My Car, My Business: Navigating Insurance Issues in a Rideshare World
In the last five years, ride share services such as Uber have effectively changed the way that millions of Americans move around in our cities. The advent of nontraditional ride share services as an alternative to traditional taxicabs, however, has created a number of issues regarding insurance coverage in states across the country. Among those issues are policy exclusions for car-for-hire activities, the incentive for ride share drivers to commit insurance fraud, compulsory minimum liability limits, the primacy of any commercial policy over a ride share driver’s liability or collision coverage, and the primary duty to defend the insured.
In an effort to address those issues, the Georgia Legislature passed a law that was signed by Governor Deal on May 6, 2015. The new law will go into effect on January 1, 2016 as O.C.G.A. § 33-1-24.
Ride share services such as Uber and Lyft operate online networks that allow a prospective rider to hail a ride using GPS location services. In order to use a service such as Uber or Lyft, a rider has to create a member account and store payment information. A driver can connect to Uber or Lyft via an online app, and when connected, a driver can see and pick up prospective riders who have requested a ride. Once a driver picks up a rider, the ride share service tracks the route via GPS and automatically bills the rider for the cost of the ride.
Generally, any policy of insurance issued in Georgia to the owner of a vehicle must carry liability coverage of $25,000 per person for bodily injury, $50,000 per accident for bodily injury, and $25,000 per accident for property damage. These liability limits, however, vary with regard to taxis, limousines, and ride share vehicles.
With the exception of Uber’s taxi, limousine, and SUV services, ride share vehicles are not currently subject to Georgia’s laws imposing $100,000/$300,000/$50,000 liability limits on limousines and intrastate motor carriers. Accordingly, a driver’s personal vehicle used in a ride share service such as UberX or Lyft is only subject to Georgia’s minimum limits of $25,000/$50,000/$25,000.
Standard personal automobile insurance policies issued in Georgia—and many non-standard policies—contain an exclusion for any loss that occurs while the insured is operating the insured vehicle as a car-for-hire. Notwithstanding an insurer’s contractual basis to deny coverage, Georgia courts may invalidate policy exclusions and provisions that deprive victims of negligence of compensation for their injuries. Thus, even if an insured is operating a personal vehicle to transport passengers for a fee, the insurer may still be required to compensate a third party for any bodily injury or property damage up to the state minimum limits. Of course, once an insurer becomes aware that its insured is violating the policy by operating a for-hire business, nothing precludes that insurer from cancelling the insurance policy, leaving the insured in a lark. Further, the failure of an insured to disclose for-hire activities on an insurance application constitutes insurance fraud.
Recognizing these issues, companies like Uber and Lyft have implemented company policies that afford commercial liability insurance for its drivers. These policies provide liability coverage with a single limit of $1,000,000 for bodily injury and a single limit of $1,000,000 for UM/UIM while a driver is actively transporting a passenger, that is, from the time the driver accepts the fare until the time the ride is completed. Further, both policies afforded by Uber and Lyft are expressly primary to a driver’s personal insurance policy, including the duty to defend. When a driver is merely logged in to the ride share app but has not been matched with a driver, however, the Uber and Lyft policies only provide contingent coverage with limits of $50,000/$100,000/$25,000. It should also be noted that Uber also requires its UberBlack, UberTAXI, and UberSUV drivers to carry their own commercial liability insurance, as required by state law.
Under the Uber and Lyft contingent liability policies, coverage will only apply if and when the driver’s personal liability insurer denies coverage for a loss. Although the contingent liability coverage afforded by Uber and Lyft closes the insurance gap for situations where a personal liability insurer denies coverage for a loss, it creates a perverse incentive for a ride share driver to lie to its personal insurer to avoid having the personal insurance policy cancelled.
Under O.C.G.A. § 33-1-24, a company such as Uber or Lyft is designated as a “transportation network company,” which is any entity that uses a digital network or other means to connect customers with drivers for the purpose of providing transportation for compensation. Further, “transportation network company services” are defined twofold: (1) “The period of time a driver is logged on to the transportation network company’s digital network and available to accept a ride request until the driver is logged off, except for [during an active ride];” and (2) “The period of time a driver accepts a ride request on the transportation network company’s digital network until the driver completes the transaction or the ride is complete, whichever is later.” Thus, the law contemplates that ride share services include both active fares and the time period during which drivers are actively looking for fares.
O.C.G.A. 33-1-24 will require transportation network companies to provide primary coverage for both ride share scenarios outlined above. In the case of a driver with an active fare, the law will require a minimum combined single limit of $1,000,000 for bodily injury and property damage, and a minimum of $1,000,000 for UM/UIM coverage. In the case of a logged-in driver seeking a passenger, the law will require a minimum of $50,000 per person for bodily injury, $100,000 per accident for bodily injury, and $50,000 per accident for property damage, excluding cargo.
Importantly, the new law will also create a statutory basis for a driver’s personal insurer to deny any and all coverage for any loss that occurs while a driver is either logged on to the ride share network or is actively transporting a customer. Thus, the proposed law will ostensibly relieve an insurer from bearing the risk and expense of denying coverage and providing a defense to its insured in the event of a non-covered loss. In fact, the new law expressly provides that the transportation network company “shall” assume the costs of defense and indemnification in the event of a ride share-related loss. The transportation network company’s duty to defend and indemnify applies to both a ride share driver and the driver’s insurer in the event that the insurer is also named as a defendant in a civil action.
In short, the new transportation network company law requires primary coverage in the event of a loss that occurs while the driver’s vehicle is available for ride share purposes. That primary coverage includes the duty to defend the driver, and the driver’s insurer has an express right of contribution against the insurer providing transportation network company insurance coverage in the event that the driver’s insurer incurs the costs of defending a ride share-related claim.
Although O.C.G.A. § 33-1-24 ostensibly resolves most of the insurance issues presented by the advent of ride share services, it does not address or solve all of the problems that have been created by companies like Uber and Lyft. Specifically, nothing in the new law provides any protection to a driver who has not notified its insurer of its side job providing ride share services. Currently, nothing prohibits a personal insurer from cancelling a driver’s insurance policy for nondisclosure of ride share activity. While cancellation is perfectly reasonable from an insurer’s point of view, that threat creates an incentive for the driver/insured to hide ride share activities from its insurer. Hiding such activities is not good for anyone involved, as it creates unnecessary risk and uncertainty.
To address the growing number of ordinary drivers choosing to use their personal vehicles for Uber or Lyft—Uber now has over 160,000 active drivers—insurance companies are developing “hybrid” policies that afford coverage for ride share-related losses for an additional premium. O.C.G.A. § 33-1-24 provides that the minimum coverage required for transportation network company services may be met as an additional provision or endorsement to the driver’s personal automobile policy. Thus, personal insurers now have the opportunity to expand into the new market created by Georgia’s new insurance requirements for ride share drivers.
O.C.G.A. § 33-1-24 creates a new framework for how ride share companies such as Uber and Lyft are required to insure their drivers and interact with established automobile insurers in Georgia. While providing for adequate coverage in the event of a ride share-related loss, the law also expressly requires the ride share company to provide, or cause to be provided, primary insurance including the duty to defend and indemnify a ride share driver and its personal insurer. This law, though not addressing all possible collateral issues, represents a large step in the right direction for insurance law in Georgia.