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Ride-Sharing May Not Give You A Lift  

Recently, while visiting the city with my twenty-something daughter, I dared to experience my first ride-sharing venture. Admittedly, I was a bit leery but anxious to learn what these ride-sharing companies were all about. So I let her take charge, tap into her smartphone and call up  a quick ride around town to get to our desired location.

Easy! The request was accepted and we could track the vehicle on her phone. Block by block, I could see our ride’s approach, ticked down to the minute in real time. We even knew what make and model car to look for. All the information was available right on her hand-held device and within minutes, our car and driver pulled up, we jumped in, and off we went. To make it even simpler, no cash was exchanged. The entire transaction was completed via pre-loaded credit card from the ride-sharing app.  Didn’t even have to tell the driver our destination – that too was communicated via cell phone with the pick-up request.

Easy indeed! However, as I settled into the middle of the Volkswagen Jetta’s tiny back seat (minus the seatbelt), my mind filled with thoughts of the inherent risks associated with sharing the ride. Regulation and background checks aside, what if we are involved in an auto accident? Who is responsible and would any losses be satisfied appropriately?

Ride-sharing companies also known as Transportation Network Companies (TNC) provide taxi-like services to connect passengers to drivers via a smartphone app. Rides can be arranged in advance or on short notice. Unlike conventional taxi services, TNC drivers use their own private passenger vehicles to transport customers and because drivers are not transporting friends or family members, the operation becomes a commercial enterprise. In addition, these drivers cannot be considered limousine or taxi drivers because they are not using a commercial vehicle. Here in lies the problem: TNC’s are commercial enterprises and are not considered private in terms of insurance liabilities.

Many TNC drivers have neither a livery driver’s license (paid transportation services are considered livery) nor are their cars registered or insured as commercial vehicles. In order to have coverage, TNC drivers must have commercial insurance coverage. A personal auto policy does not provide coverage for ride-sharing and that personal coverage stops from the moment a driver logs into the TNC app to the moment the customer exits the car and the transaction is complete. TNC’s do have insurance but, the type and amount of insurance coverage provided by a TNC can vary greatly from company to company. Additionally, TNC drivers are not employees of a TNC and therefore not protected from risk as a traditional taxi or limousine driver would be covered. In the event of an accident, the injured TNC passenger may not be able to recoup damages as they would from those traditional transportation services. In fact, some state insurance regulators acknowledge that passengers are taking a risk when they pay for a ride with an uninsured or underinsured TNC driver.

If you think this sounds a little complicated, you’re not alone. This pioneer industry is prompting insurance carriers and companies to find ways to create coverage where none previously existed.  Simultaneously, local governments and municipalities struggle to draft legislation in an effort to create a framework from which to base coverage. TNC’s intentionally use their own distinct terms and language when writing policy, making it more challenging for municipalities to find corresponding terminology that conforms with the standard insurance vernacular. State legislators and insurance regulators are rightly concerned that the riders may not be adequately protected. As the industry continues to grow, legislators endeavor to address coverage issues to determine how to best underwrite the risks of personal lines policyholders driving private vehicles for hire. Colorado and California have passed legislation regarding TNC insurance coverage and it is suspected that, at some point, insurers will begin to offer policies and endorsements for the specific purpose using a private vehicle for hire with a TNC.

Adding even more flame to the fire, TNC companies are butting up against an existing system of taxis and PUC regulations. Long established professional livery for hire companies are attempting to block these newer, unregulated TNC’s from disrupting their businesses.

While it is exhilarating to be on the edge of a driving and ride-sharing revolution, it is best to be aware of the risks involved in either driving for and/or accepting a ride from a TNC. Prospective drivers should contact their own auto insurer is discuss any gaps in liability coverage and ask to review the TNC’s insurance contracts to be aware of the exact terms and conditions of coverage. Should a serious accident occur, passengers may need to engage their own auto and health insurance policies to satisfy damages/injuries not recovered by the TNC or driver. Be prepared to accept the challenges in case the ride doesn’t run as smoothly as the app would have you believe. Ultimately, maybe that easy ride isn’t so easy after all!