Uncertainty about how the driver’s “for hire” exclusion and the TNC’s commercial policy are interpreted in the ridesharing context creates a potential coverage gap. Does a personal auto policy’s “for hire” exclusion apply when the driver’s app is on, but no assignment has been accepted? Or when the driver accepts an assignment, but has not yet picked up the passenger? Or perhaps only after a passenger has been picked up? Likewise, does a TCN’s commercial policy provide coverage in any or all of the above three scenarios? Of particular concern, if both the personal auto policy and the commercial policy exclude coverage when the app is turned on and a passenger is not assigned, an accident would not be covered under either policy.

This “app to match gap” became the focus of special concern after a 2013 incident in San Francisco when a six-year old child was struck and killed by a rideshare driver circling with his app on. As a result, in recent months, state and municipal regulators and lawmakers in a number of jurisdictions have raised concerns over rideshare insurance, leading to newly enacted and proposed legislation, including:

California: Under legislation effective July 1, 2015, a policy insuring a TNC vehicle must have minimum primary liability coverage of $50,000 per person and $100,000 per accident from “app on to match,” and at least $1 million in liability coverage from the time the driver accepts an assignment until the passenger exits the vehicle.

Colorado: Legislation effective January 1, 2015, will require a vehicle operating for a TNC to have liability coverage of at least $1 million whenever the driver’s TNC app is on – regardless whether a passenger has been assigned or picked up.

Pennsylvania: Senate Bill 1457 would require a driver providing TNC services to carry liability and UM/UIM coverage limits of at least $1 million from the time the driver turns on its TNC app until the app is turned off or a passenger exits the vehicle, whichever is later.

In addition, a suit filed by New York’s Attorney General and the Department of Financial Services against Lyft settled with the company agreeing that its New York City drivers will be required to have commercial licenses and comply with all state insurance laws. Lyft advertising states that its drivers are covered under the company’s $1 million commercial policy that is primary to a driver’s personal automobile insurance policy when the driver is matched with a passenger. However, the “app to match gap” appears to be an open issue.

The emergence of ridesharing and TNCs creates market opportunities for the insurance industry. In states where clear insurance requirements exist, current and future TNCs and their drivers will need insurance products that satisfy these requirements. These needs will grow as TNCs increase in number and market penetration, and as other jurisdictions in the U.S. and abroad seek to regulate the industry. An insurer that creates an innovative product that addresses this new market potential – a new kind of policy or add-on that would cover ridesharing drivers, passengers and the public – may increase its market share while benefitting the general public.

About the Authors

Norma Levy, of counsel at Nelson Brown & Co., provides regulatory advice to insurance companies on state, national and international regulations, developments and best practices. She resides in Nelson Brown & Co.’s New York office and can be reached at [email protected].

Lou Kozloff, a partner at Nelson Brown & Co., advises insurers when questions concerning insurance coverage arise and represents insurers in coverage related litigation. Lou is also leading the firm’s study of autonomous vehicles and the impact on the insurance industry. Lou can be reached at [email protected].