Uber Problems Ride-sharing Exclusions in Personal Automobile Insurance Policies
| Publication year | 2018 |
| Pages | 46 |
August, 2018
TORT AND INSURANCE LAW
By ANDREW MCFADDEN.
This article examines the new ride-sharing exclusion's validity by reviewing the Transportation Network Company Act's insurance requirements, similar personal automobile insurance exclusions, and case law interpreting those exclusions.
New ride-sharing businesses, such as Uber and Lyft, have transformed travel and created new business opportunities for people who own or lease personal automobiles. Companies insuring personal automobiles recently added a ride-sharing exclusion to their policies to account for the increased risks that ride-sharing businesses create.
Unanswered questions exist regarding whether, or to what extent, ride-sharing drivers' personal automobile insurance policies cover automobile accident losses. This article analyzes those questions in the context of the recently enacted Transportation Network Company Act (TNCA), several personal automobile insurance exclusions, and case law interpreting those exclusions.
The TNCA
The Colorado legislature passed the TNCA[1] in 2014 to regulate the new ride-sharing business.
The TNCA defines companies like Uber and Lyft as "transportation network companies."[2] The TNCA explicitly recognizes that many drivers operate their personal vehicles when driving for Uber or Lyft.[3] Many, if not most, Uber or Lyft drivers use their owned or leased personal vehicles, rather than driving company-owned vehicles like drivers for many taxi or limousine services.[4] In addition, the TNCA does not require a commercial driver's license (CDL) or livery license to drive for a transportation network company.[5]
Like the Motor Vehicle Financial Responsibility Act (MVFRA), the TNCA imposes minimum liability insurance requirements.[6] The ride-sharing company or driver must satisfy[7] the TNCA's insurance requirements, which depend on whether the driver is logged into the ride-sharing company's application but has not engaged in a prearranged ride[8] or is engaged in a prearranged ride.[9] This article refers to the first time frame as the "log-in period" and the second time frame as the "prearranged ride period."
The TNCA defines a prearranged ride as "a period of time that begins when a driver accepts a requested ride through a digital network, continues while the driver transports the rider in a personal vehicle, and ends when the rider departs from the personal vehicle."[10] Notably, a prearranged ride includes the driver's journey to pick up the passenger, but does not include the driver's return journey. Rather, the prearranged ride ends when the rider exits the vehicle, even if that destination is far from the original pick-up location.
When the driver is logged into the ride-sharing application but has not engaged in a prearranged ride, the TNC A requires the ride-sharing company to either provide insurance coverage for the driver[11] or confirm that the driver's personal automobile insurance policy includes a ride-sharing endorsement that meets minimum insurance requirements.[12] For the prearranged ride period, the TNCA requires that the ride-sharing company obtain minimum liability insurance coverage of SI million.[13] Stated simply, if a ride-sharing driver has a passenger when an accident occurs, the ride-sharing company's insurance covers the accident. If there is no passenger in the vehicle, the applicable TNCA insurance requirements vary depending on whether the driver is logged into the application and whether the driver has accepted a digital request for a prearranged ride. The chart below summarizes the TNC As coverage requirements and the typical ride-sharing exclusion's scope. The TNCA's minimum insurance requirements for the log-in period contain several uncertainties. First, the driver or company must maintain an automobile insurance policy that "[m]eets at least the minimum coverage of at least fifty thousand dollars to any one person[,] "[14] but the TNCA does not specify the required coverage type (e.g., liability coverage or uninsured motorist coverage). The failure to specify the required coverage type means that the minimum requirements may include both liability coverage and first-party coverage minimum limits (e.g., uninsured motorist coverage).
A second uncertainty is whether a ride-sharing company has a continuing duty to confirm that a driver has an active endorsement on his or her automobile insurance rider. If a driver's policy lapses for nonpayment, for example, the TNCA is silent as to the ride-sharing company's obligations during that lapsed period.
A third uncertainty is whether the TNCA minimum liability limits are $50,000, as stated in CRS § 40-10.1 -604(3)(b)(II), or only S25,000, as referred to in CRS §§ 40-10.1-604(3)(b)(III) (B) and -604(4) requiring compliance with the MVFRA.[15] Arguably, the TNCA sets two conflicting minimum liability limits. One way to harmonize this language is to interpret the TNCA to set the higher minimum liability limit of $50,000 and to require any ride-sharing endorsement or rider to maintain this higher liability limit rather than the lower limit the MVFRA requires.
While these uncertainties raise important questions regarding types and limits of coverage, the TNCA clarifies the personal automobile insurer's responsibility: "Nothing in this section requires a personal automobile insurance policy to provide coverage for the period of time in which a driver is logged into a transportation network company's digital network."[16] This section eliminates any requirement under the TNCA for insurers to provide coverage under a personal automobile insurance policy for losses caused while its insured drives for a ride-sharing company. However, the interplay between fulfilling the MVFRA requirements for personal automobile insurance policies and the new TNCA obligations remains unclear, especially for first-party coverages.
Automobile Insurance Exclusions
Personal automobile insurance policies offer varying coverages for losses, such as liability, collision, medical payments, and uninsured motorist coverages. Policy exclusions limit these coverages. Liability coverage is sometimes referred to as third-party coverage because it covers claims a third party asserts against the insured. In contrast, the other available policy coverages are sometimes referred to as first-party coverages (e.g., collision, medical payments, and uninsured motorist coverages) because they involve claims between the insured and the insurer. The scope of this article discusses only liability coverage and how exclusions affect liability coverage.
The Colorado legislature recognizes that automobile use causes a substantial "toll in human suffering and loss of life"[17] and has set mandatory liability insurance requirements to lessen that toll.[18] However, insurers cannot be required to insure all possible losses arising out of the use of a personal automobile, and insurers can control their risk exposure through exclusions.[19] The Colorado Supreme Court concluded that "although Colorado's public policy is concerned with protecting innocent tort victims, it is also concerned with insurers' freedom to contract, allowing insurers to limit their liability to calculate risks[.]"[20]
Colorado statutes specifically authorize three liability coverage exclusions under personal automobile policies:[21]
■ the intentional act exclusion, which applies when the injured person"[s]ustains injury caused by his or her own intentional act";
■ the stolen-vehicle exclusion, which applies when the injured person "[i]s operating a motor vehicle as a converter without a good faith belief that he or she is legally entitled to operate or use such vehicle";[22] and
■ the household member exclusion, which excludes "claims made by a member of a household against another member of the same household."[23]
To be enforceable, all other personal automobile policy liability exclusions must fall within the catch-all provision of CRS § 10-4-623(1), which states that "[t]he coverage described in section 10-4-620 [mandated liability coverage] maybe subject to conditions and exclusions that are not inconsistent with the requirements of this part 6." Colorado courts have interpreted CRS § 10-4-620(1) to authorize additional exclusions that comply with Colorado public policy.[24]
Insurers of personal automobiles have recently added a ride-sharing exclusion that seeks to exclude from coverage any loss that occurs while the driver is logged into a transportation network company's application. Stated another way, if a person is driving for Uber or Lyft, the ride-sharing exclusion precludes coverage under the driver's personal automobile insurance. The ride-sharing exclusion is not specifically authorized by statute. Thus, to be enforceable, the ride-sharing exclusion must fall within the catch-all provision and comport with Colorado public policy. No Colorado court has yet considered the ride-sharing exclusion, and its effectiveness and scope remain unresolved. But Colorado case law concerning the validity of other exclusions informs the validity of the ride-sharing exclusion.
Criminal Act Exclusion
The criminal act exclusion is a common exclusion that is not explicitly authorized by statute. It excludes from coverage any loss that an insured causes during the commission of a crime. How broadly a criminal act exclusion may be drafted and still satisfy Colorado's public policies is an open issue.
In Bailey v. Lincoln General Insurance Company,[25] Raymond Juhl rented a vehicle and obtained insurance through Dollar Rent-A-Car. This insurance included an excess liability policy provided by Lincoln General. juhl then engaged in a high-speed car chase in the rented vehicle while on...
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