Liability and Insurance in Ride-sharing Accidents

Although Uber, Lyft, and other ride-sharing companies offer commercial insurance in case of accidents, gray areas mean obtaining compensation might not be a straightforward matter

Wild, wild west of ride-sharing

It has been a turbulent year for Uber, to say the least. The popular ride-sharing app company has come under fire from all sides – authorities, media, riders (the users of the app), and even its own drivers. Uber has always been controversial for its workplace culture and for challenging the status quo of the vehicle-for-hire industry, and the company continues to face legal scrutiny and even outright opposition from authorities in many places where it is currently operating or trying to establish its services. Nevertheless, multiple accusations of sexual harassment and discrimination as well as a rape-related lawsuit in India have damaged Uber’s reputation more than any other controversy before, causing its market value to drop significantly, and its CEO to step down.

Still, ride-hailing services remain largely in-demand among the American public and as Uber’s popularity is faltering, similar companies are gaining ground. Lyft, Uber’s chief competitor, has recently reported a streak of 48 consecutive months of rides growth, reaching the milestone of 1 million rides per day and raising as much as $600 million in April, allowing it to expand to even more US cities and consider entering foreign markets.

With the popularity of ride-sharing continuing to grow, the instances of motor vehicle accidents involving Uber or Lyft drivers will probably become more and more frequent too. While the enthusiasts of the apps point to the fact that all drivers undergo thorough screening before they are employed (neither company accepts candidates with more than 3 moving violations or at-fault accidents in the 3 years prior to application), such accidents do happen and so far, as many as 23 deaths have been attributed to ride-sharing drivers. Apart from those who use ride-hailing services, potential accidents involving Uber or Lyft drivers may also affect regular motorists. For example, concerns may be raised about how an insurance claim would work if an accident were caused by a driver offering ride-sharing services. From a legal standpoint, many aspects of such a scenario still lie in a somewhat gray area. Ride-sharing companies like Uber may try to evade liability by exploiting the fact that, as will be explained in more detail later in this article, the drivers offering the service through a particular company’s app are not necessarily considered employees of the company. The remainder of this article presents detail on how insurance claims may work in case of these accidents.  It may prove useful to anyone who might be concerned about the ramifications of getting injured in an accident related to ride-sharing services.

Accident scenarios

An accident involving a driver of one of the popular ride-sharing companies usually falls into one of three categories. If the incident happens when the driver is using his or her car for personal purposes and the app, be it Uber, Lyft, or other, is not active.  In this scenario,  if the driver’s fault is proven, their personal car insurance policy will cover financial losses from property damage, injuries, medical costs, any other potential liabilities. This scenario does not differ from any other personal injury or property damage case arising from a motor vehicle crash.

The second category involves accidents that happen when the driver’s app is active but they are currently waiting for a ride request rather than fulfilling one. In this case, compensation for bodily harm and/or property damage will be covered by the driver’s personal car insurance up to the maximum amount stipulated by the policy. Any damages in excess of that limit may be covered by the ride-sharing company’s contingent liability policy. This kind of policy also has limits usually expressed by numbers 50/100/25. The numbers mean that the policy covers up to $50,000 in liabilities for injuring an individual, up to $100,000 in total liabilities for bodily injuries sustained by all the parties involved in an accident, and up to $25,000 in liabilities for property damage that occurred as a result of the crash.

The third scenario concerns a situation when the driver is actively pursuing a ride request, either en route to pick up a passenger or already carrying one. If an accident happens at this time and if it occurs because of negligence or recklessness on the part of the Uber, Lyft, or other ride-sharing company drivers, then potential bodily injuries, property damage, or other liabilities may be covered by the company’s commercial insurance that can provide compensation for up to $1 million or by the insured parties’ underinsured/uninsured coverage up to the same amount.

Legal status? It’s complicated

Still, even though Uber and similar companies do have commercial insurance in place, it does not mean that in the case of an accident, the injured party will be automatically covered by it, even if the driver offering ride-sharing through the company’s app is found at fault in the crash. Two important factors are involved here. First, as mentioned earlier in the article, companies such as Uber or Lyft argue that the drivers using their apps cannot be strictly considered their employees. Uber, for example, considers the drivers to be independent contractors or third-party service providers . Therefore, in some situations, the company may seek to avoid liability by laying the blame solely upon the driver, for instance, if he or she was intoxicated or distracted at the time of the crash. In addition, the commercial insurance is provided by the ride-sharing company itself, which makes it all the more likely that they will attempt to invalidate the claim.

As ride-sharing services continue to gain larger and larger portions of the market and become ever more popular with the public, it can be expected that aspects of their operations which, from a legal point of view, still remain only partially resolved, will be clarified, either through additional legislation, or in courts. Up until that moment, legal advice from an experienced attorney will be indispensible for anyone who has been injured or has sustained other losses in a ride-sharing accident and wishes to use legal means to obtain financial compensation for the damage.