Ride-share apps like Lyft, Sidecar and Uber are simple. Press a button on your smartphone and a few minutes later a car arrives. Auto insurance on the other hand, is complicated and when that smiling driver shows up to shuttle you across town, liability claims and underinsured motorists are probably the last thing on your mind.
As the City Council continues to debate whether and how to regulate the ride-share business, some of the discussion, according to a council staff member, will center on deciding if companies have adequate insurance protection for riders, drivers and anyone else involved in an accident with a ride-share vehicle.
On the surface, it seems that ride-share companies actually provide more liability coverage than taxis. Lyft, Sidecar and UberX all say they have $1 million liability policies — more than three times the $325,000 required by the city for taxi drivers.
By contrast, many taxi drivers choose to carry the least amount of coverage required by the city. At least according to Robert Rashidi, an agent for Top Notch Insurance, a company that specializes in taxi insurance in Seattle. “They always shop for the lowest premium and lowest required coverage,” he said. “They always ask if we can talk to the state, or the agency and see if they will take a lower amount.”
But each of the three big ride-share companies has refused to comply with City Council requests for copies of their liability policies. “Different companies have given us different reasons," says Jesse Gilliam, an aide in Council President Sally Clark's office. "Generally that it’s proprietary and between them and the insurance company.”
"From our perspective, it would definitely be helpful if we knew more about the insurance," he said. Clark chairs the Council's Committee on Taxi, For Hire and Limosine regulations — one of the venues where the ride-sharing discussion is unfolding.
Liability insurance is designed to protect passengers, pedestrians and other drivers who are harmed in a crash that is the policyholder's fault. If a ride-share driver hits a pedestrian, for example, the driver's liability insurance pays for their injuries. If another driver hits a ride-share car, then that driver's insurance pays for the damages to the vehicle and any injuries to the ride-share driver and passengers. Some uncertainty arises though if an uninsured or underinsured motorist hits a ride-share car and is at fault.
When Crosscut asked Lyft, Sidecar and Uber whether their liability policies would cover that scenario, the companies declined to comment, or dodged the question in emailed replies. Taxi drivers are required to carry $100,000 per-person and $300,000 per-incident coverage for collisions with uninsured or underinsured motorists. Personal auto insurance companies in Wash. are required by law to offer uninsured and underinsured motorist coverage, but drivers can choose to waive it, which means ride-share drivers may or may not be covered for these scenarios.
David Schoeggl, a Seattle-based lawyer and law professor who specializes in insurance and professional liability cases, warns that details like this matter when it comes to insurance policies. “Insurance is talked about like a commodity, but when a claim is made it’s treated like a contract. Everyone pulls out the terms and goes through the fine print,” he says. Schoeggl also cautions that the driver could be responsible if the damages in an accident exceeded the ride-share company’s liability coverage and that in lawsuits involving taxis, and even ice cream trucks, companies commonly distance themselves from their drivers in court.
Rashidi, the taxi insurance agent, says he's seen the same thing in cab accident court cases. “As a cab operator," he said. "The company is not your employer and is not liable for what you do."
Lyft, Sidecar and UberX all verify that their drivers have personal auto insurance policies that meet Washington's required minimum standards, but insurance agents, company representatives and trade group spokespeople say that drivers risk voiding their personal policies if they carry ride-share passengers. That's true even in the case of collision insurance, which ride-share drivers might think would cover the cost of repairs to their own vehicle if they got into an accident.
According to PEMCO's marketing and communications director Jon Osterberg, the company considers ride-sharing commercial activity — even if drivers are only compensated with donations. “Personal auto policies are not intended to cover commercial activities,” Osterberg said in an email. “They’re meant to charge the right rate for risk… Commercial activity changes the risk and makes inadequate the prices charged for that pool of drivers.”
Insurance agents at Safeco and Travellers also said personal insurance would not cover accidents that took place while ride-sharing.
Simpson said that Lyft has been in contact with top personal insurance companies to “help clear up how ride-sharing works.” She also claimed to know of multiple cases where insurance companies had, with full knowledge of their ride-sharing, paid for drivers' collision claims. In both cases, she declined to share details. Likewise, Sidecar's Vice President of Communications said, "there hasn’t been an incident where a Sidecar driver’s personal insurer has denied coverage."
Until the industry sees a little more clarity, drivers for Lyft, Sidecar and UberX who have a wreck while ride-sharing could be stuck paying the full cost of repairing their vehicle out-of-pocket. “That makes me really nervous,” said Tom, a Sidecar driver. “I definitely haven’t talked to my insurance company.”
“This is a 2012,” he added nervously, referring to his immaculately vacuumed and waxed Toyota Prius, which he insures with personal collision and liability coverage.
A taxi and commercial truck driver for 24 years before he started ride-sharing, Tom said he had not talked with anyone in-person at Sidecar since he started using the app in August. “They definitely didn't say anything [when he registered to become a driver], like, that your insurance company needs to know you’re doing ride-share.”
Branden Lopez, a graduate student in the University of Washington School of Dentistry, started driving for Lyft in early June. Like Tom, he didn't ask for the details of Lyft’s liability policy when he started using the app; nor did he tell his insurance company that he was ride-sharing. “It was kind of ambiguous,” he said, referring to the discussion about insurance when he completed the process to become a Lyft driver. “I never read the fine print.”
An UberX driver, who asked not to be identified because he used to drive a taxi and feared his former co-workers would harass him for talking about ride-sharing, said he had not seen a copy of Uber’s $1 million liability policy. “I’m such a guy that never looks at anything.” He does, however, have a “semi” commercial policy that he purchased through a friend he grew up with in New Delhi, who now sells insurance in Seattle. “It’s the best insurance one can think of,” he boasted.
Liability in the ride-share business might come into clearer focus in January, when a case in San Francisco goes to court. In March, an Uber driver failed to yield and hit another car, sending the car smashing into a fire hydrant. The hydrant sheared-off, flew through the air and hit a female pedestrian, according to court documents filed by the woman’s lawyer. The accident fractured one of her legs and herniated multiple discs in her back.
In this case, the Uber driver had commercial liability insurance, but the woman still filed a lawsuit against both the driver and Uber for damages that include medical costs, lost income and legal fees.
These are the sorts of incidents that Loretta Worters, Vice President of the Insurance Information Institute, says will make insurance companies view ride-sharing unfavorably.
“Your risks are greater when you're driving people around. There’s more people that could be hurt or killed, or could sue you,” she says. “We live in a very litigious society.”