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Wrongful death lawsuit puts ride-share insurance under scrutiny

In our post last week, we wrote about a wrongful death lawsuit in the wake of a fatal pedestrian accident in San Francisco. A young girl was struck and killed as she attempted to cross the street with members of her family on New Year’s Eve. The driver who struck her was one of many drivers providing service for Uber, one of the ride-sharing firms approved for operation in California last September.

Companies like Uber turn regular drivers with their own cars into a sort of part-time taxi service. Fares tend to be cheaper than traditional taxis. But this recent accident has raised a very important question: who is liable when someone gets injured or killed by a driver working for a ride-sharing service?

Insurance coverage for this business model is still somewhat murky. In the event of an accident, insurance liability first falls on the driver/car owner who caused it. If the damages exceed the driver’s personal liability coverage, ride-share companies are supposed to make up the difference by carrying a policy worth up to $1 million.

In the wake of this fatal pedestrian accident, however, Uber was quick to claim that the driver was not carrying a fee-paying passenger and was therefore not working for Uber. As such, he would not be covered under the company’s insurance policy. Others disagree, noting that the driver was logged on to the Uber network at the time of the crash.

This accident and the resulting lawsuit have provided a proverbial “I told you so” opportunity to critics of the ride-sharing business model. The most vocal opponents have been those in the traditional taxicab industry.

In addition to concerns about when a ride-share company is and is not liable for an accident, there are also concerns that many individuals who drive for ride-sharing companies may be doing so in violation of their own insurance policies. Many personal auto insurance policies do not cover driving for hire. Commercial driving tends to be a bigger risk, which is why commercial insurance policies can cost up to 10 times more than a personal policy.

By the time that all insurance issues are ironed out, ride-sharing services might not be any cheaper than traditional cabs. This lawsuit will likely help set the tone for future liability cases in this burgeoning industry.

Source: L.A. Times, "California regulator warns about gaps in ride-sharing insurance," Marc Lifsher and Salvador Rodriguez, Feb. 5, 2014

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