Transportation Network Companies (TNCs) facilitate the use of personal vehicles to transport passengers for a fee using a technology based platform, such as a website or a mobile application to connect riders and drivers. The three most widely used TNCs are UberX (available in 53 countries and more than 200 cities worldwide), Lyft (available in 60 locations in the United States) and Sidecar (available in a number of California cities and elsewhere). TNCs are growing in this country and, as with many new businesses, there are also new and unforeseen risks. Among those are a number of unresolved insurance issues relating to covering the use of a personal vehicle while engaged in a commercial endeavor. As a result, if you are a TNC or you are thinking about establishing one, you should consult with an attorney to determine whether the current insurance policies and coverage satisfy state and local requirements in your area, and to analyze whether any new insurance products may provide further security.
Most personal automobile policies exclude transporting strangers for a fee through a "livery exclusion" in standard policies. Regulation of TNCs is in its infancy and, not surprisingly, the state leading the way is California. In fact, it was the California Public Utilities Commission that coined the term "Transportation Network Company" to describe these rideshare entities. TNCs are quickly replacing taxis and limousines as a means of hiring transportation, but, whereas taxis and limousines are licensed by the state and are required to have commercial insurance protecting both passengers and third parties 24 hours a day, 7 days a week, no such licensing or insurance requirements currently exist for TNCs, so coverage gaps may well exist.
TNC services are broken down into three primary periods:
-
Period 1 is the time where a driver had the App open and he/she is waiting for a match;
-
Period 2 is the time when a match has been accepted, but the passenger has not yet been picked up and the driver is on his/her way;
-
Period 3 starts when the passenger enters the vehicle and lasts until the passenger exits the vehicle.
Pursuant to legislation passed last year in California, effective beginning July 1, 2015, different levels and different types of coverage attach to each of these periods. For example, during the first two periods, the TNC must maintain primary insurance in the amount of $50,000 per person, $100,000 per incident, and $30,000 for property damage. In addition, the TNC must maintain at least $200,000 of excess coverage per occurrence during these periods. During the critical third period, California will require primary commercial insurance in the amount of $1 million, as well as an additional $1 million of uninsured and underinsured motorist coverage.
Most Uber riders are probably not aware that Uber is not the name of the rideshare company instead, Uber Technologies Inc. is the entity that licenses the software/application and the ride share is a separate entity known as Rasier LLC (Rasier-CA LLC in California and Rasier-DC, LLC in the District of Columbia). The Rasier entities, and not Uber, are listed as the named insureds on a standard Business Automobile Insurance Policy issued by James River Insurance Company, a specialty insurer operating on a non-admitted basis in all fifty states and the District of Columbia.
