Where are the coverage gaps for rideshare drivers?

As more auto insurance clients take on work for rideshare and food delivery companies to make ends meet, industry sources note they may not always consult insurers or brokers before starting those jobs.

That’s bad because failing to tell insurers about changes from personal use to commercial driving can lead to claims denials if clients get into accidents. Anecdotally, brokers are telling CU they’re seeing increased rates of personal auto clients getting into accidents while doing rideshare or delivery work.

And those clients don’t appear to understand why they’re not covered when they file claims.

What causes the confusion?

In some cases, the fact that rideshare and delivery platforms’ websites indicate those companies have their own insurance may be one source of the confusion, notes Jesica Ryzynski, a claims specialist with Mitch Insurance. Drivers might believe they’re insured but quickly learn coverage is limited if there’s an accident, she notes.

Rideshare companies’ fiscal fleet policies tackle the most obvious issue – insulating personal insurers from exposures from the rideshare business – but there are still concerns around having insureds on the road and accepting business, notes Matthew Owen, a lawyer at Zarek Taylor Grossman Hanrahan.

“Personal insurers have a valid point that if their clients are engaged in these businesses, the risk of exposure on them is greater and it’s reasonable that they would be expected to want to know the vehicle is being used for that purpose in calculating a premium or deciding whether or not to issue a policy,” he tells CU.

“Drivers are on the road more frequently or for much longer periods of time than they otherwise would be.”

Compounding risk

Beyond claims concerns, there are additional risks for drivers.

Owen explains the failure by personal auto customers to disclose rideshare work can be viewed as misrepresentation – if they’re working for a rideshare or delivery company when they apply for coverage. It can also be viewed as a failure to report a material risk change if the client starts doing rideshare work later.

“Both of those circumstances are instances in which an insurer can deny third-party liability coverage under Section 233 of the Insurance Act,” he says. “Insurers have been able to successfully deny coverage for those claims.”

And these drivers aren’t merely underinsured, defined as not having enough coverage for a particular situation, they are uninsured. “If they haven’t cleared that use with their insurance company, they may not be insured regardless of the circumstances,” adds Ryzynski.

“The claim is going to be denied. And you [can be] cancelled for misrepresentation of use of the vehicle,” she says. “Misrepresentation is…essentially a lie, even if you didn’t intend to do it.”

Owen agrees, noting any circumstance in which the rideshare company’s fleet policy can’t be applied makes a driver formally uninsured.

“From the perspective of the plaintiff, if somebody sues that driver, the driver’s insurer would still be on the hook for the first $200,000 of damage through…the absolute liability provisions of the Insurance Act,” he tells CU.

“That insurer who’s denying coverage would most likely add themselves as a statutory third party, deny coverage to their insured and they’d still be liable for the first $200,000; and then the plaintiff would look to their own insurer for underinsured coverage for anything above that $200,000.”

But, Owen notes, from the rideshare driver’s perspective, their personal insurance company would likely have the right to attempt to recover the $200,000 from their ostensible insured. “They’re still potentially personally exposed,” he says.

This article is excerpted from one appearing in the April-May 2024 print edition of Canadian Underwriter. Feature image courtesy of iStock.com/Anchiy