Uber &Transportation Network

Companies – a 50 state look at

the evolving laws and their

effect on subrogation recovery

Patrick Clerkin,

Clerkin, Sinclair & Mahfouz, LLP

Transportation

Network Companies

The truism that law will always be outpaced by the speed of

technological innovation, and the uncertainty that has always

existed at the intersection of technology and the law, has been

illustrated time and time again, from the age of railroads to

the digital age of today.

John G. Browning, Emerging Technology and Its Impact on Automotive Litigation, 81 DEF. COUNS. J. 83 (2014)

Overview:

• History & Expansion of Transportation

Network Companies (TNCs)

• TNCs and Insurance Coverage Issues

• The Future

• Ongoing Litigation

History of TNCs

• Uber launched in 2010; currently in 300 cities in

60 countries; currently valued at $50 billion.

• Lyft launched in 2012; currently in 60 US cities;

currently valued at $2.5 billion.

Carl Icahn invested $100 million in Lyft in 2015,

believing that the company will continue to grow &

that its valuation of $2.5 billion is a “tremendous

bargain.”

Uber and Lyft: Average Rides Per

Month

Uber Drivers Per City

How do TNCs work?

• Use smartphone apps to directly connect

passengers and drivers;

• Provide convenience and competitive pricing

to users;

• Share similarities with ride sharing programs

& taxi/limo services

How do TNCs differ from

Ridesharing/Carpooling?

Ride Sharing/Carpooling:

• TNC drivers use personal vehicles, but drivers and passengers don’t share the same destination;

• Rideshare/Carpool drivers aren’t transporting passengers for a fee;

• Ridesharing/Carpooling is often covered by an individual’s personal liability policy and is not precluded by a livery exception.

TNCs vs. Taxis & Limos:

Taxis/Limos:

• TNC drivers move from one fare to the next

to earn an income, but TNCs do not own the

vehicles driven by their drivers.

• Taxis and limos undergo inspections, and

require commercial insurance policies

effective 24/7

Transportation Network Companies

(TNCs)

Personal Vehicles

Driver & Passenger Share a Destination

Pre-Arranged Fares

“Professional Drivers”

Use of Technology

TNCs

Taxis &Limousines

*

Rideshare/Carpool

*

TNCs: The Crucial Difference

The use of privately owned vehicles for a

commercial purpose causes tension when the

vehicle is involved in an accident.

Should the TNC provide insurance coverage for

the loss, or should the driver’s personal policy

cover the damage?

Liability, of course, is the

elephant in the room when it

comes to discussion of ride-

sharing services.

John G. Browning, Emerging Technology and Its Impact on Automotive Litigation, 81 DEF. COUNS. J. 83 (2014)

TNCs & Insurance Coverage:

Whose Loss is it Anyway?

• Personal Auto Policies Don’t Cover Loss;

• TNC Insurance Coverage Periods;

• State Legislation & the

TNC Model Bill;

• TNC Specific Policies.

Personal Insurance Coverage

• Livery exceptions prevent personal policies

from covering losses if vehicles are used for

commercial purposes;

• Commercial activities create more risk

than anticipated by standard auto policies;

TNC Coverage

• TNCs can provide insurance coverage for

loss;

• Coverage depends on what part of the TNC

transaction the loss occurred.

Insurance Coverage Periods

Period 1: The App is on & the driver is waiting for a passenger.

Period 2: A match is made, but the passenger is not in the car.

Period 3: The passenger enters the vehicle & is being transported.Period 3

Period 1 Period 2

Gap in Coverage

Period 1: Waiting for a Passenger

• Uber provides 50/100 contingent liability

coverage only;

• Does not cover damage to the driver’s vehicle;

• The driver’s personal policy must deny coverage

first.

• No UM/UIM, med pay, other optional coverages.

Period 2: En Route to Passenger

• Uber provides $1,000,000 in coverage for

the other vehicle.

• Includes UM/UIM only where required.

• Contingent comprehensive and collision for the

driver’s vehicle only if the driver purchased

coverage for their personal policies.

Period 3: Transporting Passengers

• Uber provides $1,000,000 in coverage for

the other vehicle.

• Includes UM/UIM only where required.

• Contingent comprehensive and collision for the

driver’s vehicle only if the driver purchased

coverage for their personal policies.

Determining Coverage

• Depends on when the loss occurred;

• Problematic:

• Losses occurring in Periods 1 & 2; and

• For drivers without comprehensive or collision

coverage on their personal policies, because Uber

only provides contingent coverage.

TNC and Insurer Positions:

• TNCs have generally taken the stance that they

should only be required to provide coverage when

the driver has a fare.

• Insurers are reluctant to cover losses in

connection with commercial activities & believe

TNCs should provide primary coverage.

• Regulators and Legislators want to close gaps

caused by these issues so that consumers are

protected and coverage is clear.

Legislative and Commercial

Solutions

• States have enacted legislation to resolve

coverage issues;

• Insurance companies and TNCs agreed on

a Compromise Model Bill;

• Several insurance companies offer TNC-

specific policies.

The Model Bill

• Drafted by UberX & major insurance providers to close coverage gaps created by TNCs;

• Period 1: mandatory liability coverage by TNC of 50/100/25, including any state-mandated coverage (UM, PIP); does not include comprehensive/collision for the driver’s vehicle

• Periods 2 & 3: primary coverage with $1 million, including other mandated coverage

States with Limits Similar to the

Model Bill

Many states have passed legislation with insurance

limits that mirror or are substantially similar to the

requirements of the Model Bill:

• Maine

• Minnesota

• Montana

• North Dakota

• Oklahoma

• Tennessee

• Texas

• Georgia

• Idaho

• Indiana

• Kansas

• Louisiana

State Legislation

• Each state has a different approach to

regulating TNCs;

• Some adopted the Compromise Model Bill;

• Some haven’t enacted any legislation;

• Uber is completely banned in Nevada.

• Laws are evolving in all 50 states.

Perhaps the most remarkable invention of modern times. . .is the railroad system. It is not strange, then, that when we are called to construe a statute relating to this class of subjects, passed before a steam engine or a railroad was thought of, in its application to this

modern system, we should be met by difficulties of the gravest character.

Bridge Proprietors v. Hoboken Co., 68 U.S. 116, 146-147 (1864)

State Legislation

Coverage that must be provided by either the TNC driver’s personal policy or the TNC:

• California: 50/100/300, with excess of $200,000 from app on to app off provided;

• Colorado: 50/100/30 per incident; TNCs provide primary coverage from app on to app off;

• New Mexico: TNCs provide $1m per incident for death, PI, PD, UM/UIM, coverage from app on to app off;

State Legislation

• Georgia: $1m for death, PI, PD, UM/UIM

from time ride is accepted through

completion of the transaction or end of

ride;

• Illinois: 50/100 BI, 25 PD, from the time the

app is turned on until it is turned off;

State Regulation

• Alaska• Alabama• Connecticut• Florida• Hawaii• Iowa

• Missouri• New York• Rhode Island • Vermont• West Virginia

States where bills were proposed but failed to advance:

TNC Specific Policies

Many insurers are offering TNC specific

policies to meet the growing number of TNC

drivers across the US.

• Provide liability, comprehensive & collision

coverage for the driver and other vehicles

involved in an accident.

• Not available in every state.

TNC Specific Policies

• Geico:

• All TNC drivers;

• VA, MD, TX, GA

• Progressive:

• Lyft exclusive;

• PA

• USAA:

• All TNC Drivers;

• TX, CO

• Farmers:

• All TNC drivers;

• AR, CO, UT, coming soon: CA

• Allstate:

• All TNC drivers;

• CO, IL, TX, VA

The Future

• Insurers will continue to adapt to an

evolving market by providing policies

geared toward TNCs.

• New products, like per-mile insurance

policies, are emerging to deal with

insurance issues caused by TNCs.

Per-Mile Insurance

• Insurance start up Metromile recently

partnered with Uber in CA, IL, WA to sync

with Uber’s app.

• Connects to the driver’s vehicle to separate

personal miles from business miles.

Ongoing Court Cases:

Current case law does not address coverage

issues caused by TNCs. However, there are

numerous ongoing cases involving TNC

companies & their place in US Markets.

Ongoing Litigation

• Nat'l Fedn. of the Blind of Cal. v. Uber Techs., Inc., 2015 U.S. Dist. LEXIS 51767 (N.D. Cal. Apr. 17, 2015): Complaint was filed alleging Uber discriminates against disabled persons with service animals by denying them transport of their service dogs.

• O'Connor v. Uber Techs., 2015 U.S. Dist. LEXIS 30684 (N.D. Cal. 2015): Ongoing litigation to determine whether Uber drivers are classified as independent contractors or employees under California law.

Ongoing Litigation

• Ehret v. Uber Techs., Inc., 68 F. Supp. 3d 1121 (N.D. Cal. 2014): Plaintiff’s filed suit alleging Uber engages in unfair competition practices by adding a “gratuity” 20% amount to each ride for the driver, when the amount is retained by Uber.

• Yellow Group LLC v. Uber Techs. Inc., 2014 U.S. Dist. LEXIS 94093 (N.D. Ill. July 10, 2014): Plaintiffs’ filed suit alleging Uber engages in unfair competition by misrepresenting certain features of its service, misleading customers as to an association between Uber and Plaintiffs, and encouraging taxi drivers to breach their agreements with Plaintiffs.

Ongoing Litigation

• Greater Houston Transp. Co. v. Uber Techs.,

Inc., 2015 U.S. Dist. LEXIS 28867 (S.D.

Tex. Mar. 10, 2015): Complaint alleges

Uber engages in anti-competition practices

by failing to comply with local regulations

and misrepresenting the nature of their

services to consumers.

Conclusion:

Where we were:

• Rapid expansion of TNCs outpaced insurers and legislators, causing gaps in coverage and confusion as to whose coverage applies & when coverage applies.

Where we are now:

• Solutions to these problems have evolved rapidly, and while there is now more regulation of TNCs and insurance coverage, legislation varies state by state.

Conclusion

Where we’re headed:

• Insurers will continue to offer products specifically targeted toward TNC drivers while legislators work toward enacting comprehensive legislation to deal with these issues.

• Established insurers will need to focus more on the use of technology to compete with “per mile” companies like Metromile.

Additional Resources

• Property Casualty Insurers Association of America, Industry Issues: Transportation Network Companies, available at: http://www.pciaa.net/industry-issues/transportation-network-companies.

• TNC Insurance Compromise Model Bill, available at: http://www.naic.org/meetings1503/committees_c_sharing_econ_wg_2015_spring_nm_additional_materials.pdf

• National Association of Insurance Commissioners, Transportation Network Company Insurance Principles for Legislators and Regulators, available at: http://www.naic.org/documents/committees_c_sharing_econ_wg_exposure_adopted_tnc_white_paper_150331.pdf