Uber and Lyft are designed to offer a more convenient and connected version of taxis. While they are easy to use through their mobile apps and affordable for consumers, confusion can arise for working drivers – especially when it comes to understanding insurance coverages. Here are some things to consider before joining this hot ride-hailing trend.
Am I Covered?
Uber and Lyft are promoting their services as not being livery (transporting someone for a fee) because they don’t own the cars being used and the drivers are not their employees. They are merely facilitating the transaction between 2 people, a driver and a passenger. Some states are enacting legislation to regulate these entities, but many have yet to do so, and it’s creating problems for insurance companies and drivers.
Both Uber and Lyft offer insurance to their drivers and passengers, but it isn’t as simple as just saying you are, or are not covered. There are contingent policies listed with Lyft, and 3rd party policies with Uber – however, insurance is such a complicated topic, and when lawyers and government get involved, it becomes all the more confusing.
Your personal auto policy, used by most insurance companies today, says that you are not covered if you are transporting passengers for a fee. Uber and Lyft have agreements that indicate that they will provide coverage to the driver when a passenger is in the vehicle. A deductible may be your responsibility however.
But what about before or after a ride?
Assume for a moment you have a ride request. On the way to pick up the party you have an accident and the police include in their statement that you were acting as a driver for Lyft (or one of the other ride share companies). Your auto carrier could deny your claim because you are not covered while driving for these types of “business” purposes.
With that same incident, Lyft may deny coverage under their policy because you weren’t transporting a passenger at the time, even though you were en route to pick up a customer, it is subject to their review of whether or not the contingent policy will apply to the occurrence.
Now what? Any damage to your car, the other involved car(s), and any bodily injury or other miscellaneous property damage (telephone poles, street lights, buildings, etc.) could all be your personal financial responsibility. In addition, any of the injuries that you sustained also could not be covered by your auto carrier. Your health insurance carrier may also not provide coverage to you until you meet the state mandated limit (PA minimum medical coverage requirement is $5,000 on an auto policy).
That is only one example. At this time, there are many gray areas that complicate who covers what, and when.
Could I Get A Commercial Auto Policy?
Commercial auto policies are one way to resolve these problems, but unless you are planning on doing a lot of driving, this probably is not a financially feasible idea. A full coverage commercial auto policy for someone driving for livery purposes could easily exceed $2000 per year – that’s a lot of cost to assume, especially if you are only driving for Uber or Lyft on a part-time basis. Also, as of now there are only very few companies that are willing to offer that coverage, meaning rate shopping is not always an option.
What Changes Are On The Horizon?
Currently, much of the burden lies with the drivers, and potentially puts the driver in a situation where they have little to gain and a lot to lose (personal assets and future earnings). Until states set guidelines and pass laws to regulate entities such as Uber and Lyft, we are at a stand still.
Some insurance companies are looking at possible endorsements to add to their personal auto policies (for an additional cost) to resolve some of these coverage issues. Currently none of our carriers have filed any endorsements in PA addressing this issue.
It’s been rumored that Progressive is writing coverage in PA, but our discussions with them indicate they are taking a very conservative approach to writing this coverage. Submissions have to be submitted manually, and the price seems quite high.
Another company we work with told us that they briefly looked at possibly writing the coverage but decided against doing so.
This business model is still somewhat new, so changes are bound to come about. We will continue updating you, as our number one goal is to ensure you and your families are covered.