Ride Sharing Information

We’ve included several items/articles regarding Ride-Sharing insurance issues in this informational packet which was prepared by our National Association, IIABA.

In addition, several other articles and alerts have been prepared by MAIA and by the Division of Insurance.

• March 2014 Tech Talk - One More Dangerous Business Activity Than Your Clients Are AskingAbout … And a New MAP Endorsement - http://www.massagent.com/info/tt32014.pdf

• March 2013 Tech Talk – Do You Know What Your Clients Are Doing? One More Weird AutoRental Gimmick to “Get” Your Clients - http://www.massagent.com/info/tt62013.pdf

• July 2011 Tech Talk – A New “Twist” to Auto Rental –http://www.massagent.com/info/tt72011.pdf

• September 2008 Tech Talk – Zip Cars … and Your Clients … Coverage or Not? –http://www.massagent.com/member/news/tech92008.htm

• February 7, 2014 The Massachusetts Agent – CAR Adopts Personal Vehicle Sharing Exclusion -http://www.massagent.com/info/mafebruary72014.pdf#2

• Division of Insurance July 2014 Consumer Alert on Car-Sharing and Ride-Sharing Services –http://www.massagent.com/info/consumeralert72114.pdf

http://nyti.ms/1tzxfLd

AUTO INSURANCE

The Question of Coverage for Ride Service DriversSEPT. 5, 2014

Your Money

By RON LIEBER

There is a pervasive attitude in a prominent corner of the technology industry that

goes something like this: If you’re helping people rent (not share, rent) spare

bedrooms or rides in their cars, then the usual regulations and niggling insurance

issues should not apply. Entrepreneurs start useful services, attract millions of

users, cross their fingers and hope nobody dies before the government minders

and other scolds catch up.

And so it is with Lyft and Uber’s uberX service, which help people who need

rides find drivers who offer them using their private vehicles. People who have

used the services know what a radical improvement it is to summon a car by

mobile app instead of being held hostage to unreliable taxi services and their

unpredictable availability.

But all this year, the two companies have been waging an aggressive fight to

avoid taking full responsibility for making sure drivers have the right kinds of

insurance and lots of it. Late last month in California, an overwhelming bipartisan

majority of lawmakers ordered these transportation companies to start doing just

that next year.

This may raise the cost of a ride a bit in California and elsewhere if other

states and cities make similar moves, but that’s as it should be. There is, after all,

another myth — the one that says that every time the Internet improves our lives

that the solution must necessarily be cheaper in addition to being better.

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When you own a car and buy insurance, the policy almost always says that it

won’t apply if you’re charging people money to drive them around. Even so,

services like uberX that help drivers rent rides began their operations by telling

drivers to submit insurance claims from on-the-job accidents to their personal

insurance carriers first. The companies generally had a backup policy in place that

would go into effect if a driver’s personal insurance company denied the claim

because of a policy exclusion that disallows trading rides for money.

This put drivers in a tricky spot. They could tell the truth about their

commercial use of the car and run the risk of the insurance carrier getting mad

and canceling their policy altogether. Or they could simply avoid mentioning their

rides-for-rent operation during any claim process and hope the insurance

company didn’t ask what they were doing with the vehicle.

So was Uber, the biggest company in this arena, encouraging drivers to

commit insurance fraud by hiding the truth about how they were using their cars?

No drivers have come forward to make this assertion publicly. But industry

observers are skeptical. “There is no honest answer that doesn’t include, ‘I hope

the drivers lie,’ ” said Brian Sullivan, editor of the Auto Insurance Report

newsletter, which has reported on the issue extensively. “It’s just a little lever they

were using during their early days to build the business.”

Lane Kasselman, an Uber spokesman, said that Uber does not encourage

lying. “When driver partners ask us about the process for making a claim to their

personal insurer, we recommend that they are honest and clear with their

insurer,” he said in an emailed statement. Lyft did not respond to requests for

comment.

At the beginning of the year, the insurance questions became more urgent

after an uberX driver out looking for riders hit a family in a San Francisco

crosswalk, killing a 6-year-old girl and injuring her brother and mother. The

mother reported having seen the driver looking at a glowing screen just before he

hit them.

Immediately, a question emerged: If drivers are merely out looking for riders

with their Uber driver app on, what if any responsibility does the company have

for them and any damage they do? Uber put out a statement after the accident

saying that the driver “was not providing services on the Uber system during the

time of the accident.”

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When drivers have the Uber driver app on, however, they are providing a

great service to the Uber system. After all, riders will want to use Uber only if there

are lots of empty nearby cars available that potential riders can see on their phone

screens and summon. Drivers, then, are helping Uber plenty when their app is on

and they’re available, even if they aren’t on their way to pick up a rider who has

summoned them and don’t have anyone in the back seat.

After the fatal accident, a California state assemblywoman, Susan Bonilla,

introduced legislation that would require the Ubers of the world to make sure that

proper, commercial insurance is in place from the moment drivers turn on their

apps until the time they drop customers off.

The insurance industry co-sponsored the legislation, and state insurance

commissioners initiated their own efforts. Throughout the spring, many of them

issued consumer alerts warning that drivers and passengers may not have

adequate insurance coverage when the drivers are renting rides to the passengers.

Uber improved its insurance coverage, culminating in its move in July to

provide “primary” coverage for uberX drivers when they’re going to pick up a

person who has summoned them or have passengers in the car. That meant that

there would be no more need for drivers to submit claims to their personal

insurance policy first for claims arising from either of those two types of

circumstances.

But the period when the drivers are looking for riders and haven’t found one

yet remained one where the company provided only backup insurance if the

driver’s personal policy first denied any claim. This period became a focus of

intense lobbying around the proposed legislation, as the companies hoped to avoid

primary responsibility during this time and then fought to keep the coverage as

low as possible.

Ms. Bonilla, the California assemblywoman, said she had never seen any

person or entity fight her so hard on anything she has worked on. “Susan Bonilla is

leaving consumers and entrepreneurs on the curb,” said the mailer that Uber sent

out to voters, featuring an unnamed little girl with a sad face sitting rideless by the

side of a road. “The fact that they put a little girl’s face on the back was absolutely

revolting,” said Chris Dolan, the lawyer representing the family of the 6-year old

girl who died. “This was a piece opposing legislation that a dead little girl’s family

was involved in and endorsing.”

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The tactics didn’t work, and the legislation passed after some last-minute

intervention from the governor’s office. Once he signs it, there will effectively be a

firewall in place in California starting in July 2015 that keeps the ride-renting

companies from offloading insurance risk on their drivers’ personal insurance

providers. This will be the case from the moment they turn on the app to look for

riders to when they drop riders off. “Californians love Uber, and lawmakers have

heard them loud and clear,” said an Uber spokeswoman, Eva Behrend, in an

emailed statement. “Common sense has prevailed, and the winners are

Californians.”

The bill also encourages insurers to develop new policies for drivers that could

handle both commercial and personal vehicle use; it remains to be seen whether

companies like Uber and Lyft will buy it for drivers, whether the drivers will have

to buy it themselves, what it will cost, how much the additional costs will add to

customers’ fares and whether other states and cities will adopt similar rules.

Until July, California drivers for the companies should take a look at their

exact policy language: Some insurance companies exclude commercial activity

only when a paid rider is in the car, but others have policy language that excludes

any taxilike activity, even if a driver is merely out looking for a paid passenger.

Drivers should ask insurers, point blank, if they are covered during the period

when they are looking for paid passengers but haven’t found one yet. Insurance

companies may tighten policy language in this area soon as well.

These skirmishes over who is inducing whom to do what without proper

insurance coverage will continue, and Ms. Bonilla is already anticipating the next

one. “There will be an Airbnb bill in the next session,” she said, noting her concern

for Airbnb hosts who rent rooms, or entire apartments or homes, through the

company. “They have no idea what the risk is at all.”

Twitter: @ronlieber

Make the most of your money. Every Monday get articles about retirement, saving for college, investing, new online financial services and much more. Sign up for the Your Money newsletter.

A version of this article appears in print on September 6, 2014, on page B1 of the New York edition with the headline: The Question of Coverage for Ride Service Drivers.

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© 2014 Property Casualty Insurers Association of America

8700 West Bryn Mawr, Suite 1200S, Chicago, IL 60631-3512

phone: 847-297-7800 fax: 847-297-5064

Setting a Reasonable Standard to Properly Insure Ride Sharing

Activities and Protect the Public

Backgrounder

Commercial ride-sharing services, offered by transportation network companies (TNC), are a relatively new trend in major

cities across the country. Transportation network companies, such as UberX, Lyft, and Sidecar, use smartphone

communications technology to connect individuals who want a ride with drivers for a fee. Because the drivers generally use

their personal vehicles, there are questions whether they have the proper insurance coverage as the typical standard

personal automobile insurance policy contains a “livery” exclusion which applies when the vehicle is being rented

out, or used to carry passengers for hire. Consequently, most personal automobile insurance policies do not cover

any damages or losses when a car is being used for commercial 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 approximately a dozen state insurance departments and public

service commissions have issued consumer alerts or advisories highlighting the potential insurance gaps in coverage for TNC

activity and encouraging TNC drivers to talk with their insurer to understand their exposure.

The California’s Public Utilities Commission was the first regulatory body to regulate these activities. California requires the

TNCs to carry $1 million of commercial liability coverage per incident. Many cities around the country have also grappled with

how to regulate TNC activities. State legislatures including Arizona, California, Colorado, District of Columbia, Florida,

Georgia, Illinois, Maryland, Oklahoma and Washington have considered legislation this year. While the vast majority of the

measures failed, Arizona Gov. Jan Brewer vetoed House Bill 2262 which would have forced personal auto insurers to cover

the riskier driving behavior of TNC drivers. Colorado Gov. John Hickenloopper signed legislation that sets up the framework for

TNCs to provide primary insurance coverage for all commercial activity including when the driver logs onto their app and is

available for hire through the time period when they have a passenger in the vehicle and until the driver logs off the app and is

no longer available to accept rides.

PCI Supports Innovation and Strong Consumer Protections

To support innovation and allow these new businesses to grow, it is vitally important that the vehicles used in ride-sharing

services are properly insured and the public is protected. Specifically, the drivers and their passengers need to

understand that the driver’s personal auto policy will not cover damage or losses arising when the car is used in a

ride-sharing program. We support the development of clear guidelines so everyone knows where they stand regarding

insurance coverage for ride-sharing services. PCI has been actively seeking to establish appropriate disclosures for drivers

and passengers as well as clarity regarding what insurance coverage is being provided, when it’s being provided and by

whom. PCI opposes legislative efforts to shift the commercial insurance risk and costs of ride share programs on to other

motorists.

Ride-Share with Care

Ride-Share with Care 2

Ride-Sharing Questions and Answers

Ride-share drivers have personal automobile insurance and the TNCs say they have $1 million

commercial liability insurance, isn’t that enough coverage?

The insurance gap isn’t about how much insurance there is, it is about when it applies. All of the coverage supplied

by the TNCs are “contingent” on the driver’s personal lines policy not providing coverage. While the TNCs may

interpret personal auto insurance policies as providing some coverage for TNC activities, insurers clearly do not

interpret their policy language that way. Personal auto insurance policies are not intended to cover the higher risks

associated with using a car for commercial purposes. Just about every standard auto insurance policy contains some

form of a livery exclusion which means carrying passengers for hire. As a result, any damages or losses sustained

when the car is being used for TNC activities will not be covered by the personal auto policy. Additionally it will

not provide coverage for the driver or passenger if they are hit by an uninsured or underinsured driver. There is also

no coverage to repair the driver’s vehicle if it is damaged while in use as a ride-sharing vehicle.

PCI is advocating for clear guidelines regarding when the TNC coverage applies. Without clarification, the TNCs

could challenge each and every coverage determination made by a personal auto insurer. That means delays in

compensating the victims and costs incurred with handling claims and litigation for the personal lines insurers, costs

that are reflected in the loss costs that affect the premiums of every driver in the state, in effect subsidizing the

economic activity of TNC drivers and companies.

What type of insurance coverage is appropriate?

The insurance marketplace is always evolving with new product offerings. PCI is advocating for legislative and

regulatory approaches to ride sharing that protect the public while not stifling insurers’ ability to innovate and develop

products to meet marketplace demands. However, TNC drivers should talk with their insurer about how they plan to

use their vehicle to ensure they are protected if an accident occurs. Driving a car as a livery presents higher risk than

normal personal use of a car. Insurance coverage needs to specifically apply to these activities.

What concerns do insurance companies have regarding ride sharing programs?

The insurance industry wants to ensure that the personal and financial safety of consumers, passengers and drivers

are protected. Currently there are not clear guidelines to ensure that vehicles used in these programs are properly

insured. It also is not always clear when the TNC’s coverage is activated, which could leave drivers uninsured while

they are on the road. The potential for coverage gaps put everyone at risk.

What changes do insurers want to see?

Insurers want all participants to understand what is covered and when. TNC drivers should have coverage that

specifically addresses these activities Ride sharing program participants (car owners, drivers and passengers) should

have disclosures on coverage issues as part of contracts/usage agreements. Drivers and passengers should know

where they stand regarding insurance coverage while they’re involved with a ride sharing program. Additionally,

vehicle owners have a responsibility to purchase insurance appropriate to the way they use their vehicles.

Ride-Share with Care 3

Contingent Liability Creates Coverage Uncertainty

Potential for Disputes

App On Waiting for Match

Match Notification

Picked Up Passenger Dropped Off Passenger App On

TNC: Contingent Liability Contingent Commercial Contingent Liability

Personal: Coverage Excluded

TNC/Driver: 24/7 Coverage for both Commercial and Personal Purposes Provided by TNC or Driver

Addressing the Grey Area:

With TNCs’ coverage contingent on the drivers’ personal lines insurer denying a claim, there is uncertainty that creates opportunities for disputes. Each claim has to be reviewed and if the personal lines insurer denies coverage, the TNC can dispute the insurer’s coverage determination. This process creates delays in compensating victims, higher claims handling costs and legal fees.

TNC insurance coverage should be primary and apply exclusively at all times while a driver is signed up for a ride sharing program. This approach establishes a bright line regarding coverage and reduces the opportunity for disputes that is inherent in having TNC coverage contingent on the driver’s personal lines insurer denying coverage.

Contingent Insurance Coverage Flow Chart

The insurance gap isn’t about

how much insurance there is…

It is about when it applies.

ACCIDENT OCCURS

PERSONAL LINES INSURER DENIES CLAIM

TNC CHALLEGES COVERAGE

DETERMINATION

INSURER AND TNC BATTLE OVER

COVERAGE

DELAY IN COMPENSATING VICTIM, ADDED

CLAIMS HANDLING COSTS AND

LEGAL FEES

Ride-Share with Care 4

TNC Ridesharing Insurance Coverage Periods TNC drivers are providing services during all three periods, therefore the TNC coverage should be primary and apply exclusively during all

three periods to close the insurance gap

PERIOD ONE:

App On - Waiting for a Match

PERIOD TWO:

Match Made - Passenger not yet in car

PERIOD THREE:

When passenger enters; until they exit

PCI is composed of more than 1,000 member companies, representing the broadest cross section of insurers of any national trade association. PCI members write more

than $195 billion in annual premium, 39 percent of the nation's property casualty insurance. Member companies write 46 percent of the U.S. automobile insurance market,

32 percent of the homeowners market, 37 percent of the commercial property and liability market, and 41 percent of the private workers compensation market.