Peer-to-peer ride hailing has exploded on the scene. It is either the next big innovation in the marriage between technology and social networking or it is the next big innovation since slap bracelets and Silly Bandz. Regardless of its future, ride hailing is here and, at least for the immediate future, it isn’t going anywhere.
What's ride hailing? I thought it was ride sharing?
You might be thinking “A rose by any other name would smell as sweet” but there is a difference between the terms “ride sharing” and “ride hailing.” At its most basic level, ride sharing is carpooling. It is the act of sharing a vehicle with one or more people for the purpose of commuting to a desired destination. The goal is to share costs among all occupants of the vehicle, making the commuting more inexpensive than it would be if you were commuting alone. However, with the rise of peer-to-peer ride-sharing apps from Transportation Network Companies, such as Uber and Lyft, the traditional act of carpooling has taken on a more commercial quality. TNC apps connect a driver with a passenger for a fee, an act that resembles hailing a taxi rather than hitching a ride with friends to work. Thus the term ride hailing was born.
The devil is in the details
It might seem like a small distinction between ride sharing and ride hailing, but that distinction can make all the difference in the world when it comes to insurance coverage. Typically, your personal auto policy has what is known as a “livery exclusion.” This exclusion states that when an individual uses his or her personal auto as a livery vehicle (i.e., transporting passengers in exchange for a fee such as acting as a ride-hailing driver) the personal auto policy will not cover liability, medical payments, uninsured/underinsured motorists or physical damage for any accident that occurs while the vehicle is being used in that manner. This means you will not have coverage under your personal auto policy in the event you are in an accident while acting as a TNC driver.
Make sure you have protection
We have established that your personal policy will not protect you in the event of an accident, but will the TNC provide coverage? The largest TNCs have responded to the livery exclusion in personal auto policies by providing liability, uninsured/ underinsured motorist and comprehensive/ collision coverages to TNC drivers while they transport passengers for a fee. However, this does not solve the issue completely, as policies provided by TNCs typically are considered excess to the personal auto policies, which means they will provide coverage only if your personal auto policies denies coverage. This can create a situation in which the handling and settlement of claims related to a TNC accident can be a long and drawn out affair.
What are your options?
It is not all bad news if you wish to engage in ride hailing, though. The insurance market is always adapting and evolving. The Insurance Services Office Inc., an organization that develops standardized insurance policy language for the insurance industry, has recently proposed a form that would allow a driver to purchase coverage for the time that he/she is on a TNC app, but has not yet been matched with a passenger. Some insurance companies also are venturing forth with special policies intended for ride-hailing operators. In addition, state legislatures across the country are passing measures designed to remove some of the ambiguity that is associated with ride hailing and insurance coverage.