Companies such as Uber and Lyft provide a much-welcome alternative to taxis and public transportation. These companies are rapidly expanding into local markets. Uber, for example, has expanded to 57 countries and offers ride-sharing locally in both Cleveland and Akron, Ohio. With their convenience and relatively low pricing, many believe that these ride-sharing companies are a better alternative to taxis and public transportation. However, skeptics are asking if these companies are too good to be true. One important issue passengers should consider involves insurance coverage. What happens if your Uber driver gets into a car accident and you are injured? Does the driver’s personal insurance policy or Uber’s insurance policy, for that matter, cover your injury? What about Uber and Lyft’s own liability for passengers’ injuries? A brief analysis of these concerns follows.

Ride share critics argue that passengers are at risk when riding in an Uber or Lyft car because the driver’s automobile insurance policy may not cover commercial use of a vehicle. Most Uber and Lyft drivers rely on their own personal automobile insurance to cover any incidents that occur while driving ride share passengers. These policies may not adequately cover, or in some cases provide any coverage for, injuries incurred while driving the vehicle for a profit. Most standard personal automobile insurance policies do not cover accidents “arising out of the ownership or operation of a vehicle while it is being used as a public livery or conveyance.” In plain English, this means that a driver’s personal auto policy excludes transporting people or goods for hire (for pay). This exclusion often applies to other coverages such as uninsured motorist and collision coverage. Additionally, a driver’s failure to disclose his or her commercial use of a vehicle to his insurance carrier may also cause the insurer to declare that the policy is void from the outset.

The good news for passengers is that Uber and Lyft now provide commercial coverage for their drivers. While drivers are transporting passengers, Uber and Lyft provide accident coverage of up to $1,000,000 per accident. If a driver already carries commercial coverage, Uber and Lyft’s policy will serve as excess insurance coverage. If the driver only carries personal coverage and the driver’s claim is denied, Uber and Lyft’s policy will cover the accident up to the policy limit. Additionally, this $1,000,000 coverage is high compared to that provided by most taxi companies. Many taxi companies purchase the minimum amount of injury coverage required by the state, which ranges between $250,000 and $500,000. Uber and Lyft’s commercial insurance coverage is, therefore, likely higher than that of a taxi.

One potential down side to ride-sharing is a passenger’s ability to sue Uber or Lyft. Uber and Lyft claim that their drivers are third-party independent contractors, and therefore argue that Uber and Lyft cannot be held legally responsible for their drivers’ actions. If Uber and Lyft succeed in making these arguments, this means that Uber and Lyft would not be responsible for their drivers’ actions, and passengers likely cannot sue Uber or Lyft to recover any damages beyond those recoverable under their commercial insurance policies. This issue will likely be determined under California law in a case that is pending in California, O’Conner v. Uber Techs., where Uber drivers are asking the court to find that Uber drivers are Uber employees. O’Connor v. Uber Techs., Inc., No. C-13-3826, 2015 U.S. Dist. LEXIS 30684 (N.D. Cal. Aug. 23, 2013). In O’Connor, the plaintiff Uber drivers filed a class action suit against Uber, claiming that they are employees of Uber as opposed to independent contractors, and are thus eligible for statutory protections for employees under the California Labor Code. Denying Uber’s motion for summary judgment asking the court to determine that Uber drivers are third-party contractors as a matter of law, the court made a “preliminary finding that Uber drivers are presumptive employees” and found that the ultimate issue of whether Uber drivers are Uber employees is an issue of fact to be determined by the jury. Id. at * 55.  The determination of this issue will provide some guidance as to whether passengers may sue Uber or Lyft for their drivers’ actions.

The parameters of the law and of insurance coverage are still being defined for ride-sharing companies. Several states have begun to step in and regulate these companies as well. The law is evolving, and it remains to be seen how much protection and what rights passengers have against ride-sharing companies. However, with $1,000,000 commercial coverage, passengers are able to enjoy sizable insurance coverage while riding Uber or Lyft.