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Insurance gaps for ride-share drivers

Shane H. Katz
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Since its inception, Uber has provided its customers with a convenient way to obtain rides from licensed limo and taxi drivers. However, its UberX product, which enables Uber customers to obtain rides from drivers that do not have a limo or taxi licence at reduced rates, has generated significant controversy despite its popularity.

UberX drivers are able to charge lower fares because their expenses are much lower then those of taxi and limo drivers. UberX drivers do not have to pay licensing and administrative fees, along with the myriad of other expenses, and fees, that one must pay to be legally allowed to provide taxi and limo services. As well, UberX drivers do not have to pay the large insurance premiums that taxi and limo drivers have to pay to ensure that their vehicles and any damages caused by their liability are covered under their motor vehicle insurance policies. It is of little wonder why taxi and limo drivers see UberX as an unfair threat to their businesses.

UberX drivers, and their motor vehicles, are currently inadequately insured, or not insured at all, as they do not have motor vehicle insurance that covers the vehicle as a “taxi” and the motor vehicle insurer of the vehicles will deny any claim under the policy that is made as a result of an accident that occurred during an UberX ride. Insurance companies view the change from driver to “taxi driver” as a material change in risk that allows the insurer to void coverage as the insurer would have charged higher premiums, or provided different coverage, had it known that the driver intended on using the vehicle as a “taxi”. This gap in insurance coverage means that people who suffer injuries as a result of a motor vehicle accident during an UberX ride may be unable to obtain adequate compensation to pay for their treatment and recovery.

In a recent announcement, Aviva Canada, a Canadian insurance company, stated that it will be providing motor vehicle insurance coverage for drivers that carry paying passengers in their own vehicles. The coverage would apply when the drivers are looking for paying passengers, and are carrying paying passengers, with pick-up and drop off included. Intact Financial Corporation, another Canadian insurer, has also announced that it intends on providing tailored insurance products for Uber as well.

This insurance would hopefully fill the insurance gap that currently exists for UberX drivers. However, if there is no government mandate requiring UberX drivers to purchase the insurance, the gap may continue to exist for those drivers that choose not to purchase the coverage. If the insurance becomes a legal requirement through government legislation, licensed limo and taxi drivers will also benefit, as many UberX drivers may leave the service altogether if they cannot afford the insurance premiums for this additional insurance coverage. This will decrease the competition taxi and limo drivers currently face from UberX.

UberX has generated a significant amount of debate among government, lawyers and the public, and not without reason, as it is a situation that requires a fine balance between free markets (the freedom for people to pay other people for rides in their motor vehicles) and the societal benefit that occurs when people who drive on public roads are adequately insured.

The content of this article or blog posting is of a general nature and does not constitute legal advice. It is not intended to be a full or complete analysis of the topic. Before applying the concepts or any content of this article or blog it is imperative that you consult your legal advisor.

Neither the author of this article or Singer Kwinter can accept any responsibility for financial loss nor gain of any nature should the reader not take advice from their legal advisor.

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