Can States Legislate a Solution to Ride-Sharing’s Insurance Problems?
|By Brian Heaton, Government Technology|
|McClatchy-Tribune Information Services|
Drivers working for transportation network companies (TNCs), such as Lyft and Uber, typically do so under their own personal insurance policies. Most of those don't cover commercial activities, however, leaving the TNCs' "excess" contingent liability coverage to cover the gap. But drivers and their passengers can still be on the hook for unexpected costs, if claims on a TNC's insurance are denied.
The ride-sharing companies have developed strict lines when they consider one of their drivers to be "working," and therefore covered under excess liability policies. Lyft changed its policy to provide primary coverage from the point a driver accepts a ride request until the time the ride has ended in its app, according to
But the different standards being used have caused confusion for the insurance industry, passengers and riders, resulting in some states introducing legislation to regulate coverage levels and paint a clearer picture for all parties involved.
But while the legislation to clarify ride-sharing insurance questions looks like progress, representatives from the insurance and taxicab industries still have major concerns with what lawmakers are doing.
For example, if someone looking for a ride spots a driver from Uber or Lyft and hails them down without using the company's app, and the driver is not logged into the company's system, it could pose insurance coverage problems if an accident occurs. Those "under-the-table" rides are common, according to
"If I'm a ride-sharing driver, and I see somebody on the street and they see my Uber logo, if I pick them up, I'm going to get the money," Sutton said. "It'd have to be cash, but I'm not going to have to pay Uber, so I'll make more."
Passmore added that the preference of insurance companies is that drivers purchase a commercial policy, or obtain something that provides them with 24x7 coverage. He also felt the term "app-on, app-off," in regard to when a particular insurance level applies isn't sufficient, because whenever a driver is looking for a passenger, the nature of their activities and of the risk presented by it have significantly changed.
"You can understand why it is important these people have coverage when they are making themselves available, because their behavior changes," Passmore said. "They are trying to get in position to get a ride, just like a taxi."
Government Technology reached out to Uber for comment on the issue, but did not receive a response by press time.
The three major TNCs in operation -- Uber, Lyft and Sidecar -- all started and are based in
"Period One" runs from the time a driver logs onto the TNC's application and continues up until a match with a rider is secured. The period also covers the time from when a matched person exits the private passenger vehicle until the driver either logs off the system or accepts another rider match.
"Period Two" pertains to the time a driver accepts a match on the TNC's app until the driver picks up that specific passenger. "Period Three" covers the actual ride being given until the passenger's exit.
AB 2293 also mandates that a TNC will maintain an insurance policy that assumes all liability for Periods Two and Three. A total of
The bill was introduced in part as a reaction to an accident on
As a result, Uber claimed he wasn't on its system and not "driving" for the company at the time he struck Kuang. Therefore, Uber's excess insurance policy wouldn't cover costs associated with the Kuang family's injuries and Sofia's death.
"While Uber is touting itself as the future of transportation, it has thrown transportation back into the wild-west era by trying to walk away from problems its drivers cause from the time the app is turned on until there is a match," said
While a hearing is set to discuss the bill further in August, both Passmore and Sutton weren't convinced the measure would adequately address the insurance gap problem. Sutton said the TLPA doesn't support AB 2293 because it doesn't address the "street hailing" that goes on when a TNC's app is shut-off or the rider doesn't login.
Passmore explained that the insurance companies understand the dilemma lawmakers, the TNCs and the taxicab industry are struggling with -- whether the TNCs are technology or transportation companies and where they fit in the established regulatory framework. But PCI's primary concern is making sure the insurance rules are clear so people get paid when something bad happens.
"However you look at it, these drivers are engaged in a commercial activity," Passmore said. "They're carrying people in exchange for compensation. Regardless of how long ... that's a significant change in the risk that their vehicle habits present, as compared to someone who just uses it for commuting and doing normal personal errands."
The solution could be any easy fix in the future, however. Instead of legislating rules that dictate when and how much coverage a TNC carries, a driver's personal insurance policies could be modified to permit commercial activities up to a certain level, in exchange for a higher premium.
"I know Uber and Lyft have made no bones about it that they've outreached to different companies to see if something can be developed in that way," Passmore said. "As of now, I've not heard that anything is being offered."
Editor's Note: This story has been updated to clarify when Lyft's insurance is considered the primary coverage of a driver's vehicle.
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