In Plain Sight

When changes in technology trigger changes in human behaviour, the societal implications can be far-reaching.

The well-publicized and popular Uber app that matches UberX drivers with paying passengers has been launched in several Canadian municipalities, causing headaches for insurers, brokers, regulators, law enforcement and politicians because carrying paying passengers is excluded under auto policies in all jurisdictions in Canada and because this activity violates provincial and municipal bylaws governing taxis.

Philomena Comerford, President and Chief Executive Officer, Baird MacGregor Insurance Brokers LP

Had the use of the app been brought within both municipal and provincial regulatory frameworks before its launch, the controversy could have been curtailed. Instead, the app has been rolled out in Canadian communities using a network of personally insured vehicles that explicitly exclude the carrying of paying passengers.

This not only puts UberX passengers, cyclists, pedestrians and other motorists at risk, but also puts the UberX driver’s personal assets on the line should his or her personal insurer deny a claim or void the policy when it is discovered after an accident that the vehicle is being used to carry paying passengers.

INCREASED TRACTION

On the heels of the City of Calgary’s recent injunctions against UberX drivers on account of insurance deficiencies and violations of taxi bylaws, Uber refused to stop operating in Toronto, stating there were 20,000 UberX drivers in the city. This figure is double the estimate of 10,000 UberX drivers in the City of Toronto’s September Metro Licensing & Standards staff report.

The Toronto Star reported that Aviva Canada took a hard line in November 2015, cancelling and voiding policies of UberX drivers who had hidden their UberX activities.

Other insurers have taken actions as well. It has been reported that, last December, Wawanesa Insurance began asking its automobile policyholders in a renewal questionnaire whether or not they would use their personal vehicles to drive for Uber or Lyft. Desjardins Insurance is on record as having denied a claim, as is The Co-Operators, the latter reported in a blog last year by Goldfinger Personal Injury Law.

If UberX drivers lie on an auto application or fail to disclose UberX activity started after the application is filed, they are in violation of the statutory conditions of their policies as this constitutes non-disclosure at the point of applying and material change in risk if the activity begins after coverage is arranged. These are clear grounds for voiding or cancelling the policy and denying claims.

In spite of the glaring coverage deficiency, UberX drivers continue to take their chances, relying on personal automobile insurance, likely because facility premiums are just too expensive.

An UberX driver is absolutely on the hook for getting commercial insurance, policies which can range from $4,000 to $10,000 a year. A facility price for an UberX driver without access to fleet insurance prices could be about $23,000 a year for high-risk coverage.

COST IMPACT

Left undisclosed and undetected, this growing public vehicle exposure could conceivably push the cost of personal auto insurance up given the risk of multiple passenger injuries and increased road exposure. The property and casualty insurance industry could face a backlash if premiums increase on account of this growing risk and if uninsured catastrophic or multiple injury claims hit the media, especially if industry’s efforts to inform the public about the risks are found wanting.

While the Financial Services Commission of Ontario has posted a warning of the uninsured risk, this is not enough. Surprisingly few insurers have informed policyholders about the uninsured risk or their stance on claims.

Insurers and brokers alike need to continue to raise public awareness that carrying paying passengers, regardless of the technology used, is excluded under personal auto policies. Both Uber app users and UberX drivers either do not care about the uninsured risk posed by using the service or they are ill-informed.

Uber’s $5 million Non-Owned Automobile Policy (SPF #6) does not fill the void; it covers Uber, not the driver.

This is a peculiar apathetic phenomenon, particularly because the UberX driver contract clearly shifts the accident and injury risk to the UberX driver – with a hold harmless and indemnification clause in favour of Uber – and the customer user app absolves Uber of responsibility for customer injury.

LEGAL QUESTIONS

UberX is illegal in most Canadian municipalities. Section 39.1 of Ontario’s Highway Traffic Act, for example, requires a person carrying passengers for compensation to be licensed to do so. The Ontario Automobile Policy’s statutory conditions stipulate under “Prohibited Use” that the vehicle not be used for any illicit or prohibited trade or transportation.

In two separate suits south of the border – these relating to Uber’s use of “industry-leading” and “best in class” in reference to safety measures – has resulted in the company proposing to pay $28.5 million to about 25 million riders who made trips in the United States between January 1, 2013 and January 31, 2016. The deal still needs to be approved.

Response of insurers

It remains to be seen if insurers prepared to underwrite UberX will insure what is presently an illegal form of transportation in all Ontario municipalities, or if they will wait until a regulatory framework is in place. In most municipalities, taxis and limousines must carry and certify to the municipality a $2 million liability limit, including a “Permission to Carry Paying Passengers Endorsement” without limitation to part-time use. As it stands, it is not yet known if UberX will come under a similar regime.

Aviva Canada recently launched a product designed to cover part-time transportation network drivers who use their personal automobiles, which have a maximum seating capacity of eight and are used to carry paying passengers not exceeding 20 per week. The insurer will not cover retail or wholesale delivery of goods or any other commercial use other than carrying paying passengers leaving UberEats – an app that allows users to access the instant menu of curated meals from participating restaurants – delivery outside the scope of cover offered under the new endorsement.

While Aviva Canada’s product is intended to cover part-time UberX drivers, it covers neither taxis nor full-time UberX drivers. Uber drivers can – and do – take passengers who are not booked on the app. This will not be recorded for underwriting audit purposes nor is it covered.

Some taxi drivers are throwing in the towel because of the un-level playing field, opting to drive for UberX. Like it or not, Aviva Canada will be insuring taxi drivers who have crossed the floor.

Limit considerations

UberHOP – a driver can share a trip with other commuters along Toronto’s most popular routes during peak hours – presents unique challenges. If regulators ultimately classify UberX vehicles as public vehicles, the passenger hazard bodily injury limit required under Ontario’s Public Vehicles Act for vehicles with a seating capacity of eight to 12 is currently $5 million and $5,000 for “Passenger Hazard Property Damage.”

UberHOP’s activities will likely come under increasing scrutiny because the passenger exposure is greater, it potentially interferes with public transit, and opposition from transit unions. At this juncture, it is difficult to predict if the provincial and municipal laws will be harmonized or if UberX will be legalized and, if so, in which municipalities.

Last July, Ontario taxicab and limousine drivers, taxicab and limousine owners, taxicab brokers and limousine service companies licensed, permitted or authorized to operate in Ontario launched a class action seeking $400 million in compensatory damages, $10 million in punitive damages and an injunction prohibiting UberX from continuing to operate in Ontario. The suit alleges Uber Technologies, Inc., Uber Canada Inc., Uber B.V., Rasier Operations B.V. and UberX drivers using their own cars are illegally taking market share and violating the Highway Traffic Act.

Using UberX drivers is “diverting millions of dollars of revenue away from licensed taxicab, limousine owners and drivers in Ontario and injuring their ongoing legitimate business interests,” notes Sutts, Strosberg LLP, which filed the suit on behalf of class members.

The taxi industry is also seeking an injunction against Uber, now licensed as a Toronto taxi brokerage, for dispatching unlicensed taxis in Toronto. City enforcement officers have issued more than 600 fines to Uber for dispatching unlicensed taxis.

There are also eight charges against UberX drivers, laid by Toronto police, before the courts for violations of Section 39.1 of Ontario’s Highway Traffic Act.

RISKS IGNORED

The Uber app has grown in popularity because of its convenience and because fares are cheaper than traditional taxis, but the risks are being ignored by users and UberX drivers alike. Taxis are required to carry commercial insurance with permission to carry paying passengers, obey vehicle age limitations, submit to police background checks and vehicle inspections, complete training, pay licensing fees, meet accessibility targets, and charge only city-approved tariff rates and the harmonized sale tax. Surge pricing is not permitted under city bylaws.

UberX drivers are not paying licensing fees, rely on cheaper personal insurance and surge pricing is common. They now outnumber licensed Toronto taxi drivers two to one, and their vehicles outnumber licensed taxis four to one.

The Toronto Police Service has been peculiarly passive about this growing public risk. Some taxi brokerages are trying to compete with customers apps.

In an effort to level the playing field, the Toronto Taxi Alliance has asked the City of Toronto’s Budget Committee to stop charging annual taxi industry licensing fees, which total $15 million, because UberX drivers pay nothing. Given the financial challenges that the city currently faces, the taxi industry’s request is unlikely to be taken seriously.

Uber announced February 22 it will pull out of Calgary because it rejects the city’s proposed regulatory framework requiring UberX drivers to pay licensing fees and submit to background checks and maintenance inspections.

Only time will tell what lawmakers will or will not do to address this growing public risk and whether Uber will co-operate in a lawful playing field.