Mitchell Hamline
Law Journal Of
Public Policy and Practice

The Quadriga

hand holding a smart phone with a map app visible on the screen
The Quadriga (April 3, 2019)

An Overview: The Impact of Rideshare Insurance on the Role of Liability Insurance in Motor Vehicle Accident Cases

By Kyle S. Willems*

This article is not intended to constitute legal advice and should not be relied upon as such.

Introduction

Before Uber and Lyft, the framework for approaching the run-of-the-mill motor vehicle accident (“MVA”) case remained unchanged for decades. Traditionally, MVA cases center around three primary issues: fault, damages, and who pays for the damages. The fault and damages components are allocated amongst the individuals involved in the accident. In the vast majority of cases, the issue of who pays for the damages falls on the shoulders of the insurance companies who provide liability coverage.1 This insurer provides coverage up to a set limit for the car that was driven by the at-fault party.2

In 2009 and 2012 respectively, Uber and Lyft came on the scene and disrupted both the commuter industry and the auto insurance industry.3 The dramatic increase in commuters traveling via ridesharing services over the past few years translates to a dramatic increase in the number of accidents involving ridesharing drivers. The insurance marketplace anticipated this issue; so various carriers began issuing “rideshare” policies. These policies contain liability and property damage coverages and are often issued via a partnership with Uber and Lyft.4

Thanks to Uber and Lyft, most of the rideshare drivers on the road carry two auto policies: their personal auto policy and a rideshare policy. The rideshare policies typically come into effect when the rideshare app is on and they have different coverage limits available depending on the facts surrounding the accident.5 The fact-based shifting limits available to the aggrieved party, whether it be a passenger and/or another driver, means there is a new layer of analysis for attorneys handling rideshare MVAs.

MVA Accident Insurance Basics

In its purest form a MVA involves two vehicles. Typically, the driver of one vehicle is the at-fault party. The at-fault vehicle is statutorily required to be covered by an insurance policy that has liability coverage.6 In its simplest form, this liability insurance serves a dual role: protecting the at-fault party from personal liability while at the same time ensuring the aggrieved party has a source of money that compensates him or her for the loss. Usually the liability insurance is enough to serve this dual role without issue. If the liability insurance does not provide enough coverage, the aggrieved party either goes after an excess policy7 or his or her own underinsured motorist benefits.8

Knowing this basic role liability insurance plays in MVA cases is essential. One of the first things any learned attorney handling an MVA case does is to find out who the at-fault party is and then make sure the at-fault party’s insurance carrier is properly put on notice. From there the attorney needs to sort through a coverage determination, conduct a fact-based inquiry as to fault, and analyze the issue of damages.

In the rideshare MVA context, this process is complicated by the fact that at least one of the aggrieved parties is a passenger who likely will not have any fault attributed to him or her – meaning comparative fault needs to be split between the drivers of all vehicles to the MVA. Further, the facts leading up to the MVA can now impact the amount of rideshare insurance limits available.

The Unique Issues Posed by a Ride Sharing Service’s Insurance

As previously discussed, it is the industry norm that drivers for ridesharing services carry their own liability coverage and a rideshare policy.9 The rideshare policies and their coverage provisions are similar to most auto policies. However, unlike the typical auto policies, rideshare policies have shifting coverage obligations and limits that are triggered depending on the unique facts of each accident. Based on the rideshare policy requirements issued by Uber and Lyft, there are four common scenarios (referred to as Period 0 through 3) that the rideshare policies address that every attorney needs to know about.

The first scenario, or “Period 0”, occurs when the ridesharing driver is not on duty and the ridesharing app location is not active. In this scenario, the rideshare insurance does not apply. The driver’s personal liability coverage is primary. This means the aggrieved party’s attorney needs to look to the driver’s policy for coverage and the aggrieved party is limited to the coverage limits delineated therein.10

In the second scenario, or what the rideshare insurance industry calls “Period 1”, the ridesharing service driver has the ride service app on and is actively waiting for a ride request. When this happens, the ride sharing service’s policy is triggered. The coverage limits available are 50/100/25.11 These limits are higher than Minnesota’s personal 30/60 statutory minimum limits, but there is a decent chance a 50/100/25 policy is not enough coverage for anything involving more serious injuries or property damage to a more valuable car. As such, this means underinsured motorist and/or liability and property claims to the at-fault party’s insurer have to be made.12

“Period 2” coverage applies when the ridesharing driver has the app on and is en route to pick up his or her passenger. While en route, the ridesharing driver is involved in an accident. In this case, the ridesharing service’s policy becomes primary. Typically the policy will provide $1,000,000.00 in liability coverage and full property damage coverage.13

“Period 3” coverage applies when the ride sharing driver is involved in an accident while he or she has a passenger. This scenario ensures the ride sharing service’s policy is primary. This also triggers $1,00,000.00 in liability coverage and full property damage coverage.14

Given these four scenarios, attorneys handling cases that involve ride sharing drivers need to make sure they find out immediately if the driver for the ridesharing service had a rideshare policy at the time of the accident. If so, a copy needs to be requested and reviewed as soon as possible. The attorney also needs to engage in a thorough, fact-intensive investigation of the accident as soon as practical so they can determine two things: what insurance policy is primary and, if it’s the ride sharing app’s policy, what impact does the facts of the case have on the coverage limits available.

State Law Concerns

State legislatures across the country have done a good job of keeping pace with the developments in the rideshare service industry and its impact on MVA law. For instance, the Minnesota legislature codified rideshare insurance requirements that resembles the Period 0 through 3 framework discussed above.15 For the sake of brevity this note will not discuss the details of Minnesota’s rideshare insurance statute. However, an attorney handling a MVA case involving a rideshare driver needs to research whether nor not the jurisdiction has a rideshare insurance statute and if so, have a working understanding of the statute’s impact on the insurance available to all parties.

Conclusion

The growing ride sharing industry is going to continue to impact how attorneys need to approach cases involving ride sharing service drivers. For the time being, this means a working understanding of the role rideshare insurance plays in motor vehicle accident cases.

Footnotes

* Kyle S. Willems is a litigation attorney with the law firm Tewksbury & Kerfeld, P.A. He focuses on litigating personal injury, insurance defense, products liability, construction defect, and other tort matters. He can be reached at kwillems@tkz.com or (612) 334-3399.↩︎

  1. For the sake of brevity this note will not address no-fault, uninsured, and other auto insurance coverages in the ridesharing MVA context. ↩︎
  2. See generally Minn. Stat. § 65B.49 (2018); see also Lobeck v. State Farm Mut. Auto. Ins. Co., 528 N.W.2d 246, 250 (Minn. 1998) (citing Hilden v. Iowa Nat. Mut. Ins. Co., 365 N.W.2d 765, 769 (Minn. 1985)). ↩︎
  3. Uber, Wikipedia, https://en.wikipedia.org/wiki/Uber [https://perma.cc/6U4F-WDSW]; Lyft, Wikipedia, https://en.wikipedia.org/wiki/Lyft [https://perma.cc/9M5J-P88X]. ↩︎
  4. Insurance, Uber, https://www.uber.com/drive/insurance/ [https://perma.cc/BSX5-KQPC]; Insurance Policy, Lyft, https://help.lyft.com/hc/en-us/articles/115013080548-Insurance-Policy [https://perma.cc/5L7P-TFFK]. ↩︎
  5. See generally id. ↩︎
  6. Minnesota, like almost every state, statutorily requires drivers to carry minimum liability insurance limits. See Minn. Stat. § 65B.49, subd. 3 (2018). Under § 65B.49, subd. 3, Minnesota has 30/60 statutory limits, meaning each driver must have an insurance policy that provides up to $30,000.00 per person in liability coverage, with a per occurrence (aggregate limit) minimum of $60,000.00. ↩︎
  7. Excess, or umbrella insurance is secondary insurance, i.e. a type of insurance that is designed to provide protection above and beyond the limits contained in the primary policy. See Umbrella Liability Policy, Int’l Risk Mgmt. Inst., Inc., https://www.irmi.com/term/insurance-definitions/umbrella-liability-policy [https://perma.cc/36U5-PDUJ]. ↩︎
  8. UIM or underinsured motorist benefits are triggered when the primary liability coverage is nearly exhausted or exhausted. If that occurs, the aggrieved party may turn to his or her own insurance policy to tap into an additional pool of money. See Umbrella Liability Policy, Int’l Risk Mgmt. Inst., Inc., https://www.irmi.com/term/insurance-definitions/umbrella-liability-policy [https://perma.cc/36U5-PDUJ]. ↩︎
  9. Insurance, Uber, https://www.uber.com/drive/insurance/ [https://perma.cc/BSX5-KQPC]; Insurance Policy, Lyft, https://help.lyft.com/hc/en-us/articles/115013080548-Insurance-Policy [https://perma.cc/5L7P-TFFK]. ↩︎
  10. Id. ↩︎
  11. A 50/100/25 policy means there is $50,000.00 available per person per occurrence, an aggregate limit of $100,000.00 available per occurrence, and then $25,000.00 available for the property damage. ↩︎
  12. Id. ↩︎
  13. Id. ↩︎
  14. Id. ↩︎
  15. See generally Minn. Stat. § 65B.472 (2018). ↩︎