Uber, Lyft and other ride-sharing services can make it easy to make some extra income, and they’re only becoming more popular. While the popularity of ride-sharing apps is increasing, especially in large cities, so is the host of risks associated with using them.
While they’re most commonly referred to as ride-sharing apps, any company that uses an online platform to connect passengers with drivers (using the driver’s own vehicle) is called a transportation network company (TNC). These companies each have their own unique differences, but they all operate under the same basic concept – and it can be difficult to determine what regulations the TNC and its drivers need to follow, what insurance coverages apply to them and who is considered liable in the event of an accident.
Personal Auto Policies have strict exclusions for certain business functions, such as ride sharing or livery service. Your personal auto policy will not always cover you when you are participating in Ride Sharing functions. While the TNC’s policies provide coverage for the driver while working for them, there is still a gap in coverage.
Since TNC drivers use their vehicles for both business and personal purposes, TNCs and insurance companies have to clarify the 3 phases when drivers are covered by different types of insurance:
- Phase 1: When the app is turned on and the driver is waiting for a passenger to Connect via the mobile application.
- Phase 2: When the passenger connects with the driver via the mobile app and the driver is in route to pick up the passenger.
- Phase 3: When the Passenger enters the vehicle.
Driver Risks
Some ride-share companies provide liability insurance for their drivers in excess of the driver’s personal liability coverage. However, this does not mean that the driver will always be covered.
Drivers also face the risk of being dropped by their insurance company if they’re found to be misleading them. Drivers need to be honest about what the primary use for the vehicle is when they obtain the policy. If a driver fails to indicate the intention to drive for commercial purposes, the insurer could not only deny claims, but also drop the driver from the policy. Some insurers have created hybrid policies that allow drivers to switch between personal and commercial coverage for that same reason.
NY State Drivers
The Transportation Network Company (TNC) UBER/Lyft policy provides the following coverages in NY state. (Other states have other limits – please check to see what applies in your state.)
- Phase 1: $75,000 Bodily Injury, $150,000 per Occurrence, $25,000 Property Damage and no Physical Damage Coverage. The typical personal auto policy excludes coverage in this phase, so if you are carrying higher coverages this is where the gap in coverage is. The driver would be personally responsible for any damages above and beyond these limits. There is also no Physical Damage coverage under either policy, so costs to repair or replace a vehicle would be completely out of pocket.
- Phase 2 & 3: $1,250,000 Combined single limit for liability and $1,250,000 uninsured and underinsured coverage with contingent Comprehensive and Collision coverage subject to a $1,000 Deductible.
The typical auto policy also excludes coverage in this phase, so if you are carrying higher coverages this is where the gap in coverage is. The driver would be personally responsible for any damages above and beyond these limits. Physical damage would be contingent that the underlying auto policy has physical damage but subject to $1,000 deductible.
While the TNC insurance landscape evolves to meet the safety needs of drivers and passengers, insurance companies are taking different approaches to claims. It is important for drivers to know and understand where their gap in coverage is and what options are available for them. Our agency has access to some carriers who will allow for an endorsement of coverage in Phase 1. It is important to speak to your representative about your exposures to make sure you are properly covered.
Personal Insurance
Safety
