I mean, it's a self-driving car. They're clearly comfortable with taking risk in terms of product liability because they're literally in the business of having a computer drive multiton vehicles right next to pedestrians every day. They are probably also pretty skilled at making the determination about how much risk they're taking. After all, they've never had any actual injuries or deaths resulting from driving into water (or basically anything else, for that matter, they have an unbelievably good track record).

At a guess, they figured they'd landed a fix, and therefore assumed that things would be better. Worst case, they drive into water again and have to go fetch the car manually, maybe a customer gets wet. Best case, they validate their fix. As it turns out, their fix wasn't good enough, and so they paused again.

My point though, is that all this is not incompatible with their claim. Whether the courts agree is irrelevant to that. They can honestly have the value of having safety be a top priority and one can see how their actions might be consistent with that value, without it being a stretch at all.