Many Uber And Lyft Drivers Are Underinsured, But Not In The State Of Colorado

The rideshare industry has expanded rapidly, not only in Colorado but also across the nation and the entire world. Uber, for example, was founded only seven years ago and last year, Uber executives estimated that their drivers serve two million customers every day. In the U.S., the industry’s expansion has been so swift that lawmakers, insurance companies, and drivers are all struggling to catch up. However, a new study has found that many rideshare drivers may not have enough auto insurance coverage or understand the risks involved with transporting passengers commercially. This raises concerns both for the drivers and the passengers who use ridesharing services.

1

Ridesharing insurance is complicated, and right now, it’s constantly changing. A rideshare driver who relies on his or her personal insurance may not have enough coverage. Many personal policies don’t cover vehicles that carry passengers for money, and insurers may cancel a driver’s policy if he or she is involved in an accident while driving for Lyft or Uber. This is especially the case if the driver has not told the insurance company that the car is being used for ridesharing.

Most passengers will be covered in accidents, but they should understand that there may be insurance gaps. Both Uber and Lyft offer $1 million in coverage when passengers are in a rideshare vehicle. In the most serious accidents, where injuries are severe or permanent with damages exceeding $1 million, things quickly get more complicated. Injured passengers in Denver, for example, could file a personal injury claim against the driver’s personal auto insurance with the help of a Denver personal injury attorney, or they could file an injury lawsuit against the rideshare company itself.

HOW MANY RIDESHARE DRIVERS LACK FULL COVERAGE?

SherpaShare is an app used by about 50,000 rideshare drivers to help them track their mileage, earnings, and expenses. To determine how many rideshare drivers are paying for additional insurance coverage, NerdWallet conducted a survey in January and February through the SherpaShare app and blog site. The survey of 1,022 SherpaShare users found that the majority of rideshare drivers are, at least part of the time, underinsured. Specifically, the survey tells us that:

  • Most rideshare drivers don’t have additional insurance coverage. 77 percent of those responding to the survey said they have no additional rideshare insurance coverage beyond what their company provides.
  • Of the drivers who lack additional coverage, 32 percent said cost is the reason.
  • Some rideshare drivers underestimate their risks. Of those drivers without additional coverage, 31 percent are “comfortable” with the coverage that the rideshare company offers, but 4 percent admit that they don’t fully understand what coverage they need.
  • Of the rideshare drivers who have additional insurance coverage, 43 percent said they purchased it to be compliant with the law.
  • 40 percent of the rideshare drivers without extra insurance coverage said they intend to purchase it within three months.

2

Rideshare insurance varies depending on whether there’s a passenger in the vehicle or if the driver is between calls. Uber and Lyft provide insurance coverage called “Period 3” coverage when passengers are in the vehicle. On the other hand, when a driver is heading to a call, drivers are covered by “Period 2” insurance. However, both companies provide only limited “Period 1” coverage when drivers are logged in and waiting for a call. Without additional coverage, rideshare drivers are at risk if they are in an accident while awaiting a call.

WHAT COVERAGE DO RIDESHARE COMPANIES PROVIDE?

Lyft and Uber offer at least $1 million per accident in liability, uninsured, and underinsured motorist coverage during Period 2 and Period 3. Both companies provide limited collision and comprehensive coverage only to drivers who already have this personal coverage. But when drivers are waiting for a fare, in Period 1, their coverage is provided only by the personal or commercial coverage they’ve purchased. Rideshare company policies only cover liability or damages not covered by the driver’s own insurance.

Period 1 liability limits are $50,000 per person for injuries with a maximum of $100,000 per accident, and $25,000 in property damage for each accident and there is no coverage for damage to the rideshare vehicle. Of the NerdWallet/SherpaShare survey respondents who do not have additional insurance, 31 percent say they’re “comfortable” with the coverage their employers provide. However, these drivers may not fully understand what they’re risking.

3

Not all auto insurance companies cover rideshare drivers and vehicles, and companies that do make those policies available may offer them only in some states. However, policies for rideshare drivers are now becoming increasingly available and are well worth the cost. Conceivably, a rideshare driver could pay as little as $20 a month for Period 1 coverage along with an existing personal policy. Commercial policies cost more, but some insurers are now making that coverage more affordable, specifically for rideshare drivers.

WHAT IS COLORADO’S LAW REGARDING RIDESHARE INSURANCE?

In 2015, lawmakers in Colorado approved new auto insurance requirements for rideshare drivers licensed in the state. The law offers three options to rideshare drivers for primary insurance coverage during Period 1:

  1. a personal policy that specifically recognizes the vehicle is being used for ridesharing
  2. full-time commercial insurance similar to a limousine insurance policy
  3. primary liability insurance provided by the rideshare company

In Colorado, Uber provides its drivers with primary insurance for Period 1 (Option 3). This coverage makes Uber drivers compliant with the law, but the company nevertheless recommends that its drivers review and consider all of their insurance options to determine what is best for each individual driver. Of course, merely having an insurance policy doesn’t guarantee that a claim will be paid if a driver or passenger is injured. Any parties injured in a traffic accident involving a ridesharing service in Boulder or Denver, for example, may want to consult with a knowledgeable Boulder or Denver personal injury attorney.

4

Colorado isn’t the only state responding to the insurance “coverage gap” created by rideshare services. The Property Casualty Insurers Association of America reports that as 2016 began, 29 states had adopted laws to close rideshare insurance coverage gaps. In response to these new laws, Uber and Lyft have increased their insurance coverage amounts in some jurisdictions, and a number of auto insurance companies have created new insurance offerings and policies to meet the needs of rideshare drivers and passengers.

Rideshare passengers and drivers should both understand their risks as well as their rights when working for or using ridesharing services. Ridesharing can be smart and convenient, but like almost everything in life, there are risks involved and the first step in reducing our risks is understanding them. As the risks associated with ridesharing are understood – and reduced – the innovative rideshare industry will no doubt continue to expand even more in the future.

By: Dallas Norton

Dallas Norton, the founding partner of Norton & Bowers, has practiced law with a focus on personal injury since 1992. Mr. Norton has extensive Colorado roots including grade school in Arvada and high school in Denver. He earned his J.D. from Brigham Young University Law School in 1991. When working on behalf of clients, Mr. Norton draws upon his extensive background in psychology and human resources.