Have you ever heard of a Transportation Network Company or TNC? If you don’t think you have, think again. Uber, Lyft and Sidecar are all TNCs that arrange transportation for a fee using technology platforms like mobile apps and websites. Given their relative infancy, TNCs are experiencing some growing pains, particularly when it comes to insurance.
Since TNCs fall somewhere between traditional ride-sharing or carpooling activities and taxi or limousine services, there may be potentially significant insurance coverage gaps. If there is an accident involving a TNC, these gaps can affect not only TNC drivers and passengers, but others motorists and pedestrians sharing the roadways.
Coverage gaps are primarily caused by TNC drivers relying on their personal automobile insurance policy for coverage instead of obtaining a commercial insurance policy. Standard personal automobile policies typically exclude coverage when the vehicle is used for commercial purposes, like carrying passengers for a fee. As a result, personal automobile insurance coverages, including liability, physical damage, uninsured motorist and medical payments coverage, may not be available if there is a TNC-related accident.
Gaps are also caused by risk exposures that are unique to the TNC industry. The personal vs. commercial distinction, which was once relatively straightforward, has been blurred by TNCs. Since this distinction is used to determine coverage under a driver’s personal automobile policy, the challenge has become identifying the exact moment an insured personal driver becomes an uninsured commercial TNC driver.
Under the TNC business model, there are three distinct risk exposure periods.
- Period 1 (Pre-Match): Starts when the TNC driver logs into the TNC application, but is not matched with a passenger.
- Period 2 (Match Accepted): Starts when a match is made and accepted, but before the passenger enters the vehicle.
- Period 3 (Occupancy): Starts when the passenger has been picked up and is occupying the vehicle.
Standard personal automobile policies don’t specifically address these periods, so there can confusion and uncertainty when it comes to determining the scope of insurance coverage, if any. However, some insurance companies have amended their exclusions to clarify that once a driver logs into their TNC platform, they are no longer covered under the policy.
Due to their growing popularity, many states have enacted or are in the process of enacting statutory insurance requirements for TNCs and drivers. Florida, for example, has recently proposed legislation to create specific insurance requirements for TNCs. Interestingly, the amount of insurance required under this proposed legislation varies depending on which period the TNC driver happens to be in. Higher coverage limits apply when a driver moves from Period 1 (Pre-Match) to Period 2 (Match Accepted).
Until the current uncertainty surrounding TNCs and insurance coverage is resolved, steps can be taken to reduce the risk of falling into an insurance coverage gap, such as:
- TNC Drivers: Review your personal automobile insurance policy to find out whether, and to what extent, TNC-related uses are covered or excluded. Find out what kind of insurance coverage is provided by your TNC. Compare your personal insurance and any TNC-provided insurance to identify potential coverage gaps. Obtain additional insurance to fill the gaps.
- TNC Riders: Find out what insurance requirements apply to TNCs in your area. Confirm (or require) that your driver meets or exceed these requirements.
- Employers: Update employment and fleet policies to strictly prohibit employees from using company-owned vehicles to engage in any TNC-related activities. This prohibition should also apply to employees using personal vehicles for work-related purposes, so they don’t pick up passengers while running work-related errands.
Please contact us to discuss how we can help you identify and close TNC-related insurance coverage gaps.
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