Kicking Cabs to the Curb
The “techies” have done it again. This time they’re taking on the traditional livery industry - and turning it on its head. No, it’s not Google’s self-driving car - yet. Taxi and limousine companies have been getting bulldozed by an automated version of their own business plan. Transportation network companies (TNCs) providing a phone app for customers to request a ride as an alternative to catching a cab are rapidly gaining market share.
Many of us have read or heard about Uber, Lyft, Sidecar, Summon, Wingz and maybe other related TNCs. I was intrigued with the simplicity of the business model, which is relatively the same among TNCs, but it was a fatal accident in 2014 in San Francisco that grabbed headlines and prompted a closer look at the insurance implications.
The fatality was caused by a driver who hit a pedestrian. It’s a fairly simple claim scenario that tragically occurs with some regularity and goes like this:
1. A driver hits and injures a pedestrian.
2. The pedestrian or pedestrian’s estate makes a claim against the driver’s auto insurance.
3. The auto insurance carrier determines if there is coverage under its policy.
4. The carrier then considers whether or not the driver is liable for the loss.
5. The estate gets some amount of money either via settlement or court judgment.
If you haven’t heard about this particular case, the driver claimed that he had the Uber app on and was driving around waiting for a fare. He didn’t have a customer in the car and he hadn’t been contacted for a pick up when the accident occurred. The victim’s family sued Uber.
My initial assumption was that this fatality would be covered by the driver’s personal auto insurance policy. After all, he was neither carrying an Uber passenger nor was he on his way to pick up an Uber customer, leading to a number of questions:
- What is the driver’s legal relationship with a TNC?
- At what point is the driver operating as a commercial car service? When the TNC app is activated? When a customer is in the car?
- Is a TNC driver considered an employee?
- Should the driver’s personal auto insurance cover “off-duty” drivers?
- What if the driver accepts rides for several TNCs?
Rules have been codified in some states. However, many states and countries are still fighting over whether TNCs should be allowed to operate in their jurisdictions. When you enter a TNC vehicle, can you be sure the vehicle is covered under any insurance policy? Even many TNC drivers don’t know if they are covered by their personal auto policy. With some exceptions, they are not.
Stay tuned for more on the legal, insurance and regulatory issues involved with this evolving industry in future blogs.