At The Zebra, we’re huge fans of Uber and Lyft. Both recently set up shop in Austin, despite the fact that the city hasn’t quite made it legal yet—and a few ‘stachioed Lyft cars ended up impounded as a result. But we love the same thing everyone else loves: it’s affordable, it’s easy to use, and it’s reliable—it just makes sense to get a text message when your driver leaves, and when he’s ready for you. (My sister has got it down to science in D.C.: she requests the UberX, brushes her teeth and grabs her keys, and voila. Time to go.)
But we’re also an insurance agency, so as the conversation about Uber/UberX, Lyft, and car insurance escalates, with new rulings in California just last week, we decided to take a closer look at just how insurance works with these companies. We wondered: Are riders in Uber and Lyft cars safe in terms of insurance coverage? What about drivers?
The Good News: Riders are in Good Shape
Not only can UberX rides, in which drivers use their own vehicles, rather than commercial vehicles, to transport riders, sometimes be 50 percent cheaper than taxi rides, they’re also safe, insurance-wise. Uber makes their insurance policy clear on their blog: “From the time a driver accepts a trip request through our app until the completion of the ride, our partners have $1 million of coverage for driver liability.” That means both drivers and riders are fine in the event of an accident while the driver is transporting a passenger, because they have a massive commercial policy backed by the company to protect them.
Where it Gets Murkier: The Drivers in their Down Time
Companies like Uber and Lyft are what the state of California recently coined “Transportation Network Companies,” otherwise known as TNCs. Both companies have heavily recruited drivers, some of whom work full-time, some who supplement their income by driving over the weekend. Over South by Southwest, UberX offered free services to Austin for the festival, and the driver who took my boyfriend and I from Sixth Street to the Childish Gambino show at Butler Park told us he’d make several hundred dollars that weekend, just by picking up a few hours (and it was free at the time, so he was only working for tips).
But what if our driver got in a wreck? What if he got in a wreck while he was waiting for someone to “hail” him, but didn’t have an active rider? Turns out, that’s the gray area drivers, the companies themselves, and insurance companies are still figuring out. Dave Sutton of the Taxicab, Limousine & Paratransit Association told LA Weekly‘s Dennis Romero, “Any drivers who think they are protected by their personal auto insurance when they get in an accident while working for Uber and Lyft simply won’t be. These massive insurance gaps need to be closed.”
Fast Company‘s Neal Underleider also reported last week on the recent California rulings, explaining that indeed UberX drivers are independent contractors, which means they are covered by non-primary umbrella coverage. In March of this year, Uber upped coverage of the gray area in question, explaining on their blog: “Starting today [March 14, 2014], if a driver’s personal insurance policy is found not to cover an accident during this period, this new policy will provide contingent coverage for a driver’s liability at the highest requirement of any state in the U.S: $50,000/individual/incident for bodily injury, $100,000 total/incident for bodily injury and $25,000/incident for property damage.” But critics say it’s not enough.
“The novelty of this growing and innovative form of transportation has resulted in complex questions regarding insurance and there may be language in some policies in some states where ambiguity remains about whether personal insurance will cover the time between trips,” Underleider explains.
Another startling stat from Romero’s piece: “While firms such as Uber and Lyft say they maintain $1 million coverage in “excess insurance” per incident, the devil’s in the details: The companies say the driver’s own personal insurance is the coverage of first resort.”
What Do The Insurance Companies Think?
nosy curious folks that we are, we wanted to know what some of the companies we partner with think about all of this change in such an established, regulated industry. Esurance public relations representative Danny Miller said he could not provide comment on Quoted’s questions, which included:
- If an Esurance-covered driver is using his car to transport Uber and Lyft riders, are those riders insured under the driver’s policy? Does it depend on the policy the driver has selected?
- Does Esurance have a position on whether or not Uber and Lyft drivers should maintain commercial car insurance policies or personal car insurance policies?
- Does Esurance think Uber and Lyft should be required to carry taxi-like primary insurance and/or protect drivers against lawsuits when they are providing their services?
However, we pressed him (gently!) and in answer to the first question, he did direct us to this blog post, which makes clear from the title (“Are you sure you want to be an UberX Driver?”) that Esurance wants to dissuade its customers from becoming UberX drivers:
“Though we can’t speak for all insurance companies, the livery exclusion [providing passenger transportation for hire] is pretty universal. According to our definitions of coverage, [UberX and Lyft] drivers would need commercial insurance since a personal auto policy through Esurance doesn’t cover both personal and commercial use of a vehicle. In all states except California, we’re unable to offer a standard policy to TNC drivers. And in California, the driver’s standard coverage doesn’t apply during a rideshare trip.”
The bottom line: If you’re using your car to make money, chances are, your personal insurance won’t cut it
“Many drivers’ personal insurance policies, which would cover damages to themselves or their car, are increasingly less likely to cover claims for accidents that happen while transporting paying passengers,” explains San Francisco Gate writer Ellen Huet in her piece on Uber, Lyft, and insurance. “Most standard personal policies do not cover accidents “arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance,”” Huet writes.
We went to one more expert source we knew would have great advice: Our own group of agents. Here’s what expert Zebra insurance agent Rick Vasquez offered up as his take:
“I think that services like Uber and Lyft are great, and it is where the future of public transportation is moving towards to—maximizing the use of personal vehicles, while getting reimbursed for it!” Vasquez says. “We are already overcrowded here in Austin, and the last thing we need is 9-passenger vans with only the driver inside congesting our roads. However, the problem lies in where do you draw the line between a commercial vehicle and a personal vehicle being used for such services. Most insurance carriers would probably cancel a personal lines policy if it was found that the driver was using the vehicle to transport people for compensation. And that creates a potential liability to the operator of the vehicle. If a claim is denied because of the use of the vehicle, then the driver would have to rely solely on the insurance provided by Lyft or Uber. God forbid their insurance does not come through, it is possible it would create a mesmerizing burden on the driver. Services like Lyft and Uber are new, and with everything that is new you kind of learn as you go, you just dont want to be “Subject # 1” of the case study.
So as a matter of precaution, I would recommend anyone driving for such services to protect themselves with a commercial policy. That is, until actuaries are able to come up with a way to rate Lyft and Uber Drivers using personal lines policies. At the very least, drivers should call their agents or insurance companies, and be honest with them. That way, if there are any expectations of coverage during an accident, there would be a recorded conversation somewhere.
We’d love to hear from Uber and Lyft drivers—or drivers from any other ridesharing company near or far: What do you do about insurance? Does it worry you?