Written by lawyers for Tesla's protection in far out, corner cases, and it's self-contradictory.
If the OP is reporting accurately, this was NOT a far out, corner case.
While I've only read the first and last few dozens of posts, I have an educational background in Human Factors Engineering, and also the viewpoint of having both "Classic" and an AP Model S's in the garage.
The OP is to be highly commended for pointing out what happened, and should not have been subject to the remarkable vitriol from many posters here, some of whom appear to not even be driving AP MS's. Here's a tip, especially for them: You're not in a position to understand the HF changes that occur in using AP, ESPECIALLY over time. Tesla cannot introduce an AP system that works 99.9% of the time. Or even 99.99% of the time. We need better than six sigma reliability here.
Random thoughts:
1. Of great concern, if the AP failed--which appears to be the case based on OP's comments--the system needs to have more aggressive/robust system monitoring and failure alerting.
2. Given the OP's and car's inexperience with AP, a more cautious approach would have had the distance set to far more than "2," and the guidance from the DS to set it at "2" wasn't good advice. Having said that, it is a legitimate setting and the OP was well within norms to use that setting.
3. The idea of AP is enhance the driving experience. If it works 999 times in a row, bringing the car to a safe stop, but then fails to do so on the 1,000th stop, this is a MAJOR problem for Tesla, notwithstanding the legal disclaimers. To have to intensely monitor AP to catch that "1 in a 1,000" time it won't stop the car is an absurd proposition.
4. Tesla should give the OP a P90D loaner, impound the accident car, have Tesla engineers carefully review logs and measure equipment mounting and connectivity, and then remove all the applicable AP components and bench test them until it finds out what went wrong.
Trust me when I tell you this as it's based on personal experiences that I need not get into in such a public forum (and were from events in 2013, dozens of SW revisions ago): Tesla is far from perfect; best to find errors early and quickly.