’s path, and its safety sensors failed to detect him. The robot collided with the worker, causing serious leg injuries. The worker sued our company, claiming our robot was a defective and unsafe product. Our Product Liability insurance was essential. It paid for the expensive legal defense and the eventual large settlement for the worker’s injuries. It was a stark reminder that when our products move in the real world, they can cause real harm.
Insuring Robotics Companies: From Industrial Arms to Autonomous Drones
It’s Not Just a Machine; It’s a Moving Liability
A friend who builds websites was shocked by my robotics company’s insurance premium. I explained the difference: “If your website fails, someone loses money. If my robot fails, it could crush someone.” A robot is not just a piece of hardware; it’s a moving, physical machine that interacts with the world. That ability to move and physically impact things—whether it’s an industrial arm, a surgical tool, or an autonomous drone—creates a massive risk of bodily injury and property damage that requires a specialized, high-limit insurance policy.
Robotics Insurance Needs: Product Liability (Harm!), E&O (Design), Cyber (Hacking!)
The Three Laws of Robotics Insurance
Inspired by Asimov, I think of our insurance in three laws. The first law is Product Liability: our robot must not injure a human being, but if it does, this policy pays for the harm. The second law is Errors & Omissions (E&O): our robot’s programming and design must be perfect, but if it’s flawed and fails to perform its task, this policy covers our client’s financial loss. The third law is Cyber Liability: we must protect our robot from being hacked, but if it is, this policy covers the consequences.
Product Liability for Injuries or Damage Caused by Your Robot’s Actions
When the Arm Swung Wide
We manufactured a large robotic arm for a car assembly line. A glitch in its programming caused it to swing outside its designated work area, smashing into a piece of expensive factory equipment and narrowly missing a worker. The factory sued us for the cost of the destroyed equipment. This was a classic Product Liability claim. Our policy responded to the “property damage” caused by the malfunction of our physical product. It’s the most critical coverage for any company that puts a moving machine into the world.
E&O for Flaws in Robot Design, Programming, or Sensor Failures
The Robot That Couldn’t Sort the Boxes
Our company designed a robotic sorting system for a logistics company, promising it could sort 1,000 packages an hour with 99% accuracy. After installation, the system never worked right. A flaw in our sensor design meant it could only sort 500 packages an hour with 90% accuracy. The client sued us for breach of contract and the financial loss from our system’s failure to perform. This wasn’t a product liability claim, as no one was hurt. It was an Errors & Omissions (E&O) claim, covering the failure of our professional design and programming services.
Cyber Liability: What if Your Robot is Hacked and Used Maliciously?
The Hacked Robot and the Stolen Secrets
Our company builds sophisticated robots that assemble sensitive electronics for a military contractor. A hacker breached one of our robot’s internet connections. They didn’t make the robot crash; instead, they used its high-resolution cameras to spy on the contractor’s proprietary manufacturing process, stealing trade secrets. The contractor sued us for the security failure. Our specialized Cyber Liability policy, which covered security breaches of our IoT devices, was what defended us from this new-age industrial espionage claim.
Comparing Insurance Policies for Different Types of Robots (Industrial, Medical, Consumer)
The Roomba and the da Vinci
A company that makes a Roomba-style robot vacuum and a company that makes the da Vinci surgical robot have vastly different insurance needs. If the Roomba fails, it might scratch a baseboard. The product liability risk is low. If the surgical robot fails mid-operation, the patient could die. The potential for a multi-million-dollar wrongful death lawsuit is immense. The insurance premium for the surgical robot manufacturer will be exponentially higher, reflecting the catastrophic potential for harm. The robot’s application dictates its risk.
Does Insurance Cover Failure of a Robot to Perform its Task as Specified? E&O.
The Robot That Couldn’t Pack the Boxes
We built a custom “pick and pack” robot for a client’s warehouse, guaranteed in the contract to pack 100 boxes per hour. After installation, it could only manage 60. The client, who had planned their entire workflow around our promised speed, sued us for their lost productivity and the cost of hiring temporary human workers. This is a clear Errors & Omissions (E&O) claim. Our robot didn’t break anything or hurt anyone, but our “professional service” of designing a robot to meet specific performance specs failed.
Filing Claims Involving Complex Human-Robot Interactions
Who’s Fault Is It? The Human or the Machine?
A worker was injured when a collaborative robot arm moved unexpectedly. The worker claimed the robot malfunctioned. We, the manufacturer, claimed the worker had bypassed a safety sensor and entered the robot’s space improperly. The resulting lawsuit was incredibly complex. Our insurer had to hire roboticists, human-machine interaction experts, and safety engineers to determine the root cause. When humans and robots work together, attributing fault for an accident becomes a highly technical and expensive investigation.
My Surgery Was Robot-Assisted: Thinking About the Robot Manufacturer’s Insurance!
The Hands I Couldn’t See
My surgeon told me my procedure would be performed using a surgical robot. As I was being wheeled into the operating room, I looked at the massive, multi-armed machine. I realized my life was in the hands of the surgeon, but also in the “hands” of the robot. I thought about the company that built it. Their product liability insurance must be astronomical. That policy is the ultimate financial backstop that protects the hospital, the surgeon, and me, the patient, from a catastrophic failure of that incredible machine.
Protecting Against Claims Related to Job Displacement by Robots? Unlikely.
The Robots That Took the Jobs
My robotics company sold a fleet of autonomous vehicles to a mining company, which allowed them to eliminate dozens of truck driver jobs. A group of the laid-off drivers filed a class-action lawsuit against our company, claiming our technology was responsible for their unemployment. We reported the claim to our insurer, and they quickly issued a denial. They explained that insurance covers accidents and errors, not the intended, successful economic disruption caused by a new technology working exactly as designed.
Insurance Considerations for Autonomous Vehicles and Drones (Overlap!)
The Car and the Drone Have Something in Common
A company making self-driving cars and a company making autonomous delivery drones seem different, but their core insurance risk is the same: what happens when their AI makes a mistake and the vehicle crashes, causing property damage or bodily injury? Both need a new, hybrid type of insurance that blends Product Liability (for the hardware), Technology E&O (for the AI software), and Aviation or Auto Liability (for the vehicle itself). It’s a complex, evolving area of insurance for things that move by themselves.
Supply Chain Risks for Critical Robotic Components
The German Gearbox and the Grounded Robots
Our robotics company relies on a highly specialized gearbox that is only made by one company in Germany. A fire at their factory meant they couldn’t deliver our parts for six months. Our entire production line shut down. We couldn’t build our robots. Our standard insurance wouldn’t cover this. But our separate Supply Chain insurance policy, which listed that German company as a “named critical supplier,” paid us for the profits we lost during the shutdown. It protected us from the failure of a vendor half a world away.
Robotics Insurance: Covering the Hardware, Software, and Interaction Risks
The Complete Robotic Organism
A robot isn’t just one thing. It’s a complex organism. The physical hardware—the arms and motors—is the body. The AI and programming is the brain. And its interaction with the world is its behavior. A good robotics insurance program has to cover all three parts. It needs Product Liability for the body, Technology E&O for the brain, and General Liability for its behavior. A policy that only covers one part leaves the entire robotic organism dangerously exposed.
Product Recall Coverage if a Robotic Defect Requires Widespread Fixes
We Had to Get All Our Robots Back
We discovered a flaw in a bearing used in a model of our industrial robots, which could cause the arm to fail. We had sold 500 of these robots. We had to issue a recall and send technicians to every client’s factory to replace the part. The logistical cost of the recall—the service hours, the travel, the shipping—was over $250,000. Our Product Recall insurance policy, which is separate from our main liability policy, was what reimbursed us for these massive costs of fixing our own mistake.
What if Your Robot Damages Other Equipment It Interacts With?
The Robot vs. The Conveyor Belt
We installed a robotic arm in a factory to place items onto a conveyor belt. A programming error caused the arm to move too far, and it smashed into the conveyor belt system, causing major damage. The factory owner filed a claim against us for the broken conveyor. Our General Liability policy covered the damage. It was a classic case of our product causing “property damage to others.” It’s a huge risk for any robot that has to interact with a client’s existing equipment.
Protecting Intellectual Property Related to Robotic Designs
The Competitor Who Copied Our Claw
We spent years developing a unique, patented gripper design for our robots. A new competitor came out with a robot that used a nearly identical gripper. We sued them for patent infringement. The lawsuit was incredibly expensive, with legal fees reaching into the hundreds of thousands of dollars. Our specialized Intellectual Property (IP) insurance policy was what funded the lawsuit. It’s the type of insurance that allows a smaller company to afford to defend its valuable patents against a larger competitor.
Workers’ Comp for Employees Working Alongside Robots
The “Co-Bot” and the Crushed Finger
My company uses “collaborative robots,” or “co-bots,” that are designed to work alongside our human employees. One of our employees got his hand too close to a co-bot’s moving joint, and his finger was crushed. Even though the robot was involved, this was a classic workplace injury. Our Workers’ Compensation policy covered the employee’s medical bills and lost wages. It highlights that even in a highly automated workplace, the risk of human injury is always present.
Finding Insurers Comfortable with Advanced Robotics Risks
The Underwriter Who Understood AI
When we were trying to get insurance for our new autonomous drone company, most insurers wouldn’t even give us a quote. They didn’t understand the technology or the risks. We finally found a specialist broker who connected us with an underwriter at a niche insurance company. This underwriter had an engineering background. He asked intelligent questions about our sensor redundancy and our AI’s decision-making process. Finding an insurer who is willing and able to understand your advanced technology is a critical first step.
Robotics Insurance: Programming Protection into Your Innovations
The Final Line of Code
You spend years programming your robot. You write thousands of lines of code for navigation, manipulation, and safety. But the final, most important line of code you need to write is your insurance policy. It’s the ultimate fail-safe protocol for your business. It’s the code that executes when the unexpected happens, deploying financial resources to manage a crisis and protect your company. Don’t ship your robot until you’ve written that final, critical line of code.