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Ride-Share Drivers and New Jersey Commercial Auto Insurance

Ride-Share Drivers and New Jersey Commercial Auto Insurance

Many states are now concerned with the potential insurance gaps associated with ride-sharing operations such as Uber and Lyft. These businesses involve individuals using an app on their smartphones and tablets to find a driver to transport them (using a pre-pay service), much as taxis operate. In an effort to resolve some of these fears some insurers are offering their insureds new policies that are intended to fill those gaps.

State regulators are still concerned that these ride-share drivers are opening themselves up to some possibly severe liabilities. Earlier this year, the National Association of Insurance Commissioners (NAIC), the state regulators’ association, approved a white paper for state legislators and regulators on policy concerns. For example, the impact of ride-share drivers without New Jersey commercial auto insurance, and coverage issues involving what it refers to as “transportation network companies.”

Issue stems from commercial activities by underinsured drivers

The concern is over coverage issues due to the fact that ride-share drivers “use personal cars for a commercial activity but do not have commercial auto insurance,” as stated in the NAIC white paper. While many participating drivers do get some commercial coverage from both Uber and Lyft, there can still be coverage gaps that could affect the driver and the vehicle, as well as anyone injured in an accident, according to the NAIC white paper.

Using this scenario, who ultimately takes responsibility and provides New Jersey commercial auto insurance coverage if an accident occurs when the driver is logged into the ride-sharing app but has yet to actually be matched up with a passenger? A personal auto policy will not generally provide coverage when a personal car is used to provide transportation services for hire.

Most insurers believe that using a covered car for business purposes is in violation of their contract and will presumably consider this as grounds for cancellation of the policy at any time, the NAIC report concludes. But unfortunately, New Jersey commercial auto insurance coverage could be prohibitively expensive and not something most ride-share drivers would be willing to purchase.

Some insurers are trying to fill the gap, offering to their insureds that provide these services with a specialized coverage for ride-sharing drivers. It’s estimated that the coverage would add about $6 to $8 a month to policyholders’ bills.