With the emergence of the “sharing economy” where web and smartphone-based tools allow individuals to share goods and property, some tools have morphed into commercial enterprises. In many major U.S. cities, commercial ride-sharing services, offered by transportation network companies such as UberX, Lyft and Sidecar, have taken the shared expense carpool concept and match riders with drivers. These services have become a popular alternative to taxis as consumers use smartphone apps to quickly and easily connect with drivers who will take them to their destinations. The drivers receive payment through a portion of each fare.
These services also have exposed potential gaps in insurance coverage. Because the ride-share drivers generally use their personal vehicles, questions arise as to whether they have the proper insurance coverage for ride sharing. As is often the case with anything new, there is very little in statute or regulation that deals specifically with ride-sharing programs or insurance coverage for this purpose.
However, one fact is very clear: standard personal automobile insurance policies do not cover any damages or losses when a car is being used for commercial ride-sharing. The typical policy contains a “livery” exclusion that applies when the vehicle is being rented or used to carry passengers for hire.
As of presstime, California's Public Utility Commission (CPUC), which also regulates taxis and limousines, established the first, and so far only, regulatory regime for commercial ride sharing last fall. The CPUC regulates them as common carriers, requiring safety inspections of vehicles, background checks of drivers, and insurance coverage to be provided by the ride-sharing company on a primary basis if the driver does not have applicable coverage.
This year several state legislatures have examined regulatory issues at the local level. Legislation on this issue has varied—from a Georgia bill that would only allow licensed taxis and limousines to be dispatched via smartphone application, to legislation introduced in Arizona, Colorado, Maryland and Oklahoma that exempts ride-sharing companies from commercial carrier regulation altogether. In California, a number of parties including taxi associations and the insurance industry are considering legislation building upon the CPUC regulations.
Are ride-sharing companies carpools or transportation companies? Although the ride-share firms often inquire if drivers have insurance, many of the drivers are unaware that their personal auto policy will not provide coverage for accidents while they are engaged in these activities. There also is confusion regarding the type of insurance coverage the ride-share firms provide, including excess insurance coverage. These policies are often liability only, which means there is no insurance coverage if the car is hit by an uninsured driver or an underinsured driver, no medical payments coverage.
PCI has been working at state and local levels to make it clear that standard personal automobile insurance policies do not cover any damages or losses when a car is being used for commercial ride-sharing. We support the development of clear guidelines so everyone knows where they stand regarding insurance coverage for ride-sharing services.
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
