Is ride sharing risky business?

Your parents may have said “never ride with strangers” but Uber, the new cashless ride sharing app, has taken urban regions by storm. Though there are many virtues of the on-demand travel service, liability insurance coverage remains a question mark. What should you ask before tapping the app for a ride?

Let’s back up first (after looking both ways and in the rearview mirror). Here’s what ride sharing is all about. This is a smart phone application designed to connect drivers for hire with patrons in need of a lift. Uber, the world’s leading provider, is currently available in more than 45 countries and more than 100 cities. Uber introduced a disruptive technology application that has up-ended the longstanding practice of licensed taxi cabs controlling the for-hire urban transportation market. Others such as Lyft and Sidecar have joined the chase for app-based fares.

How does it work? Once you download the app, the app will find your location via GPS. You then select “Set Pickup Location”, choose your desired car type and then simply tap “Request”. In the U.S. and Canada, verification of the request via text message is required. The app then finds the nearest available driver.

No money changes hands as the transaction is billed through the intermediary including the tip. Drivers are paid by app’s organization.

The issue of liability insurance is significant for passengers and drivers alike. Though Uber’s web site tells prospective drivers that they must have a Personal Auto Policy to qualify, the Personal Auto Policy (PAP) insurance form for some insurance companies explicitly excludes coverage for anyone engaging in a ridesharing program, also known as Transportation Network Companies (TNCs).

Should an accident occur in which the passenger is hurt or killed or property (e.g. luggage) is damaged, the driver’s personal insurance policy may not pay for bodily injury or damaged property. That could leave the passenger paying out-of-pocket for some of their care or damages. If injuries are not covered by the driver, the injured party may sue the driver or file a claim with their own insurance company for bodily injury if they have Uninsured/Underinsured Motorist coverage in their auto policy.

According to the Maine Bureau of Insurance, “Most private auto insurance policies exclude coverage for losses that occur when a covered auto is used to carry passengers paying a fee. While some TNCs purchase liability protection for their services, questions remain about how coverage would be applied in the event of an accident.”

Maine Superintendent of Insurance Eric Cioppa said, “Individuals should ensure they are protected before using these new services. Check in with your insurance agent or broker, or contact your insurance company directly, to determine if there may be gaps in coverage should an accident occur when using a TNC.”

In Maine, consumers can contact the Bureau’s Property and Casualty Division at 800-300-5000. In New Hampshire, residents can call 800-852-3416.

Another interesting feature of the Uber experience is that both drivers and passengers may be rated on a variety of factors. Passengers score their experience on a one-to-five scale in what is called a peer-to-peer rating. If drivers fall below an acceptable standard, they will be dropped from the program. Frequently mentioned transgressions include not knowing where they are driving, being late, rude or exhibiting poor driving habits.

Similarly, passengers also may be rated by the drivers – though those ratings are not public. Drivers interviewed for various articles cited passengers who damage vehicles, get sick in the back seat, smell, are rude or are tardy for their pick up. In crowded cities, simply being on the wrong side of the street can earn a passenger a low rating. The outcome: a would-be-passenger may no longer be able to access the app. The same goes for drivers with low scores.

The upshot is that the Uber ride sharing model may make both drivers and passengers more timely, civil and courteous – and that’s not a liability at all.