Ever considered earning some extra money by registering your car with Uber? Having used Uber as a passenger for a few months now, I certainly understand why Uber was able to disrupt the traditional taxi business. The convenience of GPS tracking and automated payments, along with affordable rates, is hard for passengers to complain about. And, to my surprise, each driver that has picked me up seems to enjoy driving for Uber as much as I like riding with Uber. Sure sounds like a great gig. But is it too good to be true? Before registering your car at one of the Uber recruiting sessions, consider that you may be taking major financial risks in order to earn a little extra money.
Uber has created one of the greatest nation-wide insurance disputes of the past decade. Coverage issues arose quickly once Uber drivers started filing claims on their personal auto policies for accidents that occurred while driving for Uber. Insurance companies across the U.S. have been denying these claims due to a standard exclusion in all personal auto policies. The exclusion simply states that if you are using your car to transport people or goods for a fee then your personal auto policy will not provide any coverage. This type of exposure requires a commercial auto policy, which the vast majority of Uber drivers are avoiding due to the high cost (typically 5 – 6 times the cost of a personal auto policy). As the number of denied claims (and upset Uber drivers) mounted, Uber decided to purchase a blanket commercial auto policy to cover Uber drivers during the following periods: (1) while driving to pick up a passenger and (2) while the passenger is in the car. This is a big step in the right direction.
However, it does not provide coverage during one crucial part of the Uber driving cycle: the period when a driver is logged in to the app and available to give rides but before accepting a ride request. Nonetheless, in their driver recruiting sessions Uber has been advising potential drivers that their personal auto policy will cover them during this period, even though all the major insurance companies have publicly stated that their personal auto policies will not provide coverage during this period. In fact, many insurance companies are canceling policies immediately upon finding that a customer is driving for Uber. This coverage gap should be a major concern for Uber drivers.
Additionally, even for accidents that occur while picking up a passenger or when the passenger is in the car (the period that Uber insurance is effective), consider that there will be many layers of coordination required when filing a claim. Because Uber’s overlying insurance policy is not in your name, you would likely have to communicate and negotiate with both Uber and Uber’s insurance company in order to make any progress. Unlike working with your own agent, you are left with no one on your side.
Drivers who choose to use their vehicle to operate within the Uber network, or one of a similar Transportation Network Company (TNC) such as Lyft or Sidecar, need to know what insurance the TNC provides. A personal auto policy excludes most coverage, so it's important to ask if the TNC provides the following coverages with adequate limits: Bodily Injury Liability, Property Damage Liability, Uninsured Motorists, Under-Insured Motorists, Limited Property Damage Liability, Comprehensive, and Collision.
So who’s to blame for the Uber insurance nightmare? You can’t fault Uber for creating a great alternative to traditional taxis. And it’s hard to blame insurance companies for denying claims that are explicitly excluded in their policies. Thankfully, the insurance industry is working to create an endorsement that adds the appropriate coverage to personal auto policies. The key here, however, is cost. Will the endorsement be affordable enough that Uber drivers will choose to purchase it? Or will they say “no thanks” like they currently do to commercial auto insurance? We will likely find out very soon.