July 1, 2015
By: Bronson T. Kopp
If you have a child who is still insured on your auto policy while they are away at College or beginning to transition out on their own, they may be tempted to make a few bucks by driving for one of these ride-share companies. If an accident occurs with serious injuries while your child is driving customers around, whose insurance policy will defend the lawsuit that will almost certainly follow? Most drivers are covered under personal auto policies (which likely include livery exclusions) and not commercial policies, which can cost up to 10 times the cost of a personal auto policy.
By way of a brief background, if you’re unfamiliar with how these companies work, they match individual drivers with people in need of rides, much like a private transportation or taxi company. All rides and drivers are scheduled through a mobile phone app.
Ride-sharing services blur the lines between personal and commercial automobile insurance. While the ride-share company holds a commercial policy which provides coverage while the trip is in progress, it is less clear which policy applies for incidents occurring outside the actual trip or when the driver is “off duty.”
The coverage for the commercial policies obtained by the ride-share companies is broken down into three coverage periods. Period 1 is defined as when the driver is “logged-off” of the application. Period 2 coverage the time while the driver is “logged-on” the application but not currently engaged in a trip. Period 3 begins when the driver accepts a trip and ends once the trip has been completed. Each company’s website provides specific information about their coverage for the specific periods.
For accidents occurring during Period 1, drivers are required to report accidents to their personal auto insurance carriers as coverage is not provided under the ride-sharing company’s commercial policy. Period 3 accidents are covered under the ride –sharing company’s primary commercial policy up to $1 million.
Accidents that occur during Period 2 were not always covered under the commercial policies and drivers were told to report all those accidents to their personal auto insurance. Most personal auto policies contain a livery exclusion or, worse yet, the policies have been retroactively cancelled for failure to disclose ride-sharing activities on the applications. The ride-share companies now provide some sort of contingent coverage which requires the drivers to first report the accident to their personal auto carrier for a denial before the ride-sharing commercial policy will apply. This raises a question as to which policy is really “primary” when the driver is required to get a denial from their personal auto carrier before the commercial policy applies.
Many States are attempting to pass legislation regulating insurance for ride-share industry. Georgia, for instance, requires ride-sharing drivers to have commercial policies. New York legislature is currently considering Senate Bill S4108-2015 which would require minimum liability coverage for Period 2 and $1 million primary liability coverage for Period 3.
Many insurance companies are now offering hybrid policies for persons who put a “business use” designation on their personal auto policies. These designations have traditionally covered the pizza boy zipping through your neighborhood but have specifically excluded livery- for people who use their cars like taxies. However, some insurance companies are now offering policies without the livery exclusion that provide coverage for people driving under the ride-share programs. These policies, if you can find them, are generally priced somewhere in between traditional auto policies and commercial policies.