E&O Questions for 21st-Century Personal Auto Coverage

Personal auto insurance has always been more complicated than most policyholders realize.

But with the advent of ridesharing services leading many individuals to use their personal vehicles for income, the insurance industry has had to react and adapt quickly.

A ridesharing service like Uber or Lyft generally provides insurance when drivers are online through the service’s application, using their personal vehicles to transport passengers for a fee. But the coverage types and amounts vary and are limited.

When a driver is using the app while waiting for a ride request, but has not yet accepted a request, the service provides no collision coverage and fairly limited liability coverage—typically 50/100/25.

Once the driver accepts a request to pick up a specific customer and while the driver is transporting that customer, the service typically provides $1 million in liability coverage, as well as uninsured/underinsured motorist and contingent collision and comprehensive coverage—as long as the driver has their own personal auto policy.

Finally, when the driver is using their vehicle for their own personal use, the ridesharing service provides no coverage—the driver must rely on their PAP.

In other words, ridesharing drivers must have a PAP. But it is also important to make their personal auto carrier aware that they drive for a ridesharing service.

Most PAPs consider driving for hire to be a commercial exposure and therefore exclude it. Personal auto carriers are also likely to cancel an insured’s policy if they learn after an accident that the insured had been performing ridesharing services but did not disclose it during the application process.

Obviously, getting cancelled can cause problems for the policyholder, including higher premiums when securing replacement coverage.

Some personal auto carriers will refuse to provide a policy to a driver who works for a ridesharing service, and it is important to know that before any accidents occur. Others provide rideshare insurance as an endorsement to the PAP or as a replacement hybrid policy.

Hybrid policies provide coverage for the driver’s personal use as well as the period when the driver is using the app looking for a passenger. If such a hybrid policy is unavailable, a commercial policy may be necessary.

Ridesharing is not the only recent change in how people use their personal vehicles. Food delivery services like Uber Eats and Postmates are expanding the number of people who use their personal vehicles to deliver food well beyond traditional pizza delivery. Even online retailers like Amazon are hiring people to deliver packages in their own vehicles.

Similar to ridesharing, this use of a personal vehicle for commercial purposes is likely excluded under a PAP. While these services often provide some coverage while drivers are using their app or making deliveries, it may only be on an excess basis, and there may be gaps. There’s also the issue of the personal auto insurer cancelling the policy if it learns after an accident that a policyholder was making deliveries.

Most recently, dockless electric bikes and scooters have popped up in many cities. Riders can unlock them using an app, pay for their ride and leave them at their destination. They can be parked just about anywhere and are to be driven on streets, often at speeds up to 15 miles per hour.

In the event that a rider causes an accident with a vehicle, do they have have liability coverage? E-bike and e-scooter companies do not appear to be providing liability coverage to users, though some cities are looking to require that they do, likely because most PAPs exclude two-wheel vehicles.

We may not need to provide answers for several years, but such questions are already upon us.

Ask every personal auto client whether they use their vehicle for anything other than personal use, and inform them of potential gaps in coverage. While agents in most states do not have a duty to recommend coverage types or limits, many drivers may not know that performing commercial work with their personal vehicles can expose them to coverage gaps.

John Nesbitt is an assistant vice president, claims specialist with Swiss Re Corporate Solutions and works out of the office in Kansas City, Missouri. Insurance products underwritten by Westport Insurance Corporation, Kansas City, Missouri, a member of Swiss Re.

This article is intended to be used for general informational purposes only and is not to be relied upon or used for any particular purpose. Swiss Re shall not be held responsible in any way for, and specifically disclaims any liability arising out of or in any way connected to, reliance on or use of any of the information contained or referenced in this article.

The information contained or referenced in this article is not intended to constitute and should not be considered legal, accounting or professional advice, nor shall it serve as a substitute for the recipient obtaining such advice.