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State wants new rules on insurance for ride-sharing companies

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The California Department of Insurance wants tougher rules for ride-sharing companies like Uber and Lyft that would require their commercial insurance to begin once drivers start searching for customers.

The ride-sharing companies pay drivers who use their own personal cars to pick up passengers. In general, it works like this: drivers turn on a smart phone app that lets customers contact them for a ride. Then, the driver accepts the ride request, picks the customer up and drops them off at the desired location. Here's the catch: a driver's personal auto insurance will not provide coverage during any portion of the process. 

RELATED: Uber wrongful death lawsuit highlights insurance grey area for rideshares

Ride-sharing companies like Uber and Sidecar tout on their websites they have $1 million in commercial liability insurance, but that only covers drivers starting from the time they accept a ride request, said Insurance Commissioner Dave Jones. The companies' $1 million in liability coverage doesn't cover the time when the driver turns on the app and cruises around searching for customers, Jones said.

Ride-sharing drivers could be at risk

If drivers are looking for customers in their car while working for a ride-sharing company, personal auto insurance doesn't apply, said Pete Moraga, spokesman for the Insurance Information Network of California. If an accident occurs, drivers have two choices when reporting the accident to their personal auto insurance provider:

  • Tell the truth. You had your ride-sharing app on and were looking for customers. Moraga says the claim will likely be denied.
  • Lie. Don't mention you were working for the ride-sharing company at the time of the accident. If you get caught, Moraga says that's fraud and you could face criminal penalties.

That's different than what taxi cab drivers deal with. As soon as cab drivers turn on the ignition, their commercial insurance begins, Moraga said.

RELATED: Taxis vs ride-share: How one cabbie views the industry's transformation

Department wants burden to fall on ride-sharing firms

The California Department of Insurance wants to require ride-sharing companies to have $1 million in commercial liability insurance starting from the time drivers first turn on the app. The groups also wants ride sharing companies to have $1 million in uninsured/underinsured motorist coverage.

The department sent its recommendations to the California Public Utilities Commission's president, Michael Peevey. The commission would need to issue revised regulation incorporating the department's recommendations in order for them to take place.

RELATED: California becomes first state to regulate ride-sharing

Uber says it does provide some coverage when a driver starts up its app to when s/he approves a customer ride request, but it's less than what the department is asking for.

During that time frame, Uber provides up to $50,000 per individual per incident for bodily injury, $100,000 in total per incident for bodily injury and $25,000 per incident for property damage.

The company expressed concern that if it were to raise the amount of insurance coverage before a driver accepts a passenger ride request, drivers may take advantage of Uber's car insurance policy if it is better than their personal car insurance, regardless of if they are planning to transport customers.

Lyft and Sidecar did not respond to KPCC's requests for comment.

Insurance issues play out in court

The recommendation comes after an Uber driver Syed Muzaffar hit and killed a six-year-old girl and injured two of her family members in San Francisco on New Year's Eve. Uber said Muzaffar did not have a passenger in his car at the time, but Muzaffar's attorney says his Uber app was on. The girl's family has brought a wrongful death lawsuit against Uber and Muzaffar.

Insurance Commissioner Dave Jones' letter to the California Public Utilities Commission president


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