The “sharing economy” is on the rise and there is little chance of ebbing its tide. Popular sharing services such as airbnb, Lyft, Zipcar, Car2go and AutoShare have been in business for almost a decade but UberX appears to be at the centre of the debate.

The Provincial Government and the City or Toronto have decided that ignoring the sharing economy is no longer an option. Both are now responding to the exigencies of the new forms of conducting business with the use of residential property and personal vehicles to generate income.

Bill 131 – Opportunity in the Sharing Economy Act - passed its second reading at the Ontario Legislature on October 29, 2015 and the bill was referred to the Standing Committee on Finance and Economic Affairs.  According to MP Tim Hudak, the sponsor of the private members bill, the “bill creates a modern, streamlined, province-wide framework to allow the municipal licensing of transportation network vehicles, home sharing and parking sharing”.[i] All signs point to the inevitable acceptance of the sharing economy elevating to the norm, even though the Ontario government has elected to take more time to study Mr. Hudak’s bill.

However, an important, and unsettled, question in the UberX debate remains: is there currently adequate insurance coverage for those who offer services through UberX’s transportation platform (“Partners” or “Transportation Providers” but more commonly known as drivers) and those who request UberX’s services (“Users” commonly known as passengers). This article explores the adequacy of UberX’s automobile insurance coverage in Ontario for drivers, passengers and third parties.

Ontario has a unique and evolving scheme of auto insurance which includes third party liability, property damage, loss or damage coverage, and mandatory Statutory Accident Benefits (SABs), also known as “no-fault” benefits. Uber has maintained that it has “contingent” auto coverage in place that would respond to claims made by passengers, pedestrians or other drivers. Conspicuously absent is any mention of coverage for drivers of UberX vehicles.

Before we get started, there are few interesting things about Uber that you might not know. First, more often than not when people say they use Uber, they actually meant to say they use UberX. UberX vehicles are personally owned vehicles, intended for private use that their owners (presumably) use to transport Uber Users.  They are not taxis, they are unregulated, there is no required scheduled maintenance regimen and, according to Uber’s website, the vehicles can be up to 15 years old. The average age of UberX “Partner” vehicle is 7 years.

Second, in Canada, the “contracting partner” for passengers using the Uber application (“app”) is a Dutch corporation called Uber B.V. However, Raiser Operations B.V. – another Dutch corporation – is the “contracting partner” for drivers. These corporations are separate and distinct from Uber USA, LLC. This raises a host of questions around choice of jurisdiction and choice of law. The Canadian version of the Uber “User Terms” states that disputes in relation to the use of Uber “Services” are subject to the laws of the Netherlands and “settled exclusively by the competent court in Amsterdam”. Who doesn’t want a trip to Amsterdam?

Third, Uber holds itself out as a technology platform, offering a means to obtain transportation services via third party “Transportation Providers” through its app. The app allows “Users” to request transportation services from Uber’s “Partners”. Uber claims it is not a transportation carrier nor does it provide transportation services. The provision of the service (a.k.a. the ride) is a private contractual agreement between the “User” and the “Transportation Provider”. What obfuscates this is that the entire transaction, from arranging the ride to paying for the ride, is all done through Uber’s facilities.

Fourth, there is currently no information on insurance coverage as it would apply in Ontario or Canada on the Uber website. The insurance details discussed on the Uber website only describe their understanding of the how their CGL policy would apply in America.  In America, Uber has what they call an “end to end” Commercial General Liability (“CGL”) policy with $1 million in liability coverage per incident. The Uber policy is in effect “en route” (after a pick-up is accepted) and “on trip” (during the provision of the service). During the intermediary period (when a driver is waiting for a request), the driver’s personal policy is expected to respond to any claims arising from the use and operation of the vehicle. Unfortunately, that’s not how auto policies currently operate in Ontario.

Uber has even tried to prevent the release details of its insurance policy in the course of litigation involving the City of Toronto on the basis that the content and form of its policy were a “trade secret”. Uber was unsuccessful in that regard. Justice Diamond held that Uber failed to present sufficient evidence to show that the sealing of the policy was warranted or that its disclosure would result in any loss of competitive advantage.[ii]

Lauren Altmin of Uber told the CBC that “every ride on the UberX platform in Canada is backed by $5 million ofcontingent auto liability insurance…in addition to any insurance coverage maintained by the driver.”[iii]Contingent meaning that it only responds when the driver’s personal auto coverage fails to respond. In this lays the Uber insurance coverage gap.

Following Justice Diamond’s decision in March 2015, the Uber policy was disclosed and it was discovered that Uber’s $5 million coverage policy was a CGL policy with an endorsement for standard non-owned automobile coverage, issued by AIG Insurance Company of Canada.[iv] According to Philomena Comerford, CEO of Baird MacGregor Insurance Brokers, this type of policy is designed to protect the corporation (Uber) that purchased the policy, not the drivers[v].

In Ontario, like in many jurisdictions, there are personal use and commercial use auto policies. The distinction between policy classifications addresses the different intended uses and associated risks. A specific exclusion, which may lead to a denial of a coverage and cancellation of a personal auto policy, is the use of a personal vehicle to carry passengers for money. 

The intended use of a vehicle and risk determines the type of policy issued as well as the premium. The insurer calculates risk based on information disclosed by the applicant. In the Ontario Application for Automobile Insurance Form (OAF 1) the applicant is asked to answer the following question: “Will any of the described automobiles be rented or leased to others, or used to carry passengers for compensation or hire…?” 

Should an insurer discover – which would not be difficult – that its insured was using his or her personal vehicle to carry passengers for money (a commercial use), the policy may be cancelled and/or coverage denied. Cancellation could result regardless of whether or not the accident occurred at the specific time the driver was engaged in a commercial activity. Should the insurer discover you were breaching policy conditions at any time during the policy period, altering the material risk, the policy could be void ab initio, compromising the driver’s insurance.

One of few times an insurer can deny coverage is set out in the exclusions listed under section 250(1) of theInsurance Act. The section states that an insurer “shall not be liable” when an automobile is used as a taxicab or for carrying passengers for compensation or hire.

However, certain “no fault” benefits will be maintained.

Statutory Accident Benefits

As a private vehicle owner you have a standard Ontario Insurance Policy (OAP 1) which includes mandatory accident benefits coverage. Should you be involved in a motor vehicle accident as a driver or passenger of a vehicle insured in Ontario, you would be entitled to accident benefits which include coverage for medical and rehabilitation expenses, income replacement (IRB), non-earner (NEB), caregiver and potentially attendant care and housekeeping benefits. Commercial auto policies in Ontario also include accident benefits coverage. However, a standard CGL policy would not incorporate accident benefits. The Insurance Bureau of Canada has been clear that for-hire ride services must carry commercial automobile insurance.[vi]

Section 1.8.1 of the OAP 1 states that when a personal vehicle is used as a taxi or to carry paying passengers there is no coverage, except certain accident benefits. Third party liability (section 3), property damage (section 6) and loss or damage coverage (section 7) are forfeited.

Section 1.4.1 and 8 of the OAP 1 requires an insured to “promptly” notify its insurer of a change in material risk to the policy. Transporting passengers for hire would be considered a material change in risk. During the application process, applicants are specifically asked whether an intended use of the vehicle will be to carry passengers. Section 447(2) of Insurance Act states a person will be guilty of an offence if he or she fails to inform an insurer of a material change in circumstances within 14 days of the material change. The offence carries a fine on first offence of “not more than $250,000”[vii]. These responsibilities and penalties are also laid out in the Ontario Application for Automobile Insurance (OAF 1).

In addition to the fine, an insurer can cancel the policy altogether pursuant to section 1.7.2. The cancellation would be premised on the insured knowingly misrepresenting, failing to disclose information and/or the risks having materially changed.

However, certain accident benefits will be maintained, despite policy violations. Section 13 of the OAP 1 states that a failure by an insured to comply with the Statutory Conditions (section 8), will not disentitle the insured to certain accident benefits. The rationale for this can be traced back to the government policy objective in creating the Statutory Accident Benefits scheme (SABs) in the first place, which was to transfer the expense of providing medical and rehabilitation expenses following a motor vehicle accident from the public healthcare system onto auto insurance carriers. However, exclusions to coverage exist under the SABs.

Section 31 of the SABs states that the following accident benefits will not be payable where a material misrepresentation has been made or the insured intentionally failed to inform the insurer of a material change in risk: the income replacement benefit, non-earner benefit, lost education benefit, visitor’s expenses and the housekeeping and home maintenance benefit. The only benefits that remain post-breach are: caregiving, medical and rehabilitation, and attendant care benefits. The exclusions will apply to the driver of an UberX vehicle. The most significant exclusion for the driver would likely be the loss of entitlement to the IRB. 

For passengers in UberX vehicles, pursuant to the priority as set out in section 268(2) of the Insurance Act, accident benefits coverage would fall to their own auto policy. So, if a passenger is a named insured on another policy, then he or she will have access to full accident benefits.  If a passenger is not a named insured on another policy, coverage would default to the UberX’s driver’s policy. The exclusions that apply to the driver would not apply to the passenger. Passengers should be covered under the driver’s contract of insurance.

Third Party Liability and Loss and Damage Coverage

The same policy breaches as discussed above will result in the denial of property damage and loss and damage coverage for the UberX driver. We anticipate that insurers will also take an “off coverage” position in relation to third party liability claims, reducing the insurer’s liability to the statutory minimums of $200,000.00 pursuant to section 251(1) of the Insurance Act.

For UberX drivers, be aware that your insurer is permitted, and likely will, commence a subrogated claim against you to recover any amount it pays out to a third party as a consequence of an accident you are involved in.  Further, you may be personally liable to the injured party for any amount above the statutory minimum of $200,000.00.

Uber has indicated that its “contingent auto liability insurance” (S.P.F. No. 6 Standard Non-Owned Automobile Policy) will respond to third party liability and property damage claims. As previously mentioned, non-owned automobile policies are meant to protect the company (Uber), not the driver. The “named insureds” on the AIG policy are Raiser Operations B.V. and Uber Canada Inc. Additional insureds include “partners, officers or employees”. UberX drivers do not fall under any of these categories. Coverage and indemnification from this policy would not extend to the driver.

Further, Uber has not been clear whether bodily injury or property damage sustained by the driver would be covered under UberX’s non-owned automobile policy. Uber spokesperson, Susie Heath, said: “[i]n the event of an accident during an UberX trip, passengers, pedestrians, other drivers, and the community at large can rest assured knowing that ridesharing partners are well covered by commercial auto insurance in addition to any insurance coverage maintained by the driver.”[viii] Notably missing is confirmation of coverage for UberX driver claims. The AIG policy agrees to insure for “legal liability for bodily injury” to third parties and “damage to property of others”. There is no stipulated coverage under this policy for bodily injury or damage to the driver or his or her vehicle.

An interesting question is who would be the correct parties to sue for recovery when a tort claim is commenced? The driver, Uber Canada Inc., Uber B.V., Raiser Operations B.V. and/or Uber USA, LLC? Although Uber has chosen Netherlands law, it would be hard to fathom how Uber would be successful on meeting the real and substantial connection test for the Netherlands’ being the appropriate jurisdiction where the parties and accident occurred in Ontario. We will have to wait and see.

The Rise of the Sharing Economy

Recently Aviva Canada announced it had begun a crackdown on UberX drivers caught without a commercial licence. In an internal Aviva Canada circular it stated that “[d]riving for Uber is still considered a commercial use and is unacceptable for personal vehicles”[ix].  Aviva has voided two polices, lapsed another policy at renewal and agreed to rewrite a fourth policy after it was determined the driver had not deliberately misrepresented the use of her vehicle.

But change is a foot. Even in the face of opposition from the established stakeholders, the sharing economy is here to stay. This past year the City of Toronto was unsuccessful in getting an injunction against Uber. More recently taxi drivers in Toronto commenced a $400 million class action lawsuit against Uber claiming Uber contravenes section 39.1 of the Highway Traffic Act.[x] Many other municipalities have also cracked down on UberX giving out fines and impounding vehicles. A court has recently issued a temporary injunction stopping drivers from offering rides for a fee using the Uber app in Calgary.[xi]

But UberX has its strong supporters. The Ontario Chamber of Commerce and the Insurance Bureau of Canada have urged the province and federal government to enact legislation to respond to the new sharing economy.[xii] Toronto’s Mayor John Tory has signalled that Toronto will amend its by-laws so that both UberX and traditional taxi brokerages can operate in Toronto. The Province appears to be moving forward with Bill 131.

Further, at least one Ontario insurer is trying to get ahead of the curve on the sharing economy. Intact Financial Corporation, which operates Intact Insurance and Belair Direct (among other entities) announced in September 2015 that it was working with Uber to devise the first ride-sharing auto insurance policy in Canada tailored to protect drivers (formerly “Transportation providers”) and passengers (formerly “Users”).

As things currently stand, Uber users and drivers beware, insurance coverage gaps exist. Uber drivers should contact their brokers and insurers immediately (this will likely result in a change in your premium but will have the effect of minimizing any chance of a denial of coverage). If you are an UberX driver you may lose your direct (property damage) and third party liability coverage (leaving you personally exposed to property damage and personal injury claims) and your accident benefits coverage may be drastically reduced.

As a passenger, your “no fault” benefits will be covered by either your own policy or that of the driver’s, without exclusion. However, any personal injury claim you may have against the “Uber” group of companies in tort will face complications and recovery will be an issue. However, we anticipate legislative change and insurer ingenuity in the New Year will address some or all of the current gaps in coverage.