Ride-sharing Services and Your Insurance Policy

Americans are nothing if not entrepreneurial. If there’s an opportunity out there to make a buck a new way, or by doing an old way in a less expensive or more convenient way, somebody somewhere is going to seize it. It’s happened with phone service, TV service, shopping, dining out, newspapers, air travel, and dozens more. Now it’s happening with local transportation.

We live in challenging economic times. I think it’s fair to say that most people have an eye out for ways to make some extra money. Some new services have popped up to give them the chance to do that. Take the following ingredients:

  • People in large cities who need to get around but who don’t own cars
  • Taxicabs cruising the streets of these cities
  • The number of people wanting rides at any one time exceeds the number of available taxicabs
  • Other people who need extra money and who just happen to own cars

Stir them together and you get a classic market situation in search of a solution, and that solution has arrived in the form ride sharing services. Three of the most popular are Uber, SideCar and Lyft.

Uber is actually an application installed on an iPhone or Android smart phone. It uses GPS technology to identify the user’s location. The user selects a vehicle type and presses a button to request a ride. The app searches for available nearby drivers and directs them to her location. The app informs her of the driver’s progress toward her location. The car pulls up, she gets in, the driver takes her to her destination, the charge is billed to her credit car, PayPal account or Google Wallet, and she goes on her way. She doesn’t even have to worry about a tip. The driver gets something in the neighborhood of 80 percent of the fare.

The rates vary by city, traffic, weather and other factors. Uber fares have reportedly skyrocketed when people are desperate for a ride. They call it “surge pricing.”

Who are the drivers? Chances are at least a few people here in Syracuse do, or soon will drive for Uber. Its service is available in New York City; Rochester and Buffalo are on the list of cities where individuals can apply to become drivers. Uber claims to “conduct a rigorous screening process to verify that every driver is insured and legally qualified to drive.” Good to know. But the question really is “Are you really insured?”

The ISO Personal Auto Policy (PP 00 01 01 05) states in the Exclusions to the Liability Coverage, “We do not provide Liability Coverage for any ‘insured’: … (f)or 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 provision does not apply to car-pooling arrangements, but Uber and the like do not appear to be at all like normal car pools. New York courts have upheld policy provisions that exclude coverage when a personal auto insured is driving people around for hire (see Halloway v. State Farm Insurance Cos., 2005.)

There is an ISO endorsement that amends this exclusion – Extended Non-Owned Coverage – Vehicles Furnished or Available for Use as Public or Livery Conveyances (PP 13 05 01 05.)  We don’t know at this point how willing insurance companies are to attach it to your coverage.

Ridesharing services are just one more example of how technology is giving people money-making opportunities they never had before. If you live in an area where these services are available, you would be well advised to discuss the coverage you have on your personal auto policy. Do not just assume that your insurance policies cover this situation. The wrong time to find out otherwise is after a serious accident.