Friday, November 14, 2014

Up-Lyfting Update

Last week, we noted car-sharing service Lyft's first passenger fatality, and pondered the insurance implications thereof. Since this situation is a bit outside our wheelhouse, we turned to P&C expert (and long-time FoIB) Kevin Sullivan.

I really didn't know what questions to even be asking, what issues (beyond the obvious) were relevant, and what part the location (California vs, say, Ohio) would play in this whole scenario. He kindly supplied not only the necessary questions, but the answers, as well Take it away, Kevin:

The insurance test here:  Will Lyft's Commercial General Liability, or Business Auto coverage defend the Lyft driver?

IMHO, it doesn't matter if it's the driver's fault.  Everybody's getting sued.  Lawyers cost money [ed: this is a point our friend Bill M made, as well].

If the driver has a commercial auto policy, and he's not found criminally negligent (drunk, on drugs, etc), they defend/settle.  My guess:  The driver has no such insurance.  Personal Auto expressly EXCLUDES using your vehicle to make money.  However, the coverage exists, otherwise, you wouldn't be able to get a pizza delivered to your house.  The Pizzeria (Lyft) purchases that cover.

Back to Lyft: 

1.  Is the driver named on Lyft's policy?  Or is he listed on just an "Additional Insured" endorsement? 

2.  $1,000,000 Combined Single Limit?  Liability only?

3.  What carrier wrote the Lyft policy?  That would tell me a TON...

Looks like Lyft's insurance is prepared to pay or defend.

Here's how this is all going to go down:  Settlement will occur, nobody will know how much.  Lyft will either need to find another carrier, or pay a TON more in premium.  A non-renewal (cancellation) is also possible.  Again, I'd need to know the carrier before I'd guess.

Lyft could go out of business for not being able to find a new insurance carrier.  That won't matter: another service will come along, and replace them.  Ride-sharing ain't dying.

In the big picture, the carriers are playing "wait and see" with this new auto niche.  Trust me, they are crunching numbers right now, and will develop a product for the "part time TNC (Transportation Networking Company) driver" for Uber, Lyft, Sidecar, etc.

If they had HALF A CLUE, the TNC's would create a "driver's association" for ALL ride share drivers.  As a member of the association, you'd get access to the association’s insurance plan at $X,XXX per year [ed: similar to how many professional organizations sponsor life or disability insurance].

Thanks, Kevin!

This is still a relatively immature market, with plenty of room for expansion, and missteps. But as Kevin notes, there's just too much pent-up demand, primarily tech-driven (all those iOS and Android apps aren’t going to drive themselves, after all). And the centuries old taxi-cab model with its expensive (and increasingly outmoded) barrier to entry just doesn't seem sustainable. On the other hand, folks want to know that they're protected from the risk of someone else's driving.

Something's gonna give, it's now a question of how and when.
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