Insurance Regulators Warn Drivers About Ride Networking Mobile Apps

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Insurance regulators in at least 10 states have cautioned consumers about new mobile apps that connect people in need of a car ride with local drivers who want to earn some cash.

Ride networking mobile applications, such as Lyft and Uber, have recently offered services in parts ofConnecticut. The allure is that riders can pay with a credit card via their phone. Additionally, the rides tend to be less expensive than taxis.

On Tuesday, however, the Connecticut Insurance Department issued a consumer alert warning people who might sign up as drivers for “transportation network companies” that their effort to make money could cost them.

“Drivers who work for transportation network companies (TNC) may not be covered by their personal automobile insurance policies while driving for hire,” the department said. “This is due to a common exclusion in most personal auto policies for claims arising while driving for hire, a practice sometimes referred to as livery service.”

Most personal auto insurance policies have an exclusion for livery, meaning a policy won’t provide liability incurred while the driver has passengers who paid for the ride, the department said. Car pooling is a different arrangement that is covered by auto coverage.

Other states issued similar caveats in recent months, including California, Hawaii, Maryland, Michigan, Minnesota, Nebraska, Ohio, Rhode Island and Tennessee.

Uber spokeswoman Natalia Montalvo said: “Rideshare trips requested through Uber are covered by our best-in-class insurance program. The insurance is underwritten by an insurance company rated A- (excellent) by A.M. Best. The coverage is excess to the driver’s own policy, but it acts as primary insurance if the driver’s policy is not available for any reason, covering from the first dollar.”

Since 2012, Lyft has covered drivers and passengers through $1 million commercial liability policies. The company said it has added additional coverage, too, such as contingent comprehensive and collision, excess uninsured motorist coverage and other options.

“While we do expect personal insurance carriers to cover the time period prior to a driver carrying a passenger, in order to erase any uncertainty, Lyft voluntarily provides additional protection,” Lyft spokeswoman Chelsea Wilson said in a statement. “Our contingent liability protection ensures backstop coverage to drivers for up to $100,000 per accident when they are in match mode and are not providing rides.”

Lyft has a graphic on its website saying that its contingent liability coverage begins when a driver turns on the mobile app to accept rides. Excess liability and contingent collision and comprehensive coverage begin when a drive is matched with a rider until the passenger is delivered to his or her location, according to Lyft.

Despite additional coverage offered by Lyft and other companies, there are still some questions about coverage, according to the Insurance Information Institute, a research entity funded by property-casualty insurers.

Insurance Information Institute spokeswoman Loretta Worters said in a statement: “ … 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.”

Personal auto policies are based on information when the original policy was issued, and a policyholder has to tell the insurer if there have been any changes to annual mileage, people who regularly drive the car, marital status or the location where a car is primarily garaged, Worters said. Some insurers consider car sharing, or drivers who take part in ride networking, as a greater risk.

Even when a ride networking site offers extra liability coverage, questions remain about risk, Worters said. For example, If a network requires a driver to have a properly maintained car, what happens if there is an accident caused by poor maintenance of an auto? What is there’s a dispute about exactly when a fender-bender occurred? What is there is a serious accident and $1 million isn’t enough?

“I think for these reasons insurance companies are reluctant to provide insurance for people who participate in this service,” Worters said.

About Matthew Sturdevant

Full-time staff journalist at The Hartford Courant and magazine freelancer with a master's degree in writing from Dartmouth. My work has appeared in The Los Angeles Times, The Chicago Tribune, Taiwan News, The Baltimore Sun and many other news sources. My blog has been referenced by Politico.com, the Kaiser Family Foundation, the Georgetown Law Library and a number of organizations in healthcare and business. Sturdevant’s blog is "a well-written wealth of ideas," said The Donald W. Reynolds National Center for Business Journalism, (businessjournalism.org, May 18, 2011). I have experience writing for newspapers, magazines, Web sites and blogs as well as shooting and editing video. I made regular appearances on news-talk radio and on the NBC affiliate station in Corpus Christi, Texas. I made occasional appearances on the Fox affiliate in Connecticut promoting Hartford Courant articles.

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