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Will Uber’s ‘insurance gap’ coverage stop car accident victims from falling through the cracks?

November 5, 2014 by Steven M. Gursten

No, it won’t: ‘Insurance gap’ covers liability and property damage when on-duty, but without passengers


Earlier this year, I wrote about a liability issue that was developing for Uber. Uber is the popular app-based transportation service that’s operating in Detroit and Ann Arbor and has recently entered the Grand Rapids, Lansing/East Lansing, Flint and Kalamazoo markets.

In the blog I previously wrote, an Uber driver in San Francisco, who was on-duty, but in between transporting riders, crashed into a woman and her daughter as they were walking across the street. The question that arose was whether the Uber driver’s personal insurance provided liability coverage or whether Uber’s liability coverage kicked in … or whether neither applied and there was a “gap” in insurance:

“Is Uber liable if its driver causes a car accident?”

To make sure that doesn’t happen here, and to ensure car accident victims don’t fall completely through the cracks, Uber is offering a new “insurance gap” coverage.

In a nutshell, Uber’s “insurance gap” coverage kicks in when an Uber driver’s personal auto insurance policy doesn’t cover an accident that occurs while the Uber driver is on-duty, but is between fares and looking for riders.

‘Insurance gap’ coverage

Uber’s new “insurance gap” coverage was referenced in a recent MLive discussion of Uber’s “second stage” coverage:

  • When Uber drivers “are on duty looking for riders they’re covered with $100,000 in injury insurance if their regular insurer denies the claim.”

As for specifics about Uber’s “insurance gap” coverage, Uber discussed the issue on its website.

In a March 14, 2014, blog post, “Eliminating Ridesharing Insurance Ambiguity,” Uber announced its new “insurance gap” coverage would provide up to a total of $100,000 and $25,000 in bodily injury liability and property damage coverage if:

  • A motor vehicle accident occurs;
  • While the Uber driver is on-duty, i.e., has the Uber app open and is available to receive a trip request and accept rides;
  • The Uber driver is not transporting a rider or passenger;
  • And the Uber driver’s “personal insurance policy is found not to cover [the] accident …”

In a separate blog post, “Insurance for UberX with Ridesharing,” which was originally published on February 10, 2014, but was updated on July 22, 2014, Uber noted that even though “most personal auto insurance will provide coverage … [d]uring the time that a ridesharing partner is available but between trips,” some auto insurers may not.

In such cases, Uber explained, “insurance gap” coverage will kick in:

“This policy is contingent to a driver’s personal insurance policy, meaning it will only pay if the personal auto insurance completely declines or pays zero.”

“This policy meets or exceeds the requirements for 3rd party liability insurance in every state in the U.S.”

I was surprised to read the part about “most personal auto insurance will provide coverage…[d]uring the time that a ridesharing partner is available but between trips.”

In Michigan, at least, where I practice law and where I’ve been litigating car accident and injury cases for the last 20 years, most auto policies have a “commercial use” exception that would seem to clearly exclude a Uber driver’s personal auto policy from providing bodily injury insurance coverage if he or she causes an automobile accident. This is exactly the opposite of what Uber claims in its blog.

The case law in Michigan is clear: The insurance contract language has been upheld repeatedly by our courts. And while Uber’s statement that the $100,000 meets or exceeds the third-party liability insurance in the United States is correct (the minimum bodily injury insurance policy limits in Michigan is $20,000, for example) it still makes me wonder why Uber would drastically slash the insurance coverage from $1 million to $100,000 at exactly the same time when a Uber driver is most likely to cause a car accident and injure someone: When they’re between jobs and the driver is looking for a new ride (and driving distracted).

And there’s a huge distracted driving danger present for Uber drivers – especially during this “insurance gap” stage when liability insurance is limited to $100,000. The Uber driver must have his app open, and he will be looking from the road to the Uber app to accept trip requests and accept or reject rides, all while driving and presumably watching the road for pedestrians, bicyclists and other cars.

Look, you don’t have to be an auto accident attorney to see the potential problem here. Or to wonder why Uber would decide to arbitrarily lower its own insurance by $900,000 when a driver is looking for a new ride.

Tomorrow, I will discuss a few more problems specific to Michigan No Fault that I see with the “insurance gap” coverage that Uber has recently announced.

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