On-demand meal delivery risks

Ten years ago, the foods that naturally came to mind when one thought about calling out for delivery were Chinese and pizza. The cost of hiring a full-time delivery driver often prevented restaurants from offering regular food delivery. Now, food from restaurants at every tier, from McDonald’s to the Cheesecake Factory, is being delivered at an astounding rate by several on-demand food delivery services, such as GrubHub, Door Dash and UberEATS.

The ride-sharing economy has proven to be very lucrative over the last few years, with companies like Uber and Lyft claiming that their drivers can make over $20,000 a year driving full-time. However, along with the relatively good income, ride-sharing comes with longer trips and passengers, and high standards on the vehicle being driven. On-demand food delivery services offer an alternative for drivers who want to make money driving but who don’t want to take part in ride-sharing, or who drive an older vehicle. Transporting meals, though, requires different insurance coverage than transporting people.

Delivery coverage

First, let’s talk about basic coverage that Uber provides when participating as a ride-sharing driver. While the app is on but before a ride request has been accepted, the driver is covered for their liability to a third party if they are in an at-fault accident. When a driver is on the way to pick up a rider, and while driving that rider to his or her destination, the driver is covered for third-party liability coverage, uninsured or underinsured motorist bodily injury coverage, and contingent collision and comprehensive coverage. While using the car for personal use, no coverage is provided through Uber. The ride-sharing economy emerged earlier than the on-demand industry, and the risks are higher.

At the outset of ride-sharing, the Uber policy did not kick in until the driver had a passenger. They have since changed that stance since the standard personal auto policy does not cover using the vehicle as a public or livery conveyance.

An Uber Eats driver will pick up food at a restaurant and deliver the order. Similar to how a regular Uber driver works, an Uber Eats driver can drive around and wait for a request from a particular restaurant looking for a driver. Another option is to wait at a restaurant that has partnered with Uber until they need someone to deliver food. Pay is based on the distance and time traveled. An individual who worked through the breakfast and lunch rush would likely be able to make more money but would be potentially exposing themselves to higher risks driving consistently through some of the busiest hours of the day.

TNC exclusions

So what about the insurance? Does a driver have the same coverage through Uber as a driver who carries passengers, or is that different? Looking at the standard personal auto policy, the exclusion is for public or livery use, and includes the period of time an insured is logged into a “transportation network platform”(TNC) as a driver, whether or not a passenger is in the vehicle. The policy does not address delivering food. However, the exclusion includes but is not limited to using a vehicle to transport passengers by using a TNC.

So is driving for Uber Eats covered by the auto policy or not? The devil is in the details. The standard personal auto policy defines “transportation network platform” as an online-enabled application or network that connects passengers with drivers using their vehicles for providing pre-arranged transportation for compensation. It says nothing about delivering goods.

However, the exclusion is for using the vehicle as a public OR livery conveyance. The next sentence in the exclusion is critical. “This includes but is not limited to any period of time a vehicle is being used by any “insured” who is logged into a “transportation network platform” as a driver, whether or not a passenger is “occupying” the vehicle.

A comma separates the two phrases; the one discussing being logged into a TNC, and the other discussing whether or not a passenger is in the vehicle. Looking at the two clauses it could be taken that livery is excluded because the insured is logged into the TNC. However, the definition of TNC then enters the picture. The TNC is defined as arranging transportation for passengers, not goods. Technically, delivering goods is different, and while the driver is still using a TNC by common definition, the policy definition restricts it to transporting passengers.

This could imply coverage. So then we’re back to the beginning of the exclusion which is straightforward. Liability arising out of ownership or operation of a vehicle being used as a public or livery conveyance is excluded. Period. The clauses regarding TNCs are for clarification, and to ensure that insureds know that driving for Uber, Lyft or other ride-sharing platforms is excluded. While it does not include food deliveries in the definition, driving as a livery conveyance is still excluded.

In order to ensure sufficient coverage, an Uber Eats driver should have an insurance policy that covers the commercial use of a car. Driving for an on-demand food delivery service with a policy that was purchased before the vehicle was used for business can be disastrous. If an insured fails to purchase some sort of commercial coverage, he or she could be left without the necessary coverage in the event of an accident. The average person, though, might be unfamiliar with what defines “commercial use” of a vehicle.

A common misconception is an assumption that a vehicle has to be used solely for business purposes, or owned by a business in order for a business auto policy to be required. This is not the case. Any time a vehicle is on the road for the purpose of delivery of anything in exchange for pay, the car is engaging in commercial use and any damage caused would not be covered under a personal auto policy. If a driver gets into an accident while delivering food for Uber Eats, any claim made on a personal auto policy won’t be approved.

Personal auto insurance won’t cover the damage caused while the vehicle is being used for commercial purposes. Similar to how Uber’s insurance works, Uber Eats provides differing coverage while the driver is in different stages of the food pickup and delivery. When between deliveries, the Uber Eats policy provides $50,000 for bodily injury, $100,000 for bodily injury for more than one person in a single accident, and $25,000 for property damage. While in the process of making a delivery for Uber Eats, auto liability coverage of $1 million applies.

Uber Eats coverage has a $1,000 deductible. If the driver already carries contingent comprehensive and collision coverage on their own personal auto policy, those coverages would also take effect. Even with the limits associated with Uber Eats insurance, a driver is by many standards not sufficiently covered. A lawsuit after a crash can involve hundreds of thousands of dollars in damages. Uber Eats’ insurance will cover a portion of those damages but the driver could still be responsible for a large sum of money.  If the driver is nervous about being underinsured, he or she can procure their own appropriate commercial insurance policy.

As usual, collision coverage pays for damage to your car when it’s in an accident. Comprehensive coverage pays for damages to your insured vehicle outside of collision.

So if a driver has business auto insurance and was in an accident, with Uber Eats coverage alone he or she would be responsible for $1,000 upfront, due to the high deductible. If an insured had a personal policy in place, the deductible could be lower, although with the decreased values in the cars an Uber Eats driver can drive, the vehicle might not be worth carrying physical damage.

Uber Eats insurance does not provide UM/UIM (uninsured motorist/underinsured motorist) coverage. Even though it is against the law to operate a motor vehicle without proper car insurance, countless drivers in America do so on a regular basis. Getting coverage that addresses uninsured and underinsured motorists should be a priority for drivers who spend a lot of time on the road.

Driving for a ride-sharing or food delivery company will always affect car insurance, and participation in such a program should be reported to the insurer. If a driver is in an accident while on duty and attempts to conceal the fact that people or food were being transported for profit, and the insurer finds out, that driver will be guilty of insurance fraud.

Hannah E. Smith, JD, (hsmith@alm.com) is an insurance law editor with FC&S Online, the authority on insurance coverage interpretation and analysis for the P&C industry. It is the resource agents, brokers, risk managers, underwriters, and adjusters rely on to research commercial and personal lines coverage issues.

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