Ride-sharing apps pressed to augment insurance coverage

Advancements on insuring ride-sharing apps have grown after the death of a 6-year-old girl in San Francisco.

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Following the death of a 6-year-old girl in San Francisco, lawmakers in several states are considering whether to require ride-sharing apps such as Uber, Lyft, and Sidecar to fortify their insurance policies, with a particular question arising when no riders are present in the vehicle.

The Property Casualty Insurers Association of America contends that personal auto policies are not sufficient for drivers of mobile app-based transportation companies, many of whom operate in a similar fashion to taxi and limo services.

While these companies do carry $1 million of commercial coverage in many states for when passengers are on board, PCI feels that this coverage should be extended to include the time when drivers turn on the smartphone app and begin searching for riders.

“Apparently the insurance industry believes it’s a different risk calculation when somebody is using their car for commercial purposes or for personal purposes.  And therefore it follows that they ought to have commercial insurance,” said William Mitchell College of Law professor Daniel S. Kleinberger.

“I don’t see why a person who is injured when the app is on should be guaranteed less protection than a person who is injured when there is a rider in the car.”  

Some states are stepping in to regulate the amount of coverage that ride-sharing apps should obtain.  Colorado, for example, passed a law mandating that these companies must acquire a permit from the Public Utility Commission, have $1 million of liability insurance when riders are in the car, and primary insurance when drivers are seeking passengers.

Kleinberger feels that the entire course of ridership, from finding a customer to turning off the smartphone app, should be covered by one policy.

“If they’re cruising, they’re acting in a commercial fashion, and there are two kinds of people who could be injured by the driver: those inside the car and those outside the car.  Unless it’s the case that the over- over- overwhelming majority of people are injured inside the car and drivers never hit anybody outside the car, then I don’t see a distinction,” he said.

“In some ways, it would seem more likely for drivers to have an accident when they’re looking down at their phones saying, ‘oh, is this close enough, is this person worth picking up, should I run this light?’ then when you actually have someone in the car.”

He also points out that favorable treatment granted to ride-sharing services in the form of insurance policies that differ from those applied to traditional taxis and limo carriers will stifle competition and hurt traditional cab drivers.

“When somebody who has an insurance background or comes from an insurance perspective says that the rule you’re proposing will cause these problems and here’s why, I always listen to them, because it’s always pretty rational.”

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