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Uber &Transportation Network
Companies – a 50 state look at
the evolving laws and their
effect on subrogation recovery
Patrick Clerkin,
Clerkin, Sinclair & Mahfouz, LLP
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Transportation
Network Companies
The truism that law will always be outpaced by the speed of
technological innovation, and the uncertainty that has always
existed at the intersection of technology and the law, has been
illustrated time and time again, from the age of railroads to
the digital age of today.
John G. Browning, Emerging Technology and Its Impact on Automotive Litigation, 81 DEF. COUNS. J. 83 (2014)
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Overview:
• History & Expansion of Transportation
Network Companies (TNCs)
• TNCs and Insurance Coverage Issues
• The Future
• Ongoing Litigation
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History of TNCs
• Uber launched in 2010; currently in 300 cities in
60 countries; currently valued at $50 billion.
• Lyft launched in 2012; currently in 60 US cities;
currently valued at $2.5 billion.
Carl Icahn invested $100 million in Lyft in 2015,
believing that the company will continue to grow &
that its valuation of $2.5 billion is a “tremendous
bargain.”
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Uber and Lyft: Average Rides Per
Month
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Uber Drivers Per City
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How do TNCs work?
• Use smartphone apps to directly connect
passengers and drivers;
• Provide convenience and competitive pricing
to users;
• Share similarities with ride sharing programs
& taxi/limo services
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How do TNCs differ from
Ridesharing/Carpooling?
Ride Sharing/Carpooling:
• TNC drivers use personal vehicles, but drivers and passengers don’t share the same destination;
• Rideshare/Carpool drivers aren’t transporting passengers for a fee;
• Ridesharing/Carpooling is often covered by an individual’s personal liability policy and is not precluded by a livery exception.
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TNCs vs. Taxis & Limos:
Taxis/Limos:
• TNC drivers move from one fare to the next
to earn an income, but TNCs do not own the
vehicles driven by their drivers.
• Taxis and limos undergo inspections, and
require commercial insurance policies
effective 24/7
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Transportation Network Companies
(TNCs)
Personal Vehicles
Driver & Passenger Share a Destination
Pre-Arranged Fares
“Professional Drivers”
Use of Technology
TNCs
Taxis &Limousines
*
Rideshare/Carpool
*
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TNCs: The Crucial Difference
The use of privately owned vehicles for a
commercial purpose causes tension when the
vehicle is involved in an accident.
Should the TNC provide insurance coverage for
the loss, or should the driver’s personal policy
cover the damage?
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Liability, of course, is the
elephant in the room when it
comes to discussion of ride-
sharing services.
John G. Browning, Emerging Technology and Its Impact on Automotive Litigation, 81 DEF. COUNS. J. 83 (2014)
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TNCs & Insurance Coverage:
Whose Loss is it Anyway?
• Personal Auto Policies Don’t Cover Loss;
• TNC Insurance Coverage Periods;
• State Legislation & the
TNC Model Bill;
• TNC Specific Policies.
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Personal Insurance Coverage
• Livery exceptions prevent personal policies
from covering losses if vehicles are used for
commercial purposes;
• Commercial activities create more risk
than anticipated by standard auto policies;
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TNC Coverage
• TNCs can provide insurance coverage for
loss;
• Coverage depends on what part of the TNC
transaction the loss occurred.
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Insurance Coverage Periods
Period 1: The App is on & the driver is waiting for a passenger.
Period 2: A match is made, but the passenger is not in the car.
Period 3: The passenger enters the vehicle & is being transported.Period 3
Period 1 Period 2
Gap in Coverage
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Period 1: Waiting for a Passenger
• Uber provides 50/100 contingent liability
coverage only;
• Does not cover damage to the driver’s vehicle;
• The driver’s personal policy must deny coverage
first.
• No UM/UIM, med pay, other optional coverages.
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Period 2: En Route to Passenger
• Uber provides $1,000,000 in coverage for
the other vehicle.
• Includes UM/UIM only where required.
• Contingent comprehensive and collision for the
driver’s vehicle only if the driver purchased
coverage for their personal policies.
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Period 3: Transporting Passengers
• Uber provides $1,000,000 in coverage for
the other vehicle.
• Includes UM/UIM only where required.
• Contingent comprehensive and collision for the
driver’s vehicle only if the driver purchased
coverage for their personal policies.
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Determining Coverage
• Depends on when the loss occurred;
• Problematic:
• Losses occurring in Periods 1 & 2; and
• For drivers without comprehensive or collision
coverage on their personal policies, because Uber
only provides contingent coverage.
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TNC and Insurer Positions:
• TNCs have generally taken the stance that they
should only be required to provide coverage when
the driver has a fare.
• Insurers are reluctant to cover losses in
connection with commercial activities & believe
TNCs should provide primary coverage.
• Regulators and Legislators want to close gaps
caused by these issues so that consumers are
protected and coverage is clear.
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Legislative and Commercial
Solutions
• States have enacted legislation to resolve
coverage issues;
• Insurance companies and TNCs agreed on
a Compromise Model Bill;
• Several insurance companies offer TNC-
specific policies.
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The Model Bill
• Drafted by UberX & major insurance providers to close coverage gaps created by TNCs;
• Period 1: mandatory liability coverage by TNC of 50/100/25, including any state-mandated coverage (UM, PIP); does not include comprehensive/collision for the driver’s vehicle
• Periods 2 & 3: primary coverage with $1 million, including other mandated coverage
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States with Limits Similar to the
Model Bill
Many states have passed legislation with insurance
limits that mirror or are substantially similar to the
requirements of the Model Bill:
• Maine
• Minnesota
• Montana
• North Dakota
• Oklahoma
• Tennessee
• Texas
• Georgia
• Idaho
• Indiana
• Kansas
• Louisiana
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State Legislation
• Each state has a different approach to
regulating TNCs;
• Some adopted the Compromise Model Bill;
• Some haven’t enacted any legislation;
• Uber is completely banned in Nevada.
• Laws are evolving in all 50 states.
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Perhaps the most remarkable invention of modern times. . .is the railroad system. It is not strange, then, that when we are called to construe a statute relating to this class of subjects, passed before a steam engine or a railroad was thought of, in its application to this
modern system, we should be met by difficulties of the gravest character.
Bridge Proprietors v. Hoboken Co., 68 U.S. 116, 146-147 (1864)
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State Legislation
Coverage that must be provided by either the TNC driver’s personal policy or the TNC:
• California: 50/100/300, with excess of $200,000 from app on to app off provided;
• Colorado: 50/100/30 per incident; TNCs provide primary coverage from app on to app off;
• New Mexico: TNCs provide $1m per incident for death, PI, PD, UM/UIM, coverage from app on to app off;
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State Legislation
• Georgia: $1m for death, PI, PD, UM/UIM
from time ride is accepted through
completion of the transaction or end of
ride;
• Illinois: 50/100 BI, 25 PD, from the time the
app is turned on until it is turned off;
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State Regulation
• Alaska• Alabama• Connecticut• Florida• Hawaii• Iowa
• Missouri• New York• Rhode Island • Vermont• West Virginia
States where bills were proposed but failed to advance:
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TNC Specific Policies
Many insurers are offering TNC specific
policies to meet the growing number of TNC
drivers across the US.
• Provide liability, comprehensive & collision
coverage for the driver and other vehicles
involved in an accident.
• Not available in every state.
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TNC Specific Policies
• Geico:
• All TNC drivers;
• VA, MD, TX, GA
• Progressive:
• Lyft exclusive;
• PA
• USAA:
• All TNC Drivers;
• TX, CO
• Farmers:
• All TNC drivers;
• AR, CO, UT, coming soon: CA
• Allstate:
• All TNC drivers;
• CO, IL, TX, VA
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The Future
• Insurers will continue to adapt to an
evolving market by providing policies
geared toward TNCs.
• New products, like per-mile insurance
policies, are emerging to deal with
insurance issues caused by TNCs.
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Per-Mile Insurance
• Insurance start up Metromile recently
partnered with Uber in CA, IL, WA to sync
with Uber’s app.
• Connects to the driver’s vehicle to separate
personal miles from business miles.
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Ongoing Court Cases:
Current case law does not address coverage
issues caused by TNCs. However, there are
numerous ongoing cases involving TNC
companies & their place in US Markets.
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Ongoing Litigation
• Nat'l Fedn. of the Blind of Cal. v. Uber Techs., Inc., 2015 U.S. Dist. LEXIS 51767 (N.D. Cal. Apr. 17, 2015): Complaint was filed alleging Uber discriminates against disabled persons with service animals by denying them transport of their service dogs.
• O'Connor v. Uber Techs., 2015 U.S. Dist. LEXIS 30684 (N.D. Cal. 2015): Ongoing litigation to determine whether Uber drivers are classified as independent contractors or employees under California law.
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Ongoing Litigation
• Ehret v. Uber Techs., Inc., 68 F. Supp. 3d 1121 (N.D. Cal. 2014): Plaintiff’s filed suit alleging Uber engages in unfair competition practices by adding a “gratuity” 20% amount to each ride for the driver, when the amount is retained by Uber.
• Yellow Group LLC v. Uber Techs. Inc., 2014 U.S. Dist. LEXIS 94093 (N.D. Ill. July 10, 2014): Plaintiffs’ filed suit alleging Uber engages in unfair competition by misrepresenting certain features of its service, misleading customers as to an association between Uber and Plaintiffs, and encouraging taxi drivers to breach their agreements with Plaintiffs.
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Ongoing Litigation
• Greater Houston Transp. Co. v. Uber Techs.,
Inc., 2015 U.S. Dist. LEXIS 28867 (S.D.
Tex. Mar. 10, 2015): Complaint alleges
Uber engages in anti-competition practices
by failing to comply with local regulations
and misrepresenting the nature of their
services to consumers.
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Conclusion:
Where we were:
• Rapid expansion of TNCs outpaced insurers and legislators, causing gaps in coverage and confusion as to whose coverage applies & when coverage applies.
Where we are now:
• Solutions to these problems have evolved rapidly, and while there is now more regulation of TNCs and insurance coverage, legislation varies state by state.
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Conclusion
Where we’re headed:
• Insurers will continue to offer products specifically targeted toward TNC drivers while legislators work toward enacting comprehensive legislation to deal with these issues.
• Established insurers will need to focus more on the use of technology to compete with “per mile” companies like Metromile.
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Additional Resources
• Property Casualty Insurers Association of America, Industry Issues: Transportation Network Companies, available at: http://www.pciaa.net/industry-issues/transportation-network-companies.
• TNC Insurance Compromise Model Bill, available at: http://www.naic.org/meetings1503/committees_c_sharing_econ_wg_2015_spring_nm_additional_materials.pdf
• National Association of Insurance Commissioners, Transportation Network Company Insurance Principles for Legislators and Regulators, available at: http://www.naic.org/documents/committees_c_sharing_econ_wg_exposure_adopted_tnc_white_paper_150331.pdf