Chances are good that our clients aren’t leaving their executive jobs at 5 p.m. to pick up a few extra dollars ferrying passengers around in their Teslas. However, many of their millennial children want to cut their own path in the world. And signing up to work for a transportation network company (TNC) like Uber or Lyft is an enticing, and flexible, way to gain some financial freedom while attending college or working at that internship.
A TNC is defined in most states as a company that provides ride-sharing services by contracting with drivers who use their personal automobiles to take passengers to their destination. TNC drivers don’t have to have a livery driver’s license, nor are their cars registered or insured in the same way regular taxis must be, all of which could have an impact on how an accident claim is processed.
Before Junior makes the decision to paste the ride-sharing decal on his car, power up his iPhone and go, all of you should consider what Junior’s—and his (or her) parents’—financial exposures are.
As a case study, let’s look at the coverage Uber already provides. There are three different coverage positions depending on the driver’s status:
- En route to/carrying a passenger— A $1 million limit applies.
- Available, but without an assigned passenger— Uber’s policy is restricted, and the $1 million limit is not available. Instead, the limit is $50,000 per person/$100,000 maximum per accident and $25,000 in property damage.
- Off-duty— Uber’s policy will not respond.
Virtually all personal auto and umbrella policies contain exclusionary language like this:
“Exclusions: For that insured’s liability arising out of the ownership or operation of a vehicle while it is being used as public livery convenance.”
Another TNC exposure occurs because personal insurance underwriters will likely decline to write, or will cancel, a policy if they’re aware that a personal vehicle is being used for a ride-sharing business. The message? There’s still too much gray area around when the vehicle is considered to be used for business, thus exposing carriers to defense costs not contemplated in their rating metric.
Since TNCs are relatively new, the resulting lawsuits are still making their way through the courts. Several fatal accidents have insurance carriers for the TNCs and the drivers’ personal insurance carriers litigating over whether the driver is considered to be on duty at the time of the accident, and whose policy is primary.
For children of high net worth clients, the exposure goes deeper than for the average ride-sharing driver. Parents will be named if they own the vehicle; they could also be named simply by providing primary financial support to the child. And damages could penalize the child for years, garnishing future wages.
THE BOTTOM LINE
At this time, there is no perfect solution. Obtaining a business auto policy to cover livery use is expensive. So, beware: Until the marketplace forces the insurance industry to create an endorsement to address this exposure, we believe the risk is great for high net worth offspring. Contact your advisor for more information.
Insurance services provided through NFP Property & Casualty Services, Inc., a subsidiary of NFP Corp. (NFP). Doing business in California as NFP Property & Casualty Insurance Services, Inc. (License # 0F15715). NFP and its subsidiaries do not provide tax or legal advice. Information provided herein is for general educational purposes. We believe the information is accurate; however, we make no warranty or guarantee regarding the accuracy or reliability of the content. Copyrights are the property of their respective owners.