Wednesday, September 3, 2014

Uber’s Controversial Insurance Policy is Secret No More

The California Public Utilities Commission requires Transportation Network Companies like UberX to display signage. (Jeremy Raff/KQED)
(Photo: Jeremy Raff/KQED)
A couple of days ago, the San Francisco Bay Guardian got hold of the holy grail of Lyft/UberX detractors, a document long sought by taxi companies and others calling for greater oversight of these ride services.
On Monday night, the Guardian posted Uber’s secret insurance policy. The weekly said that someone sent it the document anonymously, and that it was sent to a number of taxi-industry advocates as well.
Apparently in response, Uber soon posted the policy on its own website. Uber wrote in a blog post: “We are confident it is a best-in-class policy and hope that this additional transparency addresses any remaining questions about the insurance provided to ridesharing partners on our platform.”
The policy was written by James River Insurance Co., based in Richmond, Virginia. How much Uber is paying in premiums is redacted in both the leaked and company versions.
Secrecy an issue
The taxi industry across the country has made a big issue of the non-public nature of the ride-services’ policies. In covering the issue over the past year, we have frequently heard from taxi companies, drivers and regulators that because these documents have been seen only by the California Public Utilities Commission, no one knows what exclusions and other conditions might get the companies off the hook — and its drivers on the hook — for liability costs in an accident.
But early indications are that those looking for a smoking gun to implicate Uber as engaging in insurance hocus-pocus may be disappointed. The Taxicab, Limousine & Paratransit Association — which appreciates the technological marvel of loosely regulated, app-based dispatch startups about as much as the music industry liked Napster — focused on the name of the company listed as insured on the policy. Under “name of insured,” it says “Rasier LLC,” which is a subsidiary of Uber.
“This is some sort of corporate shell game,” said William Rouse, past president of the TLPA and currently general manager of Los Angeles Yellow Cab. “The policy states that insurance kicks in only when Rasier LLC is liable. But Uber — not Rasier LLC — is the company providing for-hire transportation across the U.S. This could be the mechanism Uber uses to avoid paying out any insurance whatsoever. Why would any city allow Uber to operate on its streets with the company’s deceitful practices now on full display?”
However, “Uber Technologies Inc.” is indeed named as an “additional insured” in an addendum to the policy. (Update Thursday: Robert Passmore, senior director of personal lines policy at the Property Casualty Insurers Association of America, told the San Francisco  Chroniclethis is not an unusual way to do things.)
The insurance issue came to the fore after a fatal New Year’s Eve accident involving an UberX driver in San Francisco. Syed Muzaffar, driving an SUV, drove into a family in a Tenderloin crosswalk, killing 6-year-old Sofia Liu. Uber said the driver was not covered under the $1 million liability policy mandated by the CPUC because he was between calls.
Uber closed that gap to a certain degree two weeks ago, when it announced it had added coverage for the period when a driver is logged into its app but not yet on a call. (Lyft said it would similarly augment its coverage.) However, UberX’s added coverage is capped at  $100,000 total per incident for bodily injury and $25,000 per incident for property damage, the company said. That’s far less than the New Year’s Eve accident, for example, is likely to incur in terms of liability.
Controversy over insurance coverage has become a sort of Achilles’ heel for the fast-growing ride-service industry as it fights numerous regulatory battles in multiple cities and states. In January, the California Department of Insurance issued a warning to ride-service drivers about potential gaps in coverage that could leave them liable in an accident.
In Chicago recently, the City Council actually subpoenaed the policies of UberX, Lyft and Sidecar in search of holes that could leave drivers and passengers unprotected. Meanwhile, there have been at least two reports of insurers canceling the personal auto coverage of ride-service drivers, leading many of them to hide their status as commercial drivers.
The policy: Excess vs. primary insurance
You can take a look at the insurance policy, which makes for fascinating reading if you’re an actuary, here or embedded at the end of this article. If you follow this stuff, I imagine you’re going to hear a fair bit of analysis over the next few days. We asked Pete Moraga of theInsurance Information Network of California, someone who has expressed skepticism to us in the past about ride-service insurance, to take a look. He told us the contract contains a lot of standard boilerplate language and exclusions found in other insurance contracts. TheSan Francisco Chronicle showed the policy to a couple of other insurance industry professionals, and they agreed there is nothing unusual about the policy.
It’s still early, but all in all one would have to say the release of the policy has been a positive development for Uber and maybe the entire TNC industry. Why? Because, as previously mentioned, the taxi industry has been attempting to use the refusal of the TNCs to make their  insurance policies public to sow distrust in them and create a sense that the coverage likely includes a host of conditions unfavorable to drivers and the public. So far, that does not look to be true.
That doesn’t mean there aren’t still issues with TNC insurance. Uber’s policy functions as excess insurance for drivers who contract with the company. Excess insurance is meant to supplement a primary policy, paying claims where the primary insurance leaves off. The TNCs have always said that should a driver’s personal insurance fail to cover an accident, their excess coverage will “drop down” to become primary insurance, picking up the entire tab if necessary. But the insurance industry has said repeatedly that drivers’ personal policies will nevercover an accident involving a ride-service vehicle, because personal policies routinely exclude coverage for commercial use. TNCs, however, have insisted that claims are getting through on personal policies. To which some in the insurance and taxi industries have replied that’s only because those insurers don’t actually knowthat the accidents occurred during a TNC call.
OK, to the seven insurance industry people still reading, let’s put it this way: During a hearing last week on TNC insurance issues held by California Insurance Commissioner Dave Jones, insurance groups said the ride-services were basically getting a free ride, no pun intended, by relying on drivers’ personal insurance to cover some claims.
It’s one reason the taxi industry is so angry: They pay for primary insurance, which is more expensive because it covers more claims than excess insurance. When the CPUC hammered out its TNC rules last year, the California Department of Insurance issued an opinion that its preferred option would have been to require that ride services carry primary insurance, because a dual system of commercial excess insurance sitting on top of personal primary insurance could result in confusion to consumers and drivers who need to file claims.
But the department also said an excess, drop-down policy would suffice as the next-best thing, and the CPUC  declined to require that TNCs get primary insurance.
Pete Moraga, from the Insurance Information Network of California, said Uber’s policy still “begs the question: Did (Uber) purchase the excess policy knowing that drivers’ own policies would not cover commercial use of the auto, or did they try to imply to drivers signing up that their own personal policy would cover them?”
Lane Kasselman of Uber’s communications department responded with this:
“Our teams work with partner drivers to answer any questions they have about a range of issues, including insurance.  As a matter of law, all California drivers are required to have auto insurance, so we require that drivers have it to partner with us.
“Personal auto insurance is a contract between the driver and their insurer. Most personal auto insurance policies contain an exclusion for transporting passengers for hire, that’s why we have the commercial policy in place.  We tell drivers to report all accidents to their personal insurance provider, and we report it to our insurance at the same time. We expect drivers to be truthful with all parties involved.”
CPUC takes another look
On Tuesday the CPUC issued a call for comments on proposed modifications to the regulations it issued last year. Among the changes floated is the requirement that TNC insurance go into effect “when the TNC app is open and available to accept rides” — in other words, between calls. This is a change that UberX and Lyft have said they have already made, and one that would have extended coverage to Syed Muzaffar, the UberX driver in the New Year’s Eve accident, who was waiting to be assigned a passenger when the accident occurred.
The CPUC is also proposing that TNCs be required to offer $1,000,000 in uninsured/underinsured motorist coverage; $50,000 in comprehensive coverage (theft, fire, vandalism); $50,000 in collision coverage (when the accident is the driver’s fault); and $5,000 in medical payments due to bodily injury sustained by the driver or passengers.
The document from CPUC Commissioner Michael Peevey said, “While efforts to craft market-based solutions are certainly appreciated, not all of the TNCs who have filed applications with the Commission have voluntarily proposed solutions to close the acknowledged insurance gap. Thus, the assigned Commissioner believes it is incumbent on the Commission to consider fashioning a remedy that will apply on an industry-wide basis.”
Uber said it “strongly supports requests for public comment,” because “for far too long transportation regulation has been made in the dark, and it’s long past time the riding public had a say.”
Note: In the original version of this article, one insurance expert called into question whether the text of Uber’s policy specified that drivers would be covered if their personal insurance policy declined to do so. However, when Uber pointed out to us where that issue was in fact addressed, the expert agreed with them, and therefore we have deleted that section of the originalarticle.