January 1, 2016 by Daniel Strigberger, Lawyer, Samis + Company
UberX, which lets drivers make money from consumers who book rides from apps on their mobile phones, is rapidly gaining popularity. However it raises a number of auto insurance coverage issues due to the taxi exclusion in Ontario’s standard auto policy and questions over whether uberX drivers could be considered as “insureds” under Uber’s commercial and general liability policy.
In order to be properly insured, uberX vehicles need to be covered under policies similar to the endorsements that taxi operators must purchase.
Uber and Intact Insurance recently announced plans to offer uberX drivers an insurance policy tailored to the ride-sharing service, while Aviva announced auto insurance coverage for drivers who carry paying passengers in their own vehicles.
Those announcements came on the heels of a lawsuit in Ontario. The Financial Post recently reported that an uberX driver – who was involved in an accident during an uberX ride – had his auto claim denied by his personal auto insurance carrier.
In Ontario, Part VI of the Insurance Act governs most of the rules and terms of automobile insurance. A standard form – OAP 1: Ontario Automobile Policy, approved by the Superintendent of Insurance – is part of every motor vehicle liability policy with road coverage. OAP 1 covers insureds and their vehicles, with the term “insured” being relatively broad, especially for accident benefits coverage.
WHAT IS UBERX?
UberX is a Web-based service program whereby users who meet certain criteria can make money carrying and delivering Uber subscribers from one place to another.
Qualified uberX drivers respond to requests made by Uber riders through apps on their mobile phones. Essentially, a rider can summon an available vehicle to his or her location and any registered uberX driver can respond to ride requests. Riders do not pay drivers directly. Instead, they leave their credit card details in their Uber accounts, which get charged when each ride is complete.
Court records indicate that Uber expected last year to have 15,000 drivers signed up, under the UberX Driver App, in Ontario by the end of 2015. Uber anticipates the majority of these will be based in the Toronto area.
WHY UBERX IS PROBLEMATIC
Like most insurance policies, Ontario’s standard auto policy contains a number of exclusions, which can limit, reduce, or invalidate certain coverages depending on the breach. Section 250 (1)(c) of Ontario’s Insurance Act sets out the exclusions for using the vehicle as a taxicab and/or carrying passengers for compensation or hire:
250. (1) The insurer may provide under a contract evidenced by a motor vehicle liability policy, in one or more of the following cases, that, except provided in the Statutory Accident Benefits Schedule, it shall not be liable while, …
(c) the automobile is used as a taxicab, public omnibus, livery, jitney or sightseeing conveyance or for carrying passengers for compensation or hire;
That exclusion is incorporated in section 1.8.1 of the OAP:
1.8 Who and What We Won’t Cover
General Exclusion Except for certain Accident Benefits coverage, there is no coverage under this policy if:
the automobile is used to carry explosives or radioactive material; or
the automobile is used as a taxicab, bus, a sightseeing conveyance or to carry paying passengers. However, we don’t consider the following as situations involving carrying paying passengers:
• giving a ride to someone in return for a ride,
• sharing the cost of an occasional trip with others in the automobile;
• carrying a domestic worker hired by you or your spouse;
• occasionally carrying children to or from school activities that are conducted within the educational program;
• carrying current or prospective clients and customers; or
• reimbursing volunteer drivers for their reasonable driving expenses, including gas, vehicle wear and tear and meals. [emphasis added]
The ramifications for an insured involved in an accident without proper coverage are obvious: The insured becomes personally responsible to indemnify a plaintiff for any personal injury claims against the insured. Any rights to property damage are forfeited. The insured’s access to accident benefits under the Statutory Accident Benefits Schedule (SABS) becomes severely limited.
There is little doubt that uberX drivers are using their vehicles, if not as taxicabs, then “to carry paying passengers” when they are engaged in Uber events (i.e., responding to calls and/or delivering passengers to their destinations).
Does the uberX driver’s insurer know that he or she is using a personal vehicle to carry paying passengers? Likely not. This could be a breach of section 233 of Ontario’s Insurance Act and, if so, “a claim by the insured is invalid and the right of the insured to recover indemnity is forfeited.” The insurer might also consider the act of uberX driving to be a “material change in risk” and cancel the policy before a loss even occurs, suggests one insurer quoted recently in the Ottawa Sun.
Insurance for licensed taxis
Most taxicabs in Ontario are insured under individual or fleet OAP 1 policies. To get around the exclusions, in Ontario, auto policies for taxicabs and carrying paid passengers, a taxi operator must purchase an endorsement called the OPCF 6A (Permission to Carry Paying Passengers). The OPCF 6A removes the exclusions in section 1.8.1 of OAP and allows the insured to carry paying passengers for their business.
Presumably an uberX driver could also purchase an OPCF 6A endorsement, although many insurers in Ontario do not offer the endorsement and the cost of the added coverage could be prohibitive for a casual uberX driver.
uberX and the Uber “Auto” policy
Uber boasts having its own insurance that protects drivers and passengers. The company states:
Every ride on the uberX platform in Canada is insured. In the event of an accident during an uberX trip, ridesharing partners are covered by commercial auto insurance in addition to any insurance coverage maintained by the driver-partner. We also have a well established claims process. Upon being notified, we work with our riders or partners on properly resolving any accident claim. [emphasis added]
Details of the insurance policy are sparse, but Uber has said it maintains an insurance policy of $5 million for passengers while on an Uber-arranged trip, notes background information provided in a recent court decision.
In that decision, the Ontario Superior Court of Justice ruled that Uber is not carrying on a business in Toronto that is required to be licensed as a limousine service company or taxicab broker.However, after the court ordered the company to disclose the details of its policy, it was revealed that Uber carried a Standard Non-owned Automobile Policy (SPF No. 6) with AIG Insurance Company of Canada.
The SPF No. 6 is actually an endorsement that is attached to Uber’s commercial and general liability policy. The endorsement provides third-party liability coverage to “the insured”, which under the policy would be Uber and its affiliated companies.
The SPF No. 6 form does provide coverage to “additional insureds”, but it is questionable whether or not an uberX driver would be considered to be an “additional insured”:
1. Additional Insureds
The Insurer agrees to indemnify in the same manner and to the same extent as if named herein as the Insured, every partner, officer or employee of the Insured who, with the consent of the owner thereof, personally drives:
(a) in the business of the Insured stated in the Declarations, any automobile not owned in whole or in part by or licensed in the name of:
(i) the Insured, or
(ii) such additional Insured person, or
(iii) any person or persons residing in the same dwelling premises as the Insured or such additional Insured person, or
(b) any automobile hired or leased in the name of the Insured except an automobile owned in whole or in part or licensed in the name of such additional Insured person.
It is unlikely that an uberX driver would be considered to be a partner or officer of Uber, and it is debatable whether or not a driver would be an employee. Uber is, in fact, appealing a recent California Labor Commission ruling declaring drivers to be employees. Accordingly, it is questionable that the driver would be protected under Uber’s SPF No. 6 coverage.
Summary of coverage gaps
If an uberX vehicle is not properly insured at the time of an accident because of a breach of section 1.8.1 of the OAP 1, uberX passengers would still be covered for accident benefits under their own policies or the insurer of the uberX vehicle. They would also be able to maintain a tort action against any third party and/or the uberX driver – but the insurance money available under the uberX driver’s liability limits would be only $200,000, pursuant to section 258 (4) of Ontario’s Insurance Act. If the passenger had his or her own auto insurance policy with a family protection endorsement, he or she might be able to claim excess coverage under his or her own policy.
Meanwhile, the uberX driver would not have any third -party liability coverage and would be subject to a subrogation claim by his or her insurer if any proceeds are paid to the plaintiff. An uberX driver without auto insurance coverage would also be subject to the balance of the plaintiff’s tort claim above and beyond the $200,000 that the plaintiff might recover.
Further, the uberX driver would be excluded from receiving various accident benefits. The uberX driver would not receive any reimbursement for property damage to his or her vehicle.
Finally, it is not clear that Uber’s SEF No. 6 endorsement would extend coverage to uberX drivers.
What is an uberX driver to do?
At the time of writing, Intact and Uber had yet to release much, if any, details about what their product would provide to uberX drivers. Aviva says its policy would “protect ride-sharing drivers (such as those contracted with uberX and the like) from the moment they initiate looking for passengers through to collecting and dropping off those passengers.”
We assume that Intact and Aviva’s policies would have to provide endorsements that are similar to the OPCF 6A but at a lower cost to policyholders.
The main feature or selling point of the product will have to be cost. At some point the uberX driver will have to decide whether it pays to continue driving if the insurance costs outweigh the profit.
Another interesting question is whether uberX drivers will start flocking to Intact or Aviva to insure their automobiles. As noted above, the OAP 1 applies to all auto policies in Ontario insuring owners’ vehicles. If an uberX driver is unable to receive an uberX-friendly policy from their insurer, there is a good chance the driver would have to take all their insurance business needs to an insurer that can.
Whatever happens going forward, there is sure to be some uber interesting insurance coverage questions answered in the coming months.