Auto Insurance Needs For Lyft, Uber and Other Ride-Sharing Drivers
By Aaron Crowe
Getting into a Lyft, Uber, Sidecar or other ride-sharing car isn’t really about sharing. You’re paying for a taxi ride. As part of that service, you expect the driver to have auto insurance that will cover you if they get into an accident while having you as a paying passenger.
Drivers of such transportation network companies, or TNCs, along with their customers, may be a little confused about how much insurance is provided during trips and who provides it — the TNC or the driver’s personal insurance.
The TNCs require drivers, who act as independent contractors, to have personal auto insurance that can be the primary insurance if they get into an accident while working for the TNC. But in an ironic twist, most auto insurance companies don’t cover the commercial use of a private car under the “livery” exclusion, unless the driver buys a policy at the commercial rate — which can be very expensive.
Some UberX drivers might not see “sharing” their car as a business, but it is and they’d have their insurance policies canceled or not renewed if they got into an accident while driving for a TNC, says Christin Wiley, a personal lines account manager for an insurance agency in Tennessee.
For those unfamiliar with ride-sharing services, they start by using a phone app where riders can summon a ride and enter where they are and where they want to go. They’re picked up within minutes by a driver 21 or older who is using their own insured car and has a clean driving record and no criminal record. Payment is through a credit card. Drivers pick their own hours of operation and give a percentage of their fare to the TNC.
What insurance is provided
The insurance coverage that the TNCs provide is limited, and Lyft’s is secondary to a driver’s personal coverage. The driver must first ask their insurer to cover a claim, and if it’s denied, then Lyft’s coverage takes effect. The $1 million in liability coverage per accident that UberX provides is the primary coverage.
The TNC’s insurance coverage, however, isn’t available during all the time a driver is working, which is an issue that a new California law will attempt to solve when it takes affect July 1, 2015.
There are three times during a ride-sharing driver’s time at the wheel when insurance either kicked in from the TNC or there’s a gap where only the driver’s insurance is available, also called contingent coverage.
The first is when the driver logs into the TNC’s system, meaning they’re available for work but haven’t yet picked up a passenger. This time is now covered by the TNC insurance, but wasn’t before a deadly New Year’s Eve accident in San Francisco by a UberX driver in 2013.
Lyft and UberX have since added insurance, though at levels much lower than the $1 million in liability and $1 million in uninsured/underinsured motorist coverage they offer between accepting a trip to passenger dropoff.
Both companies now offer contingent coverage of $50,000 per person for bodily injury, $100,000 per accident for bodily injury and $25,000 for property damage. The new California law will mandate those amounts, though it will increase the property damage coverage to $30,000. But the $100,000 per accident coverage may not be enough if there are many passengers in the car, Wiley says.
The second time when TNC insurance changes is when the driver is matched in the app with a passenger to pickup. Again, before the San Francisco accident, matching drivers with customers didn’t cause TNC’s insurance to kick in, but has since been added to the $1 million insurance required during the third and final stage of pickup to dropoff.
California law will close all of those gaps, requiring TNC insurance from log-in to passenger dropoff. Colorado has a similar law. Other states are studying the issue, with some not allowing ride sharing at all.
The contingent coverage that takes effect when a driver logs on but isn’t yet transporting passengers. For drivers, the contingent coverage may be an ambiguity they’re willing to work with, since it hasn’t been challenged in a courtroom yet.
A solution in Arizona
A TNC in Arizona, Total Transit, may have the best solution: Full commercial coverage whenever its drivers are on the road.
Mike Pinckard, the company’s president, says he covers his drivers with a commercial insurance policy so that there’s no dispute on coverage limits and whose responsibility it is for having auto insurance. Total Transit drivers must still have their own personal auto insurance policy, but they’re covered by the company policy that they pay into based on how much work time they put in.
They’re even covered for trips outside of the Total Transit app, Pinckard says. For example, a driver could agree to accept under-the-table payment from a passenger for a future trip without using the company’s app, and the trip would be covered by the commercial policy, he says.
“Insure your vehicles and protect the public like any good member of the business community,” Pinckard says of what ride-sharing services should do.
His company’s policy includes $1 million in coverage for bodily injury, property and vehicle damage, and the driver isn’t required to first make a claim with their own insurer. It saves the company time and money, Pinckard says.
For example, one of his driver’s cars was hit by a Uber driver, and it took 10 months for an $800 claim to be paid by Uber after the Uber driver’s personal policy denied the claim, he says.
Ride-sharing services like to brag about being an innovative way to efficiently match passengers with rides, and that innovation should go beyond the technology, Pinckard says.
“Not paying for insurance has nothing to do with insurance. It’s not innovative at all,” he says.
Until then, in California at least, TNC drivers will get help from the new law next year by being able to buy auto insurance while using their personal vehicles for business.
State Insurance Commissioner Dave Jones recently announced that his department is ready to accept insurance company filings to create commercial coverage or endorsements to personal auto insurance policies that will provide coverage for TNC drivers in California.
The new law will cover them during all of the time when the TNC app is on — not just when they’re alerted to pick up a passenger — giving them some peace of mind that they’re covered during the entire time they’re working and that their personal policy will protect them.
Aaron Crowe is a journalist who covers the auto industry for CheapCarInsurance.net.