A Major Flaw with Rideshare Services that You’ve Probably Never Considered

by Terry Bryant

A Major Flaw with Rideshare Services that You’ve Probably Never ConsideredModern technology provides consumers with many options in the for-hire transportation market. Over recent years, the rideshare industry has gained market share and expanded to large cities internationally. Private drivers were once exclusively associated with the wealthy. But now, the average consumer can afford to request a private driver through a rideshare app on a per ride basis at a relatively low cost.

Here in Houston, Uber has disrupted the taxi market and become a popular transportation option. Lyft is another rideshare company available in other Texas metropolitan areas, including Austin, Dallas-Fort Worth, and San Antonio.

Despite legal efforts, largely on the part of taxi unions and local governments, to prevent rideshare companies from operating in certain cities, rideshare companies look like they are here to stay. Many arguments against rideshare companies focused on the issues of lack of regulation and safety.

The process of becoming a driver for a rideshare service is largely unregulated. Policies vary by company, but most classify their drivers as independent contractors—not employees. Generally, a potential driver must complete an online application process, which includes providing a valid drivers license and proof of a personal auto insurance policy, getting their car inspected, and passing a basic background check. Once a rideshare company approves a driver as an independent contractor, the driver can hit the road with the mobile phone and rideshare app and start picking up customers.

While most rideshare users focus on price and convenience, some do not take the time to think about safety concerns associated with using a rideshare app. Most rideshare drivers do not have any more training than the minimum state requirements to obtain a drivers license, meaning rideshare drivers will not be specifically trained to offer transportation in a commercial capacity.

One of the most glaring safety concerns in using a rideshare app is insurance coverage. When a motor vehicle collision involving a rideshare driver occurs, there may not be applicable or adequate insurance coverage for bodily injuries sustained by passengers.

Uber currently maintains $1 million in liability insurance coverage and $1 million in uninsured/underinsured motorist (UM/UIM) coverage that applies when a driver is “on trip.” This coverage is reduced to $50,000 per person/$100,000 per incident in bodily injury liability coverage and $25,000 in property damage liability coverage if an Uber driver is between trips. Lyft has similar coverage with similar conditions. There are complex conditions about what mode the driver’s app must be in for coverage to apply, and in some instances, the rideshare company’s commercial policy is secondary coverage.

The key to insurance coverage will most likely lie within the distinction of the rideshare driver’s personal auto insurance policy and the rideshare company’s commercial auto insurance policy. Although a rideshare company will likely require a driver to have a valid personal auto insurance policy at the time of submitting an application, the rideshare company may not continue to monitor the driver’s continued coverage. More importantly, many personal auto insurance policies contain coverage exclusions that apply when the covered driver is engaged in providing for-hire transportation services. This means that the driver’s personal auto insurance policy will not likely provide coverage for injuries sustained while the driver is transporting customers from a rideshare app.

A consumer may think that any injuries not covered by the driver’s personal auto insurance policy would be covered under the rideshare company’s commercial auto insurance policy. Not necessarily. In addition to “on trip” requirements, most commercial policies contain other coverage exclusions. For example, if your rideshare driver’s app malfunctions and the trip is not properly documented, the rideshare company’s commercial auto insurance policy may not provide coverage.

It is quite possible to find a gap in auto insurance coverage between a rideshare driver’s personal auto insurance policy and the rideshare company’s commercial auto insurance policy. In the event of an injury claim, it is important to thoroughly evaluate all potential insurance coverage available and pursue relief from the proper parties. The law that applies to rideshare companies, drivers, and collisions is new and evolving, so there may not be a clear answer.

If you are injured in a motor vehicle collision involving a rideshare driver, consult a board certified personal injury attorney to evaluate your potential claim.