Questions related to ride-sharing increase with rising fuel costs
McCormick, Roy C
* * *. a ride sharing arrangement does not void automobile liability insurance or medical payments insurance, provided that the arrangement is not conducted for profit.
With the rapid increase in the cost of gasoline, local newspaper and television reports have called attention to ride sharing and car pooling arrangements as an effective means of addressing those costs as well as combating road congestion and air pollution concerns.
Car pooling is not a new concept. We began to become involved in the late 1950s with the insurance aspect of car pooling and other ride sharing when the principal of a private school, which did not have busing facilities, sought information on the subject. Parents of the students wanted to work out a plan to take weekly turns using their own cars to nick uD and drive three or four children to and from school. The arrangement was not prompted by pollution, traffic congestion or fuel costs but, rather, by the parents’ desire to have time off from the early morning and late afternoon driving chores!
We need an update for how automobile insurance would apply now to car pooling and ride sharing, with the likelihood that inquiries will be coming from insureds. The place to begin is with current provisions of liability and medical payments coverages.
Liability coverage under ISO’s PAP, for example, is subject to an exclusion that voids coverage when an insured is transporting passengers or property to make money. An important exception assures that coverage is effective for a typical car pool or ride sharing arrangement where riders make reasonable contributions to help pay for gasoline, oil and wear and tear. Medical payments coverage contains a similar exclusion and exception.
Personal auto policies, in general, address the problem directly in response to numerous questions and uncertainties that have arisen over car pooling and expense sharing. Most now include a qualification that the exclusion is not applicable to those situations. In any event, it is notable that courts have held that reasonable expense sharing agreements do not constitute use of an automobile as a “public or livery conveyance.” Guidelines for answering questions posed by insureds are developed by applying the pertinent policy provisions to the various ride sharing practices.
Modern job requirements, home duties, school needs of children and other demands are eased when people band together into driver groups. They take turns driving or regularly ride in one car and, usually, pay the owner a reasonable sum to help pay for gasoline, oil and wear and tear. The Insurance Information Institute is interested in public understanding of the function of insurance in these circumstances. It affirms that a ride sharing arrangement does not void automobile liability insurance or medical payments insurance, provided that the arrangement is not conducted for profit.
A popular scenario is the pure car pool, whereby the participants take turns driving their respective cars for a week, for example, with the others as passengers. No money changes hands. The expenses even out. The cars are not being used as “public or livery conveyances.” The arrangement does not void liability and medical payments coverages.
The insurance situation would be unchanged if one of the regular riders did not own a car and, instead of participating as a driver, contributed a modest sum to help with the ongoing car operation expenses. And coverage certainly remains intact when one person regularly does all of the driving and, as a good Samaritan, refuses expense– sharing overtures by the passengers.
However, passenger-carrying as a money-making activity generally voids personal auto liability and medical payments coverages. This is different from reasonable sharing of expense. The distinction must be made and can be readily understood.
Reasonably, uncertainty is especially likely to arise when one car owner drives regularly and is paid by the riders. The amount charged must be in proportion to the actual expenses of the trip. This was underscored by the Court of Appeals of Indiana on December 20, 1995, in deciding Meridian Mutual Insurance Company, Appellant v, Auto Owners Insurance Company et al.; 659 North Eastern Reporter 2d 207. Eleven passengers who worked at the same company had each paid a van owner $17 each week prior to an accident resulting in fatalities. The insurer of a passenger serving as relief driver at the time was relieved from liability as secondary insurer. The pertinent policy excluded coverage on a vehicle “used to carry persons or property for a fee,” subject to an exception for “shared expense car pools.” The court found the charge to be a fee that was not in proportion to the expenses of the trip.
Substantial liability and medical payments limits are needed by persons participating as drivers in car pools and expense-sharing rider arrangements. Vans and sport utility vehicles warrant special attention, as they accommodate numerous passengers. Personal umbrella liability insurance is an important consideration.
An employer’s potential liability is a subject for attention when car pooling or ride sharing arrangements are made by employees. Employers are cooperating with city officials to encourage the practice to minimize traffic congestion, air pollution and fuel shortage. There could be a significant exposure when an employer sponsors or arranges car pools for employees. Special arrangements during public transportation interruption are a case in point.
This would be a good time to check commercial accounts to make certain that the employer’s nonownership automobile liability coverage is in force. As the lawsuit potential is a big one, limits should be substantial, often backed up by commercial umbrella or excess liability insurance.
Guidelines for discussing with an insured the application of automobile liability and medical payments coverages to the ride sharing and car pooling exposure would include:
* Pointing out the specific exclusion for carrying persons for a fee or use of a vehicle as a public or livery conveyance, and the exception for shared expense riding and car pools.
* Making clear that there is no coverage concern when money does not change hands, as when the participants alternately drive their respective cars for a week and then repeat the process.
* Emphasizing that money payment by riders, as when only one car is used in a ride sharing arrangement, must be proportionate to the actual expense incurred by the driver for the trip. The driver’s insurance will not apply when he/she profits from the arrangement.
* Stressing the importance of substantial limits of liability and medical payments insurance commensurate with the presence of multiple passengers.
Copyright Rough Notes Co., Inc. Aug 2001
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