Are there Insurance Concerns for Ride Hailing Services like Uber?

While in Boston for a wedding recently, I had the opportunity to arrange a ride using Uber. After the fact, I started questioning how they could operate so inexpensively. Ride hailing services like Uber, Lyft, and Sidecar are gaining popularity throughout the country as economical modes of transportation. They are cheaper than using a taxi and they are a source of part time employment for people who choose to drive for them.  As I dug in deeper, I discovered a few reasons for concern.

If you are planning to use the service for your transportation, the three most common companies are providing a $1million liability policy whenever the car is carrying a passenger. You can be secure in knowing you are protected should an accident occur resulting in an injury to you.  A gray area does arise when your personal belongings are damaged or lost during such a trip. There does not appear to be any coverage for you.

My concern is for those who might be using this as an employment opportunity. When driving for one of these services, you are not an employee, so there is no workers compensation coverage for you. Assuming you are using your own car for this, you have an auto insurance coverage issue to be addressed.

Ride Hailing is still regarded by many as a new phenomenon. These ride hailing businesses took off during the recent years of economic turmoil. The technology offered by cell phones and the internet is used to match people seeking employment opportunities, with travelers seeking to save a buck; a seemingly perfect match.

Insurers, regulators and legislators are only now addressing the legal and regulatory issues ride hailing presents. As they learn more, the trickledown effect is that, regulators are applying more regulatory controls, insurance companies are making it clearer that coverage is not offered under personal auto policies and drivers are going to become more and more aware that driving for one of these services may not be the source of as much easy money as once thought.  Below is a simple breakdown of whose insurance applies in which situation:

Driver using personal auto for personal use: No insurance is provided by any of the three primary ride hailing service providers. The driver’s personal auto policy applies.

Driver is “Logged in” to the service awaiting a ride request: The three ride hailing companies each provide some limited liability coverage that applies to losses not covered by the driver’s personal insurance policy. Most do not provide any coverage for comprehensive or collision losses occurring at this point of the process.

While en-route to pick up or while transporting passengers:  The three noted service providers each provide a commercial liability policy of $1million covering their driver’s actions. There are varied limits for uninsured motorist /under insured motorist coverages provided by the services. Also, comprehensive and collision coverage for damage to the driver’s car is provided by each, to varied limits, and in each case, applying to losses in excess of what the driver’s personal insurance policy covered.

The regulators and insurance companies have dampened the enthusiasm of these services with their concerns. A personal auto policy is unlikely to be affected for a driver’s operation of the car during periods clearly for personal use. Industry experts, lawyers and regulators are clearly in agreement that while en route to pick up or while transporting passengers, the insurer for the personal policy is likely to have legal grounds to deny a claim. The hotly debated period is when a driver is “logged in” awaiting an assignment. If the driver is waiting in the comforts of their home, there is little difference from the exposures of personal use. However, to be more responsive, many drivers wait in their cars in areas common for pick up requests. This is the point where it is unlikely the driver’s personal coverage would apply. The ride hailing services expect the driver’s insurer to cover this exposure so they limit the coverage limits they provide. This may result in a driver waiting months or years for the insurance companies’ court battle to determine who is going to pay the loss.

In weighing the complexities of this, regulators seem to be expressing concern over: insurance coverages, the qualifications of the driver, and the maintenance of the vehicles used. Questions being asked relate to the selection process. Is the driver physically and mentally competent to provide this service?  Is there any scrutiny of the driver’s motor vehicle record? They want to be sure that public safety is not being jeopardized. Taxi drivers for years have had to have commercial drivers’ licenses to provide a “livery service”. Shouldn’t these ride hailing drivers have the same requirement?

If you start driving for one of these ride hailing companies, you cannot simply assume you will have coverage. You are presenting an exposure your insurance company did not agree to cover when they contracted with you to provide insurance. Personal auto insurance policies typically exclude coverage for any business use of your vehicle. When taking out an insurance policy, companies require an application to be completed and signed by the policy holder. You are specifically asked how your car is used. How many miles per day do you travel? Is your car used for business, commercial or personal use? Is it used in a car pool? From all the questions asked, an insurance company decides if they are willing to insure you, and what the rate will be.

When the insurance company discovers you are using your vehicle for a business use, you will likely have your policy cancelled. Unfortunately, too often they are discovering that use after an accident; those drivers are then having the claim denied leaving them with no coverage for the loss.

A few insurance companies are testing the waters with policies designed for these needs; more will follow suit as the services gain in popularity.  If your personal auto insurance company will not provide the endorsement or coverages needed now, you may have to find a new carrier or take out a commercial auto policy to secure the insurance coverage you need.