Transportation network companies (TNCs), like Uber and Lyft, use an online platform to develop a marketplace that connects drivers/car owners with people in need of a ride.  The TNCs operate as facilitators between drivers and paying passengers by maintaining the online platform, vetting drivers, and delivering payments from customers to drivers.  While the TNCs do not employ the drivers, in most cases they do provide insurance coverage when the drivers are engaged in the transportation of paying passengers.  

On New Year’s Eve 2013, a tragic accident occurred in San Francisco. A mother and her two young children were crossing the street when they were struck by a vehicle driven by an Uber driver who had just completed a ride and was waiting to be matched with another passenger.  The family’s six-year-old daughter was killed and the mother and young son were seriously injured.  The aftermath of this accident highlighted insurance coverage gaps that could potentially leave innocent bystanders who are injured by TNC drivers with no means of recovering for their damages. Because TNC drivers generally are only covered by the TNC’s insurance while they are transporting a paying customer, a driver returning from a paid ride and awaiting another passenger may not have insurance coverage unless the driver has purchased his or her own commercial policy.

In 2014, the California Public Utility Commission took steps to close this gap by approving coverage policies for personal automobiles that apply as soon as TNC software is engaged and before a match with a rider has been made. The state of California, which requires that TNCs provide a minimum of $1 million per incident commercial liability coverage while a driver has a paying rider in his vehicle, has also proposed extending this minimum requirement to cover the driver from the moment he or she switches on the app permitting them to accept fares.

Following the lead of California, a majority of states have adopted or are in the process of adopting regulations governing the operations of TNCs.  These regulations cover a wide range of requirements including licensing, minimum insurance coverage, disclosure rules, and operating guidelines. The following highlights some of the requirements adopted or proposed by the states of Arizona, Maine, Michigan, New Jersey, North Carolina, South Carolina, Texas, and Utah.

Arizona. Effective March 1, 2016, Arizona House Bill 2135 establishes transportation network services provisions including financial responsibility requirements and disclosures.  Additionally, under the bill, “an insurer may issue an endorsement to a private passenger policy that expressly provides coverage for the provision of transportation network services,” subject to certain limitations and specific termination, delivery, timeframes and notice requirements. However, HB 2135 does “not create an obligation of an insurer to offer, provide or issue a policy or an endorsement that includes coverage for any liability incurred while a transportation network company driver is logged in to the transportation network company’s digital network or software application to be a driver or is providing transportation network services” (HB 2135, April 9, 2015).

Maine. In June 2015, lawmakers in Maine voted to override Governor Paul Le Page’s veto and enact an immediately effective law governing TNCs operating within the state. The legislation added a new Chapter 93 to the state’s statutes that defines a TNC as “a corporation, partnership, sole proprietorship or other entity … that uses a digital network to connect transportation network company riders to transportation network company drivers who provide prearranged rides.” As with other states that have enacted similar legislation, TNCs in Maine do not include transportation brokers arranging nonemergency medical transportation for Medicaid or Medicare members pursuant to a contract with the state or a managed care organization.

Chapter 93 mandates that TNCs and their drivers maintain primary automobile liability insurance, and sets minimum insurance coverage requirements/exclusions, financial responsibility requirements, required disclosures, and claims-payment priorities. The legislation also added a provision requiring TNCs to obtain permits, the fee for which is $10,000 annually, and making operation without those permits or insurance a Class D crime (Public Law No. 279 (HB 934), June 30, 2015).

Michigan.  Michigan House Bill 4639 takes a different approach by permitting insurers to exclude all coverage under a policy insuring a personal vehicle “for any loss or injury that occurs while a TNC driver is logged on to a TNC’s digital network or while a transportation network company driver is providing a prearranged ride.” The specific coverages which could be excluded under this proposal are: residual liability insurance; personal protection and property protection insurance; uninsured and underinsured motorist coverage; comprehensive coverage; and collision coverage (HB 4639, May 26, 2015).

New Jersey. In New Jersey, Senate Bill 2519 seeks to establish registration requirements for TNCs with the New Jersey Motor Vehicle Commission. Proposed requirements include mandatory liability insurance, medical payments coverage, and collision and comprehensive coverage and would require that a full copy of these policies, together with any endorsements, be filed with the commission. The legislative statement for this bill includes the following: “The bill’s insurance requirement applies to a TNC driver whose vehicle is otherwise covered by a private passenger automobile insurance policy when the driver is not on duty. The bill establishes a point at which the private passenger automobile insurance policy is supplanted by the transportation network company’s policy. That point is established at the time the TNC driver logs on to the company’s digital network to indicate availability. The company is required to keep a log as to the time of the engagement and is required to keep that record for five years; the record is subject to discovery in the event of a dispute regarding which policy is to respond in the event of an accident. The driver is required to keep a copy of the certificate of insurance for coverage supplied by the TNC in his vehicle” (SB 2519, October 23, 2014).

North Carolina. A new law enacted by the North Carolina legislature and signed by Governor Pat McCrory on September 4, 2015, requires TNC drivers, or TNCs on the driver’s behalf, to maintain primary auto insurance that recognizes that the driver is using a vehicle to transport passengers for compensation and sets forth the minimum coverage requirements necessary. The new law also sets out guidelines that all drivers and vehicles used in TNC operations must meet, including, among other things, requirements addressing payment options, safety, and driver background checks. The legislation also requires TNCs to obtain permits, the fee for which is $5,000 annually (Session Law 2015-237 (SB 541), September 4, 2015).

South Carolina. A South Carolina law approved on June 24, 2015, amended Title 58 of the 1976 Code of Laws of South Carolina by adopting rules governing the activities of TNCs. The new rules require TNC drivers, or TNCs on the driver’s behalf, to maintain primary auto insurance that recognizes that the driver is using his or her vehicle to transport passengers for compensation. The new law also sets forth the minimum coverage requirements necessary for prearranged versus non-prearranged services, and sets out safety guidelines that all vehicles used in TNC operations must meet, including a 19-point safety inspection and placarding requirements (Act No. 88 (H.B. 3525)).

Tennessee. Tennessee Senate Bill 1052 proposed to establish insurance and disclosure requirements for TNCs, including the following: (1) a TNC shall disclose in writing to drivers, as part of its agreement with those drivers, the insurance coverage and limits of liability that the TNC provides while the driver uses a vehicle in connection with a TNC’s online-enabled application or platform, and shall advise a driver in writing that the driver’s personal automobile insurance policy may not provide any required or optional coverage because, and while, the driver uses a vehicle in connection with a TNC’s online-enabled application or platform; (2) a TNC, any driver, or a combination of both as provided in this part, shall maintain TNC insurance as provided for in this bill; (3) coverage under a TNC insurance policy shall not be dependent on a personal automobile insurance policy first denying a claim nor shall a personal automobile insurance policy be required to first deny a claim; and (4) in every instance where a TNC insurance policy that is maintained by a driver to fulfill the insurance obligations in this bill has lapsed or ceased to exist, the TNC shall provide the coverage required by this section beginning with the first dollar of the claim (SB 1052, February 12, 2015).

Texas. A Texas law that takes effect January 1, 2016, adds a new Chapter 1954 to the Texas Insurance Code governing TNCs that operate within the state. Signed by Texas Governor Greg Abbott on June 17, 2015, H.B. No. 1733 mandates that a TNC driver (or a TNC on the driver’s behalf) maintain primary automobile insurance. The new Chapter 1954 sets standards such as minimum coverage requirements/exclusions, financial responsibility requirements, required disclosures, and claims-payment priorities. For example, at the time that a TNC driver is engaged in a prearranged ride, the automobile insurance policy must provide, at a minimum, coverage with a total aggregate limit of liability of $1 million for death, bodily injury, and property damage for each incident. Uninsured or underinsured motorist coverage and personal injury protection coverage also are required, and coverage under an automobile insurance policy maintained by the TNC will not be contingent upon a TNC driver’s personal automobile insurer’s initial denial of a claim.

In addition to the legislative action in Texas, the Government Employees Insurance Company (GEICO) announced on June 15, 2015, that it would begin offering an end-to-end policy to Texans that cover vehicles for personal use, ridesharing, and other on-demand services.

Utah. Utah Senate Bill 294 establishes statutory requirements for TNCs. Key elements addressed include: required registration of a TNC with the Division of Consumer Protection; mandated TNC insurance requirements including minimum coverages and limits; and provisions for transportation network driver policies (SB 294, March 31, 2015).