Ride-sharing apps have long claimed that they are simply technology companies, providing marketplaces where drivers can connect with potential passengers. As such, traditional taxi laws don't apply to them--or so their argument goes. Whether or not that's true depends on regulators in cities where transit apps have launched, but in a concession to reality, Lyft and Uber are offering new insurance policies that cover drivers when they're available to accept rides but in between fares.
Insurance companies and hot new start-ups are like oil and water. You can put them near each other, but they have no reason to mix. But now, with transit apps coming under fire for not covering drivers properly in the wake of an Uber driver's involvement in a recent pedestrian death, the rules are changing. The new insurance policies, which Lyft and Uber both introduced Friday, will cover drivers who are actively seeking fares in the app but not actually driving any passengers.
The insurance gap
Before the new liability coverage kicked in, Lyft and Uber drivers were only covered when they were transporting passengers, because drivers aren't considered employees. As independent contractors, their personal insurance was expected to cover accidents when no passengers were in the car. That policy drew criticism after an Uber driver who was actively looking for fares struck and killed a little girl in a crosswalk. Uber's insurance didn't cover the accident, leading to a wrongful-death suit against the company filed by the 6-year-old girl's family.
"Since the tragic accident in San Francisco on New Year's Eve, there has been much written about an insurance gap' during the time that ridesharing drivers are not providing transportation services for hire, but have the Uber app open and are available to receive a trip request," the company said in a Friday blog post. "As a practical matter, the vast majority of personal insurance policies cover this period either by the plain terms of the insurance policy, or due to the insurance requirements set by state. In the New Year's Eve case, for instance, the driver's insurance company has offered up the limits of the driver's personal auto policy."
But laws vary from state to state, and there are lingering questions about who bears responsibility when things go awry. The new policies apply to Lyft and Uber drivers across the country in an effort to standardize practices. Both companies also offer protection from uninsured and underinsured drivers and collision coverage. Lyft in February organized a meeting of the Peer-to-Peer Rideshare Coalition, which brought together transit app companies, California regulators, and insurance representatives. It's unclear if the new contingent insurance policies were the result of that meeting.