Capitol Briefings: Bills would clarify insurance coverage for Uber, Lyft drivers

Michigan and other states are grappling with insurance requirements for ride-sharing companies, as traditional taxi services plead for a level playing field.

LANSING — Bills in the Michigan Legislature that would impose new licensing regulations on ride-hailing companies like Uber and Lyft also would satisfy insurance industry concerns about coverage for drivers who offer rides for hire in their personal vehicles.

Among the requirements would be tiered, minimum-liability coverage amounts for drivers who work for San Francisco-based Uber Technologies Inc. or Lyft Inc., depending on whether the driver has logged into the companies’ smartphone apps or accepted rides. The proposed language attempts to clarify what’s required from both insurance carriers and drivers, since many personal auto insurance policies don’t cover rides offered for pay.

Many insurance carriers have started to offer riders or specialized auto policies that include coverage for Uber or Lyft drivers, though not necessarily yet in Michigan.

Transportation network companies like Uber and Lyft have agreed to the provisions, as have state and national trade groups representing insurance carriers. Bills pending in a state Senate committee are adapted from model language that was approved in 2015 by the Manasquan, N.J.-based National Conference of Insurance Legislators, a group of state lawmakers who focus on insurance policy, after ride-hailing companies and the insurance industry established the framework as part of a national compromise.

That language since has been adopted in 40 states, with Michigan in line, said Bob Passmore, assistant vice president of personal lines policy for Chicago-based Property Casualty Insurers Association of America.

Taxi companies aren’t opposing the legislation in its current form, since they believe requiring a state license of all transportation carriers — whether taxis, limousines or ride sharing — creates a level playing field. The bills would require limos and taxicabs also to carry insurance, though the minimum liability limit for taxis would be lower than for limos and transportation network companies.

Requirements for ride-hailing companies have been the most contentious, in part because insurers have to adapt to new technology.

“With a commercial use comes a much higher risk profile,” said Dyck Van Koevering, general counsel for the Lansing-based Insurance Institute of Michigan, which represents the state’s property and casualty insurers. “Our concern has been that you have a personal insurance policy on a personal vehicle that’s being used for a commercial purpose, and it’s not being properly priced.”

What covers who

One of the main items to be resolved was whether personal auto policies would cover drivers for Uber or Lyft when they have the ride-hailing apps turned on but haven’t yet picked up a passenger. The Property Casualty Insurers Association of America, which helped negotiate the national compromise with transportation network companies, contends state laws with more specific guidelines about when coverage applies to ride sharing would prevent transportation network companies from contesting insurers’ coverage determinations and delayed benefits for crash victims.

Under Michigan’s legislation, drivers would need coverage of at least $50,000 per person and $100,000 for accident for bodily injury or death if they were logged onto the ride-hailing company’s app but not yet driving a customer, and at least $1 million while a driver has a for-hire passenger in the car. The language would be flexible enough that either Uber or Lyft, or individual drivers, could provide the required coverage. If drivers don’t purchase additional coverage, the ride-hailing company must provide it for them.

Limo carriers also would need minimum liability coverage of $1 million under the terms of the bill, while taxi operators would be required to have minimum liability coverage of $300,000. Currently, state law does not require taxis to carry any insurance coverage; instead, those decisions are left to municipal ordinances. The city of Detroit, for instance, requires minimum liability coverage of $100,000 for bodily injury or death per person per accident and $300,000 for two or more people per accident.

Matt Oddy, operations manager of Checker cab company in Detroit, said he believes the legislation simply codifies existing practice into state law. He added that a $1 million policy for taxis, especially in Detroit, is either not offered or would come with premiums so high that they would cost too much to purchase.

“The difference in the insurance is that the taxis have it in place all the time,” Oddy said, compared to drivers for Uber or Lyft, who only would be required to carry the $1 million policies when they have a passenger in the car.

Under the bill, a transportation network company would have to disclose to prospective drivers the coverage that the company provides and that their personal auto policies might not cover them while driving for hire.

Covering the gaps

In addition, insurance providers wouldn’t be required to offer coverage for transportation network company drivers, Van Koevering said.

“If you’re a personal auto policy writer (and) you have no commercial exposure or experience, you don’t have to completely alter your model,” he said.

In August, Farmers Insurance introduced ride-sharing coverage in Michigan, following its initial rollout in Colorado in February 2015. It’s now offered in more than 30 states, said Mariel Devesa, the Los Angeles-based company’s head of product innovation.

Farmers offers minimum coverage limits of $50,000 per person and $100,000 per accident, she said, though customers can choose to buy coverage with higher liability limits.

Ride-sharing coverage also is less expensive than commercial policies, Devesa said, with rates that reflect individual markets and the fact that drivers for ride-hailing companies typically drive less than commercial drivers. Farmers would not disclose the number of ride-sharing policies purchased to date, but said the company is happy with the number.

Lyft, for instance, says it offers coverage for drivers from the time they turn on the app until a passenger is dropped off at his or her destination. Drivers are covered by their personal auto policies when they are not using the company’s app.

Lyft offers contingent coverage of up to $50,000 per person and up to $100,000 per accident for bodily injury coverage while the app is on but a driver has not picked up a passenger — the levels can vary based on state thresholds, Lyft said — and up to $1 million when a driver has accepted a ride and is carrying a passenger. Lyft’s coverage is provided on top of a driver’s individual coverage if he or she has elected insurance riders on their personal auto policies.

A spokeswoman for Lyft said the company supports Michigan’s legislation.

“The intent and the way it is drafted is not to leave any gaps,” Brian Balow, a member with Bloomfield Hills law firm Dawda, Mann, Mulcahy & Sadler PLC, who represents clients in the automotive industry and on such issues as information technology. “From my reading of it, I think it does what it’s intended to do.”