Uber and Lyft are two of the most popular "rideshare" or car-hire services. But how does automobile insurance work when you drive for Uber or Lyft? Whose insurance will cover a car accident that occurs when the driver has accepted a trip, or is just in "driver mode" on the app -- the driver's, the company's or both? Who would an injured Uber or Lyft passenger make a claim against? Read on to get the answers.
Uber and Lyft are "rideshare" services that compete with taxis and more traditional car transport services. These companies do not own or operate their cars, and do not hire their drivers directly. Drivers are independent contractors who drive their own vehicles to pick up and drop off customers. The major differences between Uber and Lyft and taxis and traditional car services are their pricing structures, and how customers arrange rides with Uber and Lyft drivers.
Unlike as with taxis, a prospective Uber/Lyft passenger does not hail a vehicle on the street. Instead, a passenger must download the Uber or Lyft app to their smartphone and arrange for a driver to pick them up through the app. Pricing for an Uber or Lyft ride varies. Some rides can be cheaper than a standard taxi, and other rides can be more expensive. Uber is known (and sometimes criticized) for its so-called "surge" pricing, meaning that its prices vary with demand. At peak times, an Uber ride can be far more expensive than at an off-peak time.
Uber and Lyft require all of their drivers to have personal car insurance that meets or exceeds state minimums, especially when it comes to liability coverage. Drivers don't need commercial insurance, however.
While a personal car insurance policy is a prerequisite in order to drive for Uber and Lyft, drivers should be aware that their personal policy probably doesn't provide coverage while they are driving for Uber/Lyft. This is because many private car insurance policies specifically disclaim coverage for accidents that occurred while the driver was driving for pay. Every standard automobile insurance policy has a list of exclusions from coverage, and one of the exclusions in many states is driving for hire. So, what happens when an Uber or Lyft driver gets into an accident while driving for the company?
Early on, the extent to which Uber and Lyft would provide insurance protection to their drivers was a little muddy, but the picture has gotten a lot more clear in recent years. Both companies have adopted very similar policies when it comes to providing insurance protection for accidents that occur when a driver has accepted a trip and/or is transporting a customer. Here are the highlights:
When the driver is in his/her vehicle but is not logged into the Uber/Lyft app (the driver is not in so-called "driver mode"), then the driver's own personal car insurance coverage will apply to any accident that occurs, and Uber's/Lyft's insurance coverage will play no role.
When the driver is logged into the app, but has not yet accepted a ride request, Uber/Lyft provides liability coverage for any accident that is the fault of the driver. It only covers losses sustained by others who were injured or had their property damaged. It does not cover the Uber/Lyft driver's own injuries or vehicle damage. This liability coverage pays:
When the driver has accepted a trip/ride, Uber/Lyft provides liability coverage in the amount of $1 million. So, this liability coverage would apply to injuries sustained by an Uber/Lyft customer who is riding in an Uber/Lyft car whose driver causes an accident. It would also apply to injuries and vehicle damage sustained by anyone who is hit by an Uber/Lyft car when the Uber/Lyft driver is found to be at-fault for the accident. But again, it won't cover injuries and vehicle damage sustained by the Uber/Lyft driver, and once the accepted trip/ride is over, so is the $1 million liability liability protection, until the driver accepts another trip/ride via the app.
Keep in mind that, in the rare event that an Uber/Lyft driver has his or her own commercial liability insurance, or if their personal car insurance policy specifically covers ridesharing, then Uber's/Lyft's coverage will only act to supplement that coverage -- the driver's personal insurance will probably pay first, up to policy limits, and Uber/Lyft's coverage will pay any amount left over between the value of the injured person's claim and the driver's personal insurance limits.
"Contingent" collision/comprehensive coverage. Uber and Lyft also provide "contingent" collision/comprehensive coverage as long as the Uber/Lyft driver has his or her own collision/comprehensive coverage. This "contingent" coverage will pay for damage to the Uber/Lyft driver's own vehicle, regardless of who or what caused the underlying incident, up to the vehicle's actual cash value, subject to deductibles (Uber's is $1,000, while Lyft's is $2,500). Learn more about Car Insurance Coverage Options.
Editor's note: If you've been involved in a car accident with an Uber or Lyft driver, and you're wondering about issues like liability and financial responsibility, check out our companion article I Was Hit By an Uber/Lyft Driver, What Now?