Rider Beware When it Comes to Ride-Sharing Apps
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Ride-sharing apps have been growing in popularity, but in the last few months, more than a dozen states and insurance regulators have warned consumers about potential insurance problems. Here’s what you should know before accepting a ride, or driving someone else for a transportation network company.
Ride networking apps have been gaining traction for several reasons: they tend to be cheaper than legitimate livery companies, and the rider can pay with a credit card via their phone. But riders — as well as drivers — beware.
On May 6, the Connecticut Insurance Department (CID) issued a consumer alert warning people who are considering becoming drivers for transportation network companies (TNC) that they may not be covered in case of an accident.
Livery: a common exclusion in personal auto policies
The CID explained that drivers who work for TNCs may not be covered by their personal automobile insurance policies while driving for hire. This is because most personal auto policies have a common exclusion for livery, meaning driving someone for hire. Most auto insurance policies won’t provide coverage and benefits for liability incurred while the driver has passengers who paid for the ride. Carpooling is a different arrangement that is covered by auto coverage, since most people usually don’t pay for a carpooling service.
In recent months, other states including California, Hawaii, Maryland, Michigan, Minnesota, Nebraska, Ohio, Rhode Island and Tennessee issued similar TNC warnings.
Some TNC companies cover drivers and passengers with commercial liability policies, but despite additional coverage, there are still questions to consider about coverage. The Insurance Information Institute, a research firm funded by property-casualty insurers, asked, “Even when a ride networking site offers extra liability coverage, what happens if a network requires a driver to have a properly maintained car? Or there is an accident caused by poor maintenance of an auto? What if there’s a dispute about exactly when a fender-bender occurred? What if there is a serious accident and $1 million isn't enough?
For these reasons, the Insurance Information Institute stated, "Insurance companies are reluctant to provide insurance for people who participate in this service, and any peer-to-peer car sharing service is doing a disservice to its customers by not disclosing to them that they are putting their personal insurance and perhaps their own assets at risk. These companies should let their customers know that if their vehicle is being used as a commercial venture, it should be insured with a commercial policy."
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