Don’t let your kids ride-share with your car

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Stuck and can’t find a cab? Using a phone app for a ride-sharing service, you can summon a ride, entering where you are and where you want to go, and a driver picks you up in minutes. You pay with a credit card through the app, eliminating worries about having enough cash on hand.

If your kids live in a big city, they probably know about ride-sharing outfits like Uber, Lyft or Sidecar, if they haven’t already downloaded one of the apps.

The San Francisco-based transportation network companies have taken off across the U.S. — the six-year-old Uber, for example, is in 43 countries.

The appeal, especially to the young, is easy to understand. Drivers age 21 and older with insured cars and clean driving and criminal records can make extra money working for the services, using their own cars and working whatever hours they choose.

“It’s a very popular and innovative approach to an age-old business of transporting people for money,” says James Whittle, the American Insurance Association’s chief claims counsel.

Ride-share insurance

But insurance and regulatory concerns abound. Unlike taxi companies, which are highly regulated, the rules of the road are not yet spelled out for ride-sharing businesses. Regulators and insurance industry officials warn consumers to understand the risks involved when riding with or driving for transportation network companies.

And if your child has a car and is making money driving people around, you might have cause for alarm.

Under the so-called livery exclusion, a personal auto insurance policy does not provide coverage when you use the car to transport people for money. If you (or your child) get in an accident while driving for a transportation network company, your personal auto insurance likely won’t cover the claim.

“They need to understand the risks and the obligations they may be assuming,” Whittle says. “There may be insurance gaps, and those gaps could affect you as a passenger and as a driver.”

Ride-sharing companies provide insurance to protect drivers and passengers, but the questions of whether the coverage is enough and when that coverage applies are murky.

The issue came into sharp focus after an UberX driver struck and killed 6-year-old pedestrian Sofia Liu and seriously injured her family members on New Year’s Eve in San Francisco. UberX is the least expensive service offered by Uber. The company denied responsibility because the driver was not transporting a passenger at the time.

The family filed a lawsuit against Uber and the driver in San Francisco Superior Court, claiming the company is responsible for Sofia’s death because the driver had the Uber app on when the collision occurred.

“As transportation delivery systems evolve so will the law,” said Liu family attorney Christopher Dolan in a press statement. “The technology may change but the basic rights of the public to safety and accountability will be upheld through the civil justice system.”

Is there enough auto insurance coverage?

Since then both Uber and Lyft beefed up the insurance they provide drivers.

Both companies had provided $1 million of liability coverage and $1 million of uninsured/underinsured motorist coverage per incident for drivers from the time they accept a trip to passenger dropoff. The liability insurance covers others’ injuries, including passenger injuries, and property damage if the driver causes an accident. The UM/UIM insurance covers the driver’s and passengers’ injuries if an uninsured or underinsured driver causes an accident.

Both companies then added coverage this year for times when drivers are logged on to their networks but are not yet transporting passengers for hire. The coverage kicks in if the driver’s personal auto policy doesn’t pay out. The contingent coverage is $50,000 per person for bodily injury, $100,000 per accident for bodily injury and $25,000 for property damage with both Uber and Lyft.

“Most personal auto policies cover the period of time when a driver is between commercial trips and not carrying a passenger,” Uber spokesperson Natalia Montalvo says in an email. “However, if a driver’s personal insurance policy is found not to cover an accident during this period, Uber’s policy will provide contingent coverage for a driver’s liability at the highest requirement of any state in the U.S.”

Lyft spokesperson Paige Thelan says, “While we do expect personal carriers to cover the time period prior to carrying a passenger, in order to erase any uncertainty, Lyft now provides additional protection. This protection provides backstop coverage to drivers when they are in match mode and are not providing rides.”

Sidecar offers $1 million of liability coverage from the time a driver accepts a passenger trip through the app to dropoff. It has not yet announced additional insurance to cover the time when a driver has the app on but hasn’t accepted a passenger. In May the company announced it had added $50,000 of collision insurance, with a $500 deductible, to cover the driver’s car while on “an active ride.” The company states that the insurance it provides is secondary coverage, meaning that it kicks in if the driver’s personal auto insurance policy denies the claim or is inadequate. 

App on, app off

The auto insurance industry objects to framing that coverage as contingent or backstop. They say most personal auto insurance policies would not cover the time a driver has the app on and is looking for fares.

“When you turn on the app and start driving, you are driving in a commercial way,” says Association of California Insurance Companies spokesperson Nicole Mahrt Ganley.

They say ride-sharing companies should be required to provide adequate insurance from the time a driver turns the app on to turning it off.

“Imagine driving in a big crazy city, and you’re competing for a fare,” Ganley says. “These [transportation network companies] are putting people on the road, encouraging them to drive and look at their phones.”

Ride-sharing critics also say the contingent liability coverage isn’t enough. San Francisco attorney Dolan has noted that the Liu family’s medical bills have exceeded $500,000.

Meanwhile, Uber also added contingent comprehensive and collision insurance during trips, up to $50,000 per incident, with a $1,000 deductible, if the same coverage on the driver’s personal auto policy doesn’t pay out.

Lyft provides the same amount of contingent collision and comprehensive insurance, but with a $2,500 deductible.

Drivers must come up with the deductible amount if they have a claim. Also, the contingent collision and comprehensive coverage is not available when drivers are looking for passengers but haven’t accepted a trip.

Signing away your rights

Passengers should also beware of signing away rights and accepting obligations when they agree to the terms of service for using a ride-share app, says Whittle of the American Insurance Association.

“If you are a passenger and a Lyft driver is using a borrowed car, has not maintained the car in good operating condition, ‘misrepresents’ anything about Lyft, breaks any law . . . or does anything else Lyft does not like, Lyft can, unilaterally, deny its touted $1 million in insurance,” Dolan wrote in a series of articles last year warning consumers about transportation-network companies.

Battle lines have been drawn in many states and cities across the country with insurance and taxi companies on one side and ride-sharing companies on another.

In April 2014, Arizona Gov. Jan Brewer vetoed a house bill that would have let car insurance companies exclude “commercial, fee or livery activities” only during a transportation “trip” but not when drivers were looking for passengers.

The Property Casualty Insurers Association of America’s ride-sharing map shows regulatory or legislative activity in all but 14 states. More than a dozen state insurance regulators have issued alerts warning consumers about potential insurance gaps and encouraging drivers to check with their insurance companies about coverage.

“Consumers may be focused on the new innovation without understanding their liability or risk exposure,” Pennsylvania Insurance Commissioner Michael Consedine said in a June press statement. “Learning too late of gaps in insurance coverage can have serious financial consequences for participants in these programs.”