Ridesharing Confusion Begs Question: Who’s Covering Whom?

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Photo from Alfredo Mendez

Colorado’s state Senate has set its sights on the relatively new ridesharing business that has taken root through companies like Uber and Lyft. Senate Bill 125 would permit these “Transportation Network Companies,” or TNCs, to operate in-state with “limited regulation by the Colorado Public Utility Commission (CPUC),” reported Insurance Journal.

The bill aims to distinguish when drivers are driving for personal reasons and when they are driving commercially.

For a bit of background, the two companies — Uber and Lyft — have considerable footprints within the US. Currently, Uber is in 38 of the nation’s largest cities, while Lyft is in 24. Furthermore, Uber has a presence in 32 countries throughout the globe.


Ridesharing Liability

One case out of San Francisco that involved Uber now has a number of states and cities considering laws and regulations to tackle the ridesharing trend.

The case is the first known incident where a person was killed — a young girl — by a motorist on contract with the cellphone app-based ridesharing provider.

“That driver was allegedly not in the process of providing a ride, but was logged in to the Uber app as available to offer a ride,” IJ reported. “Uber has denied liability in the incident and a lawsuit has been filed by the girl’s family.”

The confusion over ridesharing that the new state Senate bill hopes to address is drawing a clear distinction of when Uber’s $1 million commercial policy is in place and when the driver’s personal insurance policy should be the one filing a claim. Cab operators have also been frustrated with the two apps, which permit anyone to circumvent standard taxi operations and instead grab a ride from a nearby driver logged in to the app and showing available.


Ridesharing Background

The ridesharing apps allow a person to enter in their destination. From there, they produce a price quote. The buyer can then submit payment and wait for their ride to arrive.

“As a result of the death of the young girl, a San Francisco county supervisor has publicly stated interest in creating an ordinance governing TNCs,” explained IJ. “The Seattle city council has drafted an ordinance to create a two-year pilot program governing TNCs, and the city’s mayor said in late February the ridesharing providers may be shut down if they don’t carry more insurance.”

Lyft and Uber PR departments have not answered inquiries at this time, but you can follow the continuing developments here.


Livery Exclusion

As for SB 125, its author, state Senator Ted Harvey, R-Highlands Ranch, said the legislation would enable TNCs to operate in the state under CPUC oversight with a livery exclusion, stating that when a driver is not in the process of providing a ride, or on their way to pick up a ride, they are covered under personal auto insurance policies.

“My understanding is that Colorado’s is the furthest along in including the livery exclusion,” said Kelly Campbell, vice-president of state government relations for the Property Casualty Insurers of America (PCI).

PCI’s take is that TNC drivers are providing a commercial service any time they are logged in to the app and looking to pick up a fare. They note a “gap” in coverage between when a driver is covered under his personal policy and when the ridesharing service’s commercial policy kicks in, and that personal policies should only be responsible for when the driver is operating the vehicle for personal use. SB 125 seeks to eliminate that gap, switching coverage to the personal insurer if the driver has the app running while waiting to pick up a new fare.

Campbell contends that the app itself shows that drivers are positioning themselves in the best location to pick up a ride whether they’re at their home, a coffee shop, or anywhere else that a hotspot may exist in the communities they serve. She believes that “Driving to urban centers, or driving late at night – in places and at times where there are greater chances for collisions and other incidents that may trigger insurance coverage – can  be considered a ‘changed behavior’ for drivers, and therefore that behavior should take the liability out of the hands of personal insurers.”

“So that’s really what our concern is, the motive for profit really begins once the driver has made themselves available to accept rides,” she said. “There is a reason that commercial drivers pay more for very similar activity.”


Avoiding Shutdown

For his part, Harvey contends that he wants TNCs “to be able to operate legally in Colorado.”

“If we don’t pass something in this session, then the PUC will put these businesses out of business here in Colorado,” he said, adding that the bill “outlines regulations requiring basics such as background checks and vehicle maintenance, while the insurance requirement draws a ‘bright line’ that states when personal auto insurance carriers’ coverage stops and when the TNC’s commercial policy begins,” the IJ reported.

“One of the main goals is to make sure the consumers, and the drivers and the riders and the public in general have coverage,” he added, acknowledging that “language wasn’t broadened to mandate commercial coverage whenever a rideshare driver is logged into the app because that would mean both TNCs and the drivers would end up paying for coverage.

“If we changed it then you would have double coverage,” he said.

He also voiced concerns that drivers might take advantage of TNC’s commercial coverage. “That sets up a whole negative incentive system, where people would be incentivized to have the lowest private insurance policy possible and then drive around with the app on all the time … It’s a moral hazard that we are incentivizing the wrong behavior for people to be underinsured on their (personal) insurance policy and driving around with the app on.”


In Summary

The rise of ridesharing is starting to create a confusing gray area for when coverage should be charged to the TNC and when it should be the personal insurer’s responsibility. As SB 125 goes to the Colorado House, it will be interesting to see what happens and whether any legal challenges come about as a result. When do you think the commercial policy should be enacted — when the driver is in pursuit of or in the process of driving a fare, or whenever they’re logged in to the app? Share your thoughts in our comments section below.

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