Uber & Ridesharing Services Q&A
What is ridesharing?
It is a new term used to describe an operation of private individuals offering rides in their personal vehicle for hire or compensation. This often involves the use of “digital dispatch services,” such as apps.
What is Uber?
Uber was started as a company in March 2009. Uber passenger transport service is available in 67 countries and over 300 cities internationally. Uber projects a company valuation of $50 Billion by the end of 2015.
Uber has many brands operating with their technology. Uber is a company that offers mobile technology that connects a paying passenger with a taxi known as Uber Taxi, black car service known as Uber Black or a ride sharing independent driver branch which is known as UberX.
How does ridesharing affect your personal automobile policy?
In the Ontario Automobile Policy, as per the general exclusion under s. 1.8.1, except for certain accident benefits coverage, there is no coverage if the automobile is used to carry paying passengers. In the case of an existing policy where someone starts driving for Uber, the statutory condition in s. 8 applies: “The insured shall promptly notify the insurer or its agent in writing of any change in the risk material to the contract and within the insured’s knowledge.”
One of the questions on an Ontario automobile insurance application asks whether any of the described automobiles will be used to carry passengers for compensation or hire. Even if the insured can truthfully say ‘no’ at the time of application, if he or she subsequently starts driving passengers for Uber, the wording of an automobile insurance policy requires the insured to promptly notify the insurer of any material change in risk. Given that carrying passengers for compensation is one of the few questions asked on an automobile insurance application, it is reasonable to assume that the courts will view the carrying of passengers for compensation as a material underwriting fact. Not only would this allow an insurer to deny a claim, it would also be grounds for cancelling a policy altogether. Knowingly misrepresenting or failing to disclose a material fact is one of the few events that allows an insurer to cancel automobile insurance coverage mid-term.
Carpooling versus Ride Sharing
Carpooling is defined as carrying coworkers to or from work for compensation while, and only while, the insured driver is on his/her own way to or from work. If Carpooling: your policy can be endorsed to include 6A Endorsement to extend coverage to a personal lines policy.
Ride Sharing is defined as a program that that allow ordinary motorists to turn their personal cars into a prearranged transportation service in exchange for compensation. If ride sharing, it is considered a commercial operation similar to a taxi and would be require commercial automobile insurance.
The Risks of Driving For a Ride sharing Company:
Insurers have said, specifically, that your personal lines coverage will be void if you use your vehicle to carry paying passengers in a ride sharing program. Because your personal automobile insurance policy will not respond, any costs associated with vehicle damage, or injury or damage to the property of a third party will likely be entirely the responsibility of the vehicle owner or driver.
Uber has confirmed that they carry an insurance policy, but the exact protection it provides is not clear as Uber does not make the coverage wording available to the public. It is believed that Uber’s insurance policy is not designed as primary coverage to be extended to the company’s drivers or passengers. Therefore the primary insurance coverage must be absorbed by the drivers’ personal auto policies. The dilemma is the current personal auto policy wordings today in Ontario exclude coverage when a private passenger vehicle is being used to carry passengers for hire or compensation such as a taxicab. To be clear, a driver’s personal insurance policy is excluded/void when driving for UberX.
Risks for Passengers
If the automobile they enter does not carry appropriate insurance, it is unclear what Accident Benefits coverage they can call upon if they are injured in the vehicle.
Why is a commercial taxi policy all that is available to ride sharing drivers?
Ontario insurance companies are working on developing coverage. Ride sharing is a new form of transportation and they don’t “fit” into the established rules and regulations. This presents coverage gaps that insurance companies are working to fill.