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Carpooling and ride-sharing: The auto accident dilemma

Progress can be a great thing. Innovators and inventors come up with ideas to improve society, and people tend to respond well. Most of the time, life is made easier. Sometimes, they save money. Along with the benefits, however, as entrepreneurial schemes are fitting into communities, some questions need answering to smooth out the process. Ride-sharing liability is one that national and state regulators are addressing now.

The relatively new businesses are called transportation network companies. Located across the country, they are becoming established in New Hampshire as well. Unlike traditional livery services such as cabs and limousines, these ride-sharing organizations provide transportation for individuals in private vehicles operated by independent driver contractors. A ride is booked with a software application, and payment is made to the driver.

One of the issues at hand is accident liability. Traditionally, ride-sharing and carpooling were interchangeable terms. Most personal automobile policies covered anyone in the vehicle at the time of a car accident. These new companies, known in the insurance industry as a TNC, are different in that they transport an individual for a fee not considered to be a sharing of expenses. Profit-based, they receive a percentage of a driver's fare.

The TNC have terms and conditions, which a passenger agrees disclaim, among other things, the safety of the driver. They typically have qualifying requirements that a driver must meet. The questionable insurance risks, however, arise because TNC drivers use personal vehicles for a commercial activity, without commercial automobile insurance. State regulators are just beginning to address liability questions and coverage gaps. Livery exclusions, for example, will need to be amended in personal auto insurance coverage or commercial policies must be made available to cover all the TNC activities - from application on to application off.

Some larger TNC organizations provide commercial coverage, however, they may not provide the same comprehensive, medical payments and uninsured/underinsured motorist coverage that drivers maintain with personal policies. Drivers may not be aware of the intricacies of their policies, and riders might assume they are covered if an accident happens. These gaps are likely to be addressed sooner rather than later. At present, they can affect the driver, a victim sustaining personal damages as a result of a car crash and the lienholder of the vehicle used for ride-sharing services.

Source: Center for Insurance Policy and Research, "Transportation Network Company Insurance Principles for Legislators and Regulators," accessed April. 28, 2015

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