Insurance for ridesharing companies like Uber can be complex
June 2, 2015
Transportation network companies (TNCs), which connect passengers with both layperson and professional drivers via phone apps, are rapidly gaining popularity. The companies bring regulatory and safety concerns, however, particularly with respect to insurance. Utah recently adopted regulations for TNCs, which had previously been operating in a grey area of state law.
Park City requires "for-hire vehicle" drivers to obtain a business license from the city. The drivers are required to have a commercial driver’s license endorsement, a current certificate of inspection for their vehicle and commercial insurance coverage of at least $750,000 for a vehicle that carries fewer than eight passengers. The insurance requirement is $1.5 million for vehicles with up to 15 passengers.
The two largest TNCs are Uber and Lyft. Lyft operates in Salt Lake City but not Park City, which leaves only Uber operating locally.
For its most basic service, UberX, Uber says it provides $1 million of liability coverage per incident and $1 million of uninsured/underinsured motorist coverage while passengers are in the vehicle.
Utah essentially legitimized Uber’s operations in the state when Senate Bill 294 ("Transportation Network Company Amendments") was signed into law by Gov. Gary Herbert on March 31. The bill requires Uber to maintain insurance levels that it already provided (e.g., $1 million liability coverage). The company is responsible for its own background checks and vehicle inspections and is overseen by the state Division of Consumer Protection.
Senate Bill 294 expressly forbids local government agencies from implementing more restrictive requirements on TNCs, such as those related to insurance. Even if it wanted to, Park City cannot regulate ridesharing services like Uber.
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Insurance coverage gaps
While Uber provides coverage when a passenger is in a car, and it also provides supplemental coverage when a driver has his Uber app on and is looking/waiting for a trip ("if/when the driver’s personal auto policy does not provide coverage"), it does not provide coverage when the app is off.
The National Association of Insurance Commissioners (NAIC) recently released an analysis of ridesharing companies, noting that the insurance coverage is somewhat patchwork.
"Coverage gaps for TNC drivers may exist because TNCs do not require drivers to maintain commercial coverage. Instead, TNCs rely on a combination of the driver’s personal auto insurance and the TNC’s commercial insurance to cover the TNC activities," according to the report.
The Utah Insurance Department advises people interested in becoming Uber drivers "to talk to your insurance provider about what your personal policy may cover if you are involved in an accident."
"Be aware that some providers may not insure you if you choose to conduct commercial business with your personal vehicle," it adds.
The NAIC notes that insurers are beginning to offer specialized supplemental TNC coverage that can be added to personal insurance policies. Those insurance supplements, called "endorsements," are offered in various states by insurers such as MetLife, GEICO and Farmer’s. With Senate Bill 294 fully legalizing TNCs in Utah, it shouldn’t be long until such endorsements are available for Utah drivers.
For Uber passengers, the Utah Insurance Department explains, "Your personal auto policy will likely provide you with some coverage."
For passengers who don’t own a car, however, "you might consider purchasing a ‘named non-owner’ policy, which provides coverage for you above any insurance the vehicle’s owner may have," it advises. Such a policy would protect a passenger in a case in which the driver was not adequately insured.