Ride-Sharing and Car-Sharing

Commercial Ride-Sharing (naic.org) – updated 3/4/2020

Commercial ride-sharing companies, or Transportation Network Companies (TNCs), have gained in popularity in dozens of U.S. cities over the past several years as a new option in the public transportation market. TNCs use mobile technology to connect potential passengers with drivers who use their personal vehicles to provide transportation for a fee.

A TNC is an organization offering prearranged transportation services for compensation using an online application or platform to connect passengers with drivers willing to transport them. Instead of hailing a cab or calling for a car service, consumers in need of a lift can download the app and connect with drivers who use their personal vehicles to pick up passengers. The app also allows users to get a price quote, track the driver's location and pay their fare using a credit card on file. 

While every personal auto insurance policy differs, most contain exclusions when a person uses their vehicle for livery services. Several insurers have developed products to fill gaps in coverage created by commercial ride-sharing and the common use of livery exclusions in personal auto insurance. 

Ride-sharing is different, however, than taking a traditional taxi or limousine. Taxis and limousines are typically licensed by the state and/or local transportation authority. The vehicles are required to be inspected and drivers must be properly licensed. In addition, taxi operators are required to have commercial insurance that protects a passenger and third parties (i.e., pedestrians or other drivers) in the event of an accident. TNCs may not be subject to the same requirements that apply to taxis and limousines. Additionally, commercial auto insurance for a TNC is typically more expensive than personal auto insurance because it presents more risk and therefore may be cost prohibitive for individuals only driving on a part-time schedule. 

It is not uncommon for personal auto policies to exclude coverage for livery or receiving compensation for driving. As a result, a TNC driver's personal auto insurance policy may not provide coverage when the driver is using his car to transport people in a ride-sharing arrangement for a fee. This applies to liability insurance, personal injury protection coverage in no-fault states, comprehensive coverage and collision, and UM/UIM. 

The largest TNCs have policies on their drivers that include commercial auto, liability, and collision coverage, with several offering $1 million single limit on primary liability coverage. Some of the large TNCs say they have filled the insurance gap with extended excess policies, although such policies are mostly secondary and lack first party coverages such as comprehensive and collision. Additionally, insurers have responded by offering new insurance products. The coverage types and limits vary by insurer.  

Car-sharing is the short-term use of a vehicle for which compensation is exchanged through a membership-based organization. Vehicles are available for time periods as short as an hour. Users generally pay for time and/or mileage each time they check out the car. 

Consumers renting their vehicle through a car-sharing program can be: 

• Responsible for any damages and injuries from accidents during the rental period.
• Denied coverage under their personal auto policy, including legal defense.
• In violation of their auto insurance policy and the insurer which could lead to cancellation.
  

Contact your insurance agent or company to determine if coverage is excluded on your policy.