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In the sharing economy as it currently stands, it’s the users who bear the risk as the leading companies shelter themselves from responsibility.
It wasn’t a car accident that caused Adrian Anzaldua to quit driving for Lyft — it was the fear of one.
The 27-year-old started driving full time for the app-based car service in October but quit in December after hearing anecdotes that raised questions about his insurance policy.
“I looked into this whole situation more closely because it seemed too good to be true,” said Anzaldua, who lives in San Francisco’s Mission District. “I read a couple accounts online of people who had gotten into accidents while driving for Lyft. They had their coverage denied, so they were stuck with a totaled car. I said, ‘I’m not driving until I figure out the insurance situation.’ ”
Anzaldua discovered what more and more drivers and insurance providers are finding: Those who work for companies like Uber, Sidecar and Lyft, which link drivers with customers through apps, are stuck in an insurance limbo that could leave them saddled with major costs after an accident.
Monday’s lawsuit against Uber and an UberX driver who struck and killed a 6-year-old girl on New Year’s Eve in San Francisco has made clear the insurance gaps that drivers for those companies face.
As startups disrupt old industries, from Uber taking on taxis to Airbnb going against hotels, regulation has lagged behind. But all too often, it’s individuals who bear the risk.
Drivers must have personal insurance, and the companies must carry $1 million excess liability policies that cover damages in the case of an accident that is their driver’s fault.
But huge gaps remain. Uber said it is not liable for the New Year’s Eve accident because its driver did not have a passenger with him at the time, though the suit claims he was distracted by the app he used to look for new fares.
And many drivers’ personal insurance policies, which would cover damages to themselves or their car, are increasingly less likely to cover claims for accidents that happen while transporting paying passengers.
Most standard personal policies do not cover accidents “arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance.” They do cover shared-expense car pools, according to the state Department of Insurance, which issued a warning to motorists about the insurance gaps this month.
“It’s very clear in California: If you drive your car and make money on it, you need a commercial license,” said Pete Moraga, a spokesman for the Insurance Information Network of California. “But because it’s so new, insurers don’t ask the question, which does open the process up to fraud.”
That leaves many drivers tempted to hide such work from insurers. The other option, commercial insurance, can be difficult to find and very expensive.
Anzaldua said he was shocked to discover how many Lyft drivers were unaware of the danger or concealing that they were using their cars as taxis when he asked about the issue on a drivers’ forum.
“I basically got responses that said ‘out of sight, out of mind,’ ” he said. “They knew it was a problem, but they were ignoring it because the money was good. Some people were really dismissive of it. They would try to make the same argument as Lyft was making, that you’re not a commercial driver so you don’t need this insurance.”
Anzaldua was also stunned to hear of a woman who claimed to have lost her insurance after asking about driving for hire.
“She had asked about ride-sharing and they had taken that (to mean) that she was doing it, so they dropped her,” Anzaldua said.
Taxi advocates say it’s unfair that drivers for Uber, Lyft and Sidecar are doing the same job as taxis but aren’t required to pay for pricier commercial insurance. A September ruling by the state’s Public Utilities Commission doesn’t require app-based drivers to have commercial insurance, but personal insurance might not be an option for anyone who is candid about their car use.
“They’re allowing them to get away with an insurance that doesn’t exist,” said Barry Korengold, president of the San Francisco Cab Drivers Association. “There is no personal insurance policy that’s going to cover you while you’re using your car for passengers. A cabdriver I know (who) was looking to drive for UberX couldn’t even find commercial insurance to cover him.”
Anzaldua found an insurance broker in Southern California who was willing to give him a custom personal policy, but it was much more expensive — about $200 per month instead of his regular $90 per month. One stipulation was that he was driving for donations, not payments.
But in November, both Lyft and Sidecar stopped categorizing fares as donations and began calling them payments. (Uber has always dubbed them payments). Now it was clear: These were rides for hire.
“I called my broker, and asked, ‘What is it going to do to my policy?’ ” Anzaldua said. “My broker said: It’s going to make your policy worthless.’ ”
So he began his search again.
“Insurance companies are now wise to what ride-sharing means,” Anzaldua said.
The only option was commercial insurance, which he says was quoted by Geico at $8,000 per year — almost eight times his personal insurance rate.
Anzaldua called it quits, but he says Geico made him send a notarized letter promising he would no longer drive for hire before it would reissue his personal insurance policy.
Other drivers are not as cautious and figure things will work themselves out. Andrew Holmgren, a 24-year-old comedian, bought a car last month mainly to drive for Lyft. When he bought his Progressive insurance online, he checked a box that said he was going to use it for business — but left it at that.
“I am aware that they may come to me someday and say, ‘That’s not OK with us,’ ” Holmgren said. “As of now I haven’t had any issues, and I’m not too worried. I wouldn’t be surprised if a company comes about that has insurance that’s personal but for people doing ride share.”
Sidecar said it hasn’t heard of any of its drivers getting a claim denied. Uber said some of its drivers have commercial licenses. Lyft did not immediately respond.
The oft-cited $1 million liability insurance also has its surprises. Many drivers don’t realize that it never covers damage to their car. It only covers damage and injuries to passengers and other parties and their property, and only if the driver-for-hire is at fault. If another motorist with cheap insurance or no insurance is at fault in a crash, a driver working for Uber, Lyft or Sidecar could be left in the lurch.
And as the recent Uber lawsuit shows, companies and drivers may disagree about when the liability coverage is in play. The state’s ruling is vague — coverage kicks in while they are providing services for what the PUC has defined as transportation network companies. Uber, Sidecar and Lyft have all said this means from when a driver accepts a ride request to when the passenger is dropped off.
The gray area is dangerous to people who depend on the driving to support themselves, Anzaldua said. Many drivers have families and need the income but could be devastated by an accident where personal or company insurance unexpectedly pulls out.
“Lyft and UberX, it’s too enticing. It’s amazingly enticing,” he said. “But the downfalls and the dangers of it are never laid out. I just felt there was a certain amount of neglect. They just keep dodging you on these things.”