Gulfshore Insurance > Gulfshore Blog > Commercial Risk Management > Ridesharing and the Insurance Gap: What Uber, Lyft Drivers and Passengers Need to Know

Uber and Lyft, two of the most widely known ridesharing companies, have transformed the public transportation industry. Riders love the service due to costs that are a fraction of a traditional taxi. Drivers love the ease and flexibility of this part-time job. Cabbies and taxi companies, however, aren’t big fans, using a variety of regulatory maneuvers to try and stop the industry’s phenomenal growth.

After spending $100 dollars on a cab, I can certainly understand the allure of ridesharing. As an insurance and risk management professional, I can also understand the potential liability issues that could arise if a ridesharing driver does not carry the proper insurance.

As these ridesharing services become an increasingly popular way for people to earn money (as drivers) or save money (as passengers), it is important to be aware of potential gaps in insurance coverage. State insurance regulators have grown increasingly concerned about the insurance implications of these services. The main issue is a possible gap in insurance coverage between the driver’s personal automobile insurance policy and the commercial policy maintained by the ridesharing company.

The Coverage Gap Explained
While these ridesharing companies have expanded their own insurance policies to carry $1 million in liability protection, there still remain some gaps in coverage. Their policies only cover drivers once they have been matched with a fare and when they are carrying a passenger.

So what happens during the period of time between fares? This is called a trolling period, or the time when drivers are logged into the Uber/Lyft app, waiting to be matched with a fare. During this time, the Uber or Lyft auto policy does not apply and quite possibly neither does the driver’s personal auto policy. This is what is referred to as the insurance gap.

Most personal auto insurance policies contain standard exclusions to limit exposures related to the commercial use of a vehicle. This exclusion also applies to other coverages, including uninsured motorist and collision. Uber drivers may be in for quite a surprise in the event of an accident that could leave them personally liable following a valid insurance coverage denial. In some states, failure to disclose commercial use of a vehicle would be classified as a material misrepresentation, subjecting the policy to be void ab initio (from the beginning).

Before becoming a driver or passenger with one of these ridesharing companies, you may want to consider the insurance implications if an accident were to occur. Currently, there is a bill in process in Florida that would establish new insurance requirements for rideshare drivers. This policy includes higher death, injury, and property damage coverages, and coverages for the current insurance gap. Currently, 29 states have already created coverage for rideshare drivers.