LOOK OUT! Those Cars with the Pink Mustache May Not Have Insurance Coverage

Have you seen those cars around town with a pink mustache?  The drivers of those cars are apparently associated with companies such as Lyft, Uber, and/or others.  Through the use of a mobile app installed on a smartphone, rides may be provided to those who might otherwise have called for a taxi or have taken a bus.  Such services are believed to have been intended as a “peer-to-peer ride share” program allowing those who need a ride to request a ride from a driver nearby in his or her own car.  Lyft drivers claim not to charge a fare but, instead, receive a “donation” from the passenger – though it seems some payment is required.

To request these types of services, you have to have the appropriate company’s app installed on your smart phone.  The app contains a map displaying the location of the nearest available driver, allowing the user to request a ride.  Those offering a ride are typically individuals using their own private automobiles.  The question becomes whether insurance coverage is available in the event the passenger is injured in an auto accident while using such services as many any private automobile policies include exclusions similar to the following:

COVERAGE EXCLUSIONS

This coverage does not apply to:

1.  Use of any motor vehicle:

a)  to carry persons or property for a fee; or

* * *

The plain language of the exclusion demonstrates coverage does not apply while the insured is carrying a person for a fee.

In Jackson v. Old Colony Ins. Co., 216 S.W.2d 354 (Tenn. Ct. App. 1948), an insured started using a private automobile as a taxi.  The policy had an exclusion that the policy did not apply when the automobile was “used as a public or livery conveyance” unless declared.  Id.  The trial court found that, “If he was engaged in using his automobile generally for carrying persons for a charge . . . he had no coverage during the period of such operation.”  Id. at 427.  Thus, during the specific use of private automobiles carrying persons for a charge, the exclusion would apply and there would be no coverage for a passenger’s injury.

In the case of Smith v. Service Fire Ins. Co., 197 S.W.2d 233 (Tenn. 1946), the insured quit his job and started using his private car as a taxi without telling the insurer.  The insured took a man and his son to a place near the airport but on the return, an accident occurred.  The court held a similar exclusion barred coverage even though he had dropped his fare and the accident occurred during the return trip.  Id.  Applying this rationale, coverage may be unavailable to insureds under private automobile polices while on their way to pick up a passenger, while carrying the passenger, or returning from dropping off a passenger.

The Tennessee Department of Commerce and Insurance issued a memorandum citing similar concerns.  Because of this very issue, companies like Uber and Lyft are reportedly taking steps to offer coverage for accidents that occur while their drivers are logged onto the systems and available to accept riders. (See The Tennessean, March 14, 2014 and The Seattle Times, March 14, 2014).   Whether you are a rider or a driver, it is worthwhile to check and see whether you are covered in the case of an accident.

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