Ride Sharing and Your Auto Insurance Policy

The insurance industry news sites are abuzz about ride sharing. Many state governments are getting into the conversation, too (e.g., California, Rhode Island, Illinois and Texas). Everyone is commenting on the concept—either for or against it. So far, three forms of ride sharing have emerged: 1) when drivers use their vehicles to pick up passengers; 2) when the vehicle (without a driver) is loaned out to other drivers; and 3) ad-hoc carpooling—called slugging.

Advocates promote ride sharing as a way to utilize the empty seats in passenger cars, thus lowering fuel usage and transportation costs. The taxi and livery industries have been opposed to ride-sharing programs.

Insurance ramifications All three types of ride sharing have their own insurance ramifications. The traditional ride-sharing method utilizes a smartphone app, in which a customer logs in, requests a ride and the app notifies a potential driver of the fare. Then the driver commutes to the fare and drives the fare to the requested location.

The main argument with the use of a smartphone app is determining when the ride sharing actually begins. This issue hit the forefront when a Transportation Network Co. driver, under contract with Uber, struck and killed a 6-year-old girl. Her family filed a lawsuit against Uber Taxi. Uber issued a statement that the driver was not responding to a fare and didn’t have a passenger in his car when he struck the girl. The family argues that the driver, in fact, was responding to a ride request from the Uber app.

Another issue with these ride-sharing agreements is who is responsible for the insurance protection. Most standard personal auto policies contain exclusions for livery—driving for hire. Typical exclusions found in policies are described as follows:

Liability: We do not provide liability coverage for any insured: For that insured's liability arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance.

Medical payments coverage: We do not provide medical payments coverage for any insured for bodily injury: Sustained while occupying your covered auto when it is being used as a public or livery conveyance.

Coverage for damage to your auto: We will not pay for loss to your covered auto or any non-owned auto, which occurs while it is being used as a public or livery conveyance.

Many states have introduced legislation to put the insurance requirements squarely on the shoulders of the company organizing the fares and not the individuals who are driving the passengers. In fact, New Jersey has adopted the ISO (PP 23 16) endorsement–Personal Vehicle Sharing Program Exclusion.

What this endorsement does is remove all obligations from the carrier for:

  1. liability;
  2. medical payments coverage;
  3. uninsured motorists coverage;
  4. coverage for damage to your auto; and
  5. underinsured motorists coverage, for coverage for the ownership, maintenance or use of:

“Your covered auto” while:

a. Enrolled in a personal vehicle-sharing program under the terms of a written agreement, and

b. Being used in connection with such personal vehicle-sharing program by anyone other than you or any “family member.”

In terms of the damage to your covered auto coverage, the endorsement also excludes loss to, or loss of use of, a “non-owned auto” used by:

a. You, or

b. Any “family member;” in connection with a personal vehicle-sharing program if the provisions of such a personal vehicle-sharing program preclude the recovery of such loss or loss of use, from you or that “family member,” or if otherwise precluded by any state law.

The second form of ride sharing, in which the vehicle is loaned (without the driver or owner), also can face insurance issues. Generally, coverage is available under permissive use when you allow someone to borrow your vehicle. However, like in the earlier example, there is no liability (Part A), medical payments (Part B), uninsured motorists (Part C) or physical damage (Part D) coverage exclusion for an owned vehicle used in a business pursuit. If the owner of the vehicle is renting out his or her vehicle for others to drive, this would constitute a business pursuit.

As for the third example of ride sharing—slugging—is the practice in which a driver may go to a carpool pickup or bus stop and look for riders who are traveling to the same location in order to help defer the cost of the commute. In this instance, there are no insurance implications, as long as the vehicle owner is looking to help share or defer the cost of the commute and not acting as a livery service. Typical exclusions found in policies are described below:

We do not provide liability coverage for any “insured:” For that “insured’s” liability arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance. This Exclusion (A.5.) does not apply to a share-the-expense car pool.

We do not provide medical payments coverage for any “insured” for “bodily injury:” Sustained while “occupying” “your covered auto” when it is being used as a public or livery conveyance. This Exclusion (2.) does not apply to a share-the-expense car pool.

We do not provide uninsured motorists coverage for “bodily injury” sustained: While “occupying” “your covered auto” when it is being used as a public or livery conveyance. This Exclusion (B.2.) does not apply to a share-the-expense car pool.

We will not pay for loss to your “covered auto” or any “non-owned auto,” which occurs while it is being used as a public or livery conveyance. This Exclusion (1.) does not apply to a share-the-expense car pool.

Bottom line: If a driver charges an individual for a ride, more than to offset the commute expense, then coverage would be excluded as in the first example above.

Source: Jim Pitz, PIA

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