Understanding New Insurance Concerns Involving Rideshare Company Liability

The booming rideshare market in the U.S. has rapidly emerged since beginning in 2012. Executives with Uber claim that the company provides roughly 2 million rides each day to those worldwide. As with most new services that enter the market, the insurance providers, regulators, management and workers lagged behind in truly addressing liability concerns. Many of the drivers either do not have adequate insurance coverage or are not aware that a lack of coverage exists. Rideshare companies have put forth efforts to protect the company and their drivers with solid insurance coverage during certain periods, but not during others. In 2016, approximately 30 states had taken action to address these liability concerns. Many of the laws make it necessary for drivers to add additional coverage in order to remain compliant.

Often a driver’s personal liability coverage is very insufficient; however, both Uber and Lyft are providing a minimum of $1 million in coverage when passengers are onboard. A collaborative report between NerdWallet and SherpaShare surveyed about 1,000 drivers and found instances where they were underinsured. 77% of those in the study relied exclusively on the company insurance. In order to truly understand the problem, the three periods that correspond to coverage must be specified:

• Period 1: Driver is logged in awaiting a passenger
• Period 2: The driver in traveling to pick up a passenger
• Period 3: A passenger is in the vehicle

The $1 million in minimum coverage from Uber and Lyft is for liability, uninsured motorist, and underinsured motorist protection exclusively for periods 2 and 3. In addition, they provide supplemental collision and comprehensive coverage to drivers that have these types of personal policies in place. During Period 1, the company limits are reduced to $50,000 for injuries ($100,000 total) and $25,000 for property claims. In Period 1, no coverage is extended for damages occurring to the driver’s vehicle. We know that only 23% of respondents claimed to have purchased their own additional coverage. One of the reasons is that some carriers do not issue rideshare policies, or only do so in certain markets. Fortunately, industry results show that these policies are increasingly becoming more available and more affordable. Commercial policies exist; however, many are priced beyond the reach of rideshare drivers.

New Jersey is one state that has aggressively addressed this issue by implementing the Transportation Network Safety & Regulatory Act.

This requires that rideshare drivers maintain the following:

• Personal insurance coverage when not working
• Period 1 minimums of $50,000 for death or injury ($100,000 total), $25,000 for damage to property and uninsured & underinsured coverage
• Period 2 and 3 minimums of $1.5 million for death, injury, damage to property, uninsured and underinsured coverage as well as $10,000 per person in medical payment coverage