Insurance and Liability Issues Facing Uber and Lyft Drivers

July 12, 2014

Ridesharing services such as Uber and Lyft have dramatically grown in popularity in New Jersey. These services pride themselves in making it easier and cheaper to obtain taxi services. Ridesharing services boast that they can operate at a cost of up to 50% less than the price of regular taxi cabs in some cities.  Unlike taxis, however, customers do not hail Uber or Lyft drivers on the street.  Instead, customers download the Uber or Lyft app to their smartphone and arrange for and pay for the driver through the app.  Ridesharing service  drivers consist primarily of individuals with other jobs who moonlight their personal, driver-for-hire services to supplement their income.  The companies perform background checks on the drivers, inspect their vehicles, and give them a meter.  Drivers work their own hours and use their own vehicles to transport customers.

Although innovative, these services raise several issues from a liability standpoint.  For example, when an accident happens, who is liable?  According to Uber, their drivers “carry best-in-class commercial insurance coverage” in the event of an accident.  Insurance coverages issues in this scenario, however, can be complex.  Although Uber’s above-mentioned $1 million of commercial coverage kicks in regardless of whether the driver’s personal insurance applies to the trip, that coverage is only effective from the time the driver accepts a trip request through the app until the completion of the ride.

Coverage issues may arise, however, when a driver who is not on a trip, nor picking up a rider, gets into an accident.  At that point, the commercial liability coverage is not in effect and instead the driver’s personal automobile policy should apply – or so says Uber at least.  This exact scenario was recently the subject of a lawsuit after a 6-year-old girl, Sofia Liu, was killed in San Francisco after she was struck by an Uber driver.  Uber’s insurance carrier denied coverage in that case, claiming that the driver was not on an Uber trip or picking up a rider.  The family, however, argued that the Uber driver had the Uber app open, was able to receive a trip request, and was distracted by the app at the time of the accident.  Although the driver’s insurance company ended up offering the policy limits on the driver’s personal auto policy, the fear is that an insurance gap exists under such a situation – with both Uber and the driver’s personal auto policy denying coverage based on ambiguities in policy language.

To address this issue, Uber has stated that, effective March 14, 2014, they now have a contingent insurance policy in place that expands the insurance of ridesharing drivers to cover any potential insurance gap for accidents that occur while drivers are not providing transportation service for hire but are logged onto the Uber network and available to accept a ride.  Under this scenario, according to Uber, if a driver’s personal insurance policy is found not to cover an accident during this period, their new policy will provide contingent coverage for a driver’s liability at $50,000/individual/incident for bodily injury, $100,000 total/incident for bodily injury, and $25,000/incident for property damage.  If the Uber app is not open and the driver is not providing transportation services, on the other hand, Uber says that the driver’s personal auto policy would apply.

Despite Uber’s reassurance, the safest bet of course would be for ridesharing drivers to maintain a commercial auto policy, much the same way traditional taxis and limo companies operate.  If you are involved in a car accident with someone who is driving for Uber, Lyft, or a similar car service, the primary defendant will of course be the individual driver.  Another potential defendant, as can be seen above, however, would be the car service provider, such as Uber of Lyft, itself.  Moreover, although Uber and Lyft disclaim any liability for their drivers’ behavior, contending that they are independent contractors, one potential claim against Uber and Lyft is their selection process for their drivers. To the extent that their selection and vetting process of potential drivers is at all inadequate, a person hit by an Uber or Lyft driver may be able to maintain a claim against the company for negligently permitting a driver to operate a car on its behalf.

In addition to liability and insurance coverage issues, these services have met resistance among taxicab groups, city and county governments, and concerns from law enforcement.  Law enforcement officials continue to ticket Uber drivers for not being in compliance with the current law.  Nearly all drivers from Uber and Lyft may not be in compliance with the current state of New Jersey Motor Vehicle Code Title 39 or the provisions of article 2 chapter 16 of Title 48 of the Revised Statutes.  Officers may cite these drivers for not having proper commercial insurance and for not having their cars registered as vehicles for hire.

For example, N.J.S.A. 39:5G-1 provides penalties for violations of limousine laws.  Pursuant to N.J.S.A. 39:5G-1(a)(1), for operating a limo without a licensed issued by a municipality and/or for failure to have filed an insurance policy in the amount of $1,500,000, violators are subject to a fine of $2,500 for the first offense and a fine of $5000 for the second or subsequent offense.  Additionally, pursuant to N.J.S.A. 39:5G(a)(2), violators are subject to a fine of $1,250 for the first offense and a fine of $2,500 for a second or subsequent offense for operating a limo with improper registration or without being property inspected.

As can be seen, there are several legal issues that need to be addressed with respect to these relatively new services. If you were involved in a car accident with someone who is driving for Uber, or if you are Uber driver yourself and have questions with respect to insurance or liability issues, contact Randolph H. Wolf today for a free consult.

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