As a consumer, I love the idea of Uber or Lyft. When my family and I were on vacation overseas this summer, it was very convenient to secure a pre-arranged trip and feel confident that we wouldn’t be taken advantage of as tourists.
As an insurance professional, I’m less than thrilled with the idea of Uber. Just before my son left for college, I overheard him talking to a friend. “Yeah, I wish I could drive for Uber, but my car is too old.” I mentally patted myself on the back for providing him with a not-so-pretty, but well-maintained '98 Buick Century.
From an auto insurance standpoint, the problem with Uber is coverage for an accident while the driver is “on the clock." Most, if not all, personal auto insurance policies exclude liability coverage, medical coverage, uninsured/underinsured motorist coverage and physical damage coverage when a personal vehicle is used for a fee. Examples of this exclusion include the following from well-known insurance companies:
Policy Example 1
Vehicles used for a fee. We do not cover any person for damages arising out of the ownership, maintenance, or operation use of a vehicle while it is being used as a public or livery conveyance, including while it is being used for ride sharing in connection with a ride sharing program, for a fee.
“Ride sharing” means the use of any vehicle in connection with a ride sharing program during any time period the driver is logged into an online-enabled ridesharing application or digital network as a driver, when the driver accepts a requested ride, is en route to pick up a passenger, or is transporting a passenger until the passenger departs the vehicle.
Policy Example 2
NOTICE TO POLICHOLDERS – RIDESHARE EXCLUSION
The following sections of your Personal Auto Policy contain an exclusion which states coverage does not apply when “your covered auto” or a “nonowned auto” is being used as a public livery or conveyance:
Part A – Liability Coverage
Part B – Medical Payments Coverage
Part C – Uninsured/Underinsured Motorists Coverage; and
Part D – Coverage for Damage to Your Auto
The exclusions are clarified to specifically indicate no coverage exists when there is utilization of an online-enabled application, digital network or other form of communication used to connect passengers with drivers using vehicles for the purpose of providing prearranged transportation services for compensation.
Note that these exclusions are written to be as airtight as possible. In example 1, the exclusion applies when you are “en route to pick up a passenger” and “until the passenger departs the vehicle." Uber provides their own insurance, but the app must be on, even when the driver is waiting for a ride request. In addition, what constitutes “departing” a vehicle? What if the passenger gets out of the vehicle, realizes she left her purse in the back seat, and is injured as she gets back in the car to retrieve her purse? Has she “departed” the vehicle?
In Example 2, the company reminds you that there is no coverage and then clarifies the exclusion with a separate Notice to Policyholders. Note that this exclusion even mentions transportation services for “compensation”. It does not limit the exclusion to money.
But what if you have your heart set on becoming an Uber driver? You have the time and you want to earn some extra cash. Can you get coverage?
As with most insurance questions, the answer is “it depends”.
It depends on the insurance company that covers your car and it depends on the coverage that is offered. It is important to remember that your insurance policy is a contract between you and the insurance company. The insurance company spends millions of dollars per year employing attorneys to write the contract language and get that language approved by Department of Insurance (DOI) offices in every state in which they do business. Think of the contract language as a wall. Inside the wall is the coverage you want. Outside the wall is everything the insurance company does not want to pay for and every word in the contract is a brick in that wall.
One well-known insurance company offers an extra-cost endorsement to provide coverage while your vehicle is being used to provide rides for a fee. The endorsement is almost two pages long, contains approximately 1,000 words, and is entitled LIMITED RIDE SHARING COVERAGE. Note that the endorsement includes the word “limited”. That’s because the insurance company is taking great pains to limit the amount of coverage they are going to provide when you start your side hustle with Uber.
So, before you hit the “I accept” button on the Uber application, consider the costs against the benefits. You may have considered the loss of free time, the wear and tear on your car, and the possibility of dangerous passengers, but you also need to consider the insurance implications and how your policy may or may not respond. Talk to your agent and make sure you understand the financial risks involved.
Have questions about insurance coverage while driving for a ride-share company? David Miller has answers. Miller, who writes the monthly, DID YOU KNOW? blog is The Plexus Groupe’s Vice President, Client Executive for Private Client Solutions. He can be reached by calling 846-307-6141.
