By: Newton Anderson
I predict that the vast majority of those reading this post have used or have a close family member that has used Uber or Lyft for transportation. The advantages of ease of use, availability and price are certainly a temptation, even if you own your own car. Those advantages are fueling tremendous growth. According to the website of McKinsey & Company, (a self-described “global management consulting firm that serves a broad mix of private, public and social sector institutions”) “in December 2013, Lyft and Uber combined for approximately 30 million VMT [vehicle miles traveled] per month in the United States. Three years later, the two had reached 500 million US VMT per month—a compound annual growth rate of more than 150 percent, which resulted in over $10 billion in revenues for 2016.”
However, considerations that seem to get the most attention from those in the taxi business are the purported lack of regulation and insurance requirements for Transportation Network Companies or TNCs and their drivers and also the risks faced by the passengers.
Without coverage being provided by the TNC, coverage in the event of an accident is unlikely. A typical exclusion found in the liability section of a personal auto policy provides that liability coverages are not provided for any person for “liability arising out of the ownership or operation of a vehicle while it is being used to carry persons or property for a fee.” Or the policy might state that it excludes coverage for an “insured’s liability arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance.” Ridesharing insurance is available but anecdotal evidence would seem to indicate that relatively few ridesharing drivers have purchased it.
The website, “Who Is Driving You?” is an initiative of the Taxi Cab, Limousine and Paratransit Association (TLPA). As you might expect, they have not been pleased with the meteoric rise in the public’s use of TNC’s. They described their website as “a public awareness campaign for promoting for-hire vehicle safety and highlighting the risks of Uber and Lyft.” The site includes a lengthy “reported list of incidents involving Uber and Lyft” including the following categories: Deaths, Assaults, Sexual Assaults, Kidnappings, Felons, Imposters, Other Serious Incidents.” The existence of risks associated with TNC transportation cannot be denied.
A quick use of your search engine will reveal several law firms that are attempting to establish themselves as experts in making claims on behalf of passengers, occupants of other vehicles and pedestrians who have been injured in an accident being driven by someone driving for a TNC.
State laws vary but there appears to be a trend in requiring at least $1 million in liability coverage for the privilege of operating a TNC in certain states. However, it is not a simple question of whether or not there is coverage in the event of an accident.
It is generally accepted that they are three phases of risk. The first is the sign in phase, or that period of time when the driver is logged into the TNC app but has not yet accepted a passenger. The second phase is when a passenger has been accepted, but has not been picked up. The third phase occurs while the driver is transporting a passenger. Depending upon the state’s particular requirements and the current level of voluntary coverage being provided by the TNC, the amount of coverage available during any of those phases may vary. In addition, the TNC may argue that it has no responsibility whatsoever during phase one.
According to Uber’s website, liability coverages for the Uber driver during the first phase are at least:
- $50,000 per person/$100,000 per accident for bodily injury
- $25,000 per accident for property damage
During the second and third phases, Uber provides third-party liability coverage and Uninsured Motorist/Underinsured Motorist coverages which are at least $1,000,000 per accident. Interestingly, Uber states that this “insurance covers [the driver’s] liability for damages to any third party such as another driver, pedestrian, or property in case of an accident when [the Uber Driver is] at fault.” The Uber passenger is not mentioned.
Uber also carries contingent collision and comprehensive coverage for their driver’s vehicle with a $1,000 deductible.
Of course, the specific terms of the policy must be checked, but it would appear that a TNC passenger, the occupant of another vehicle or a pedestrian who is injured by a TNC driver who has no or inadequate liability insurance, would be entitled to Uninsured/Underinsured Motorist Coverage if that injured person has their own coverage. The typical UM/UIM exclusion regarding a vehicle “being used to carry persons or property for a fee” applies when the vehicle being used to carry persons or property for a fee is a “covered auto” under the policy. So, the TMC driver would likely not be entitled to UM/UIM coverage, but the passenger or other injured party should not be precluded from making a claim with their own carrier.
Under current Tennessee law, in the Tennessee Ridesharing Act, first passed in 1984, the definition of “Ridesharing” is “the prearranged transportation of persons in a motor vehicle where such transportation is incidental to another purpose of a volunteer driver, and includes ridesharing arrangements known as carpools, vanpools, and buspools.” Tenn. Code Ann. § 65-19-202. That is probably due for an update.
As the rideshare industry is growing and changing, so too are the issues related to liability for accidents. However, as state laws increasingly require coverage and as more personal policy providers offer ridesharing coverage endorsements, the risk that those injured due to the negligence of a TNC driver would have to look to their own UM/UIM carrier would seem to diminish. But there will still be much tort and coverage litigation associated with the unique circumstances associated with the TNC business.
Now, don’t even ask me about driverless cars!
Newton Anderson is the Managing Member in the Memphis office and focuses on Litigation (Business and Commercial, Employment Practices, Insurance Coverage, Insurance Defense, and Real Estate), Liability (Automobile, Premises, and Products), Alternative Dispute Resolution, Corporate and Business, Insurance Subrogation and Workers’ Compensation law.