By Irene Morrill, CPCU, CIC, ARM, CRM, CRIS, LIA CPIW Vice President of Technical Affairs

Transcription

1 TECH TALK One More Dangerous Business Activity That Your Clients Are Asking About... And a New MAP Endorsement By Irene Morrill, CPCU, CIC, ARM, CRM, CRIS, LIA CPIW Vice President of Technical Affairs Smart phones are all the rage these days but smart phones allow bad/foolish choices! In the last month, I ve had four s regarding Uber and how the MAP would respond to this activity or not. Researching Uber, I also found SideCar and Lyft. All are ridesharing/providing or taxi-esque ways of making money. Some of your clients are asking whether their MAP will cover them when they are drivers under the Uber/Lyft/SideCar, etc plan. Just think of those that are involved in these activities/business ventures WITHOUT asking you. The internet and other forms of social media are wonderful things?? Let s take a look at some of these potential new business ventures that your insured might decide to provide to others. And make no mistakes these ARE business ventures regardless of how they are advertised to your clients. So What is Uber? Uber has a few variations... but if your client is at least 23, has a mid-size car with personal auto insurance, a good driving record, and a smart phone that will download the Uber app, then he/she qualifies under UberX. Fares are set, and the driver supposedly receives 80-85% of the stated fare. Strangers enrolled in Uber will contact those Uber drivers who have identified their availability. If your client is one of the available drivers, then he/she will provide the transportation for hire. The further your insured drives, the more it costs. Hmmmmm... doesn t this sound like a public or livery conveyance? Uber advertises that the drivers have their own personal insurance. Uber provides $1million liability coverage as excess over the driver s insurance. Uber does state that if the primary insurance is not available, then their policy covers from the first dollar. This is a good thing because the MAP has a public or livery conveyance exclusion applicable to Part 4 and ALL optional coverages (Parts 5-12).... while your auto is being used as a public or livery conveyance. This does not apply to the use of your auto in a share-the-expense car pool arrangement or in an expense reimbursement program either as a volunteer or at work. Uber can be accessed through a mobile app downloaded to one s cell phone. Payment is paper free. Payment is performed through the phone app. Uber advertises or exists on Facebook, Twitter and Linkedin. For the social media-minded clientele this allows a paperless, easy, and inexpensive method of obtaining transportation from one point to another. Massachusetts Association of Insurance Agents 91 Cedar Street - Milford, MA TECH Hotline * * * (FAX)

2 2 For those individuals who want to be the transportation providers, I would suggest that they investigate just how well and quickly this Uber insurance will apply to an incident because the MAP was NOT designed to address this type of driving activity. There is a current court case in California involving an Uber transportation provider and the Uber organization. A driver who was logged in to Uber as available to drive struck and killed a 6 year-old girl in a crosswalk. Uber is stating it is not liable because there was not an active trip at the time of the incident. The personal auto carrier is arguing that since their insured was driving around logged in to the ridesharing app, that he/she was providing a livery service at the time of the incident. What a mess! The Lyft Option The Lfyt website advertises your friend with a car. However, this friend is NOT providing free rides! Again, a mobile phone app allows potential riders to be hooked up with potential drivers for a fee. Drivers get 80% of the ride fee. There is a background process for being a driver or a rider. But if it smells like a duck and quacks like a duck it s a duck. This ridesharing seems to be a public or livery conveyance type situation to me! Lyft advertises that a million dollars of excess liability coverage is available. I would hope that it will drop down when the driver s personal auto policy denies the claim. SideCar More of the Same Rideshare (Public or Livery Conveyance) Again, an organization allowing an individual to find, fetch, and pay for a ride with just a few touches on their smartphones, SideCar advertises that they provide peer-to-peer ridesharing. But, someone pays the driver for a ride. Hmmmmm sounds like public or livery conveyance to me. All of these organizations make it easy for the social media savvy individual to make some quick cash by providing transportation to others without the hassle and without the paper. However, if this individual is insured under the Massachusetts Personal Auto policy, he/she should NOT assume that the MAP will provide coverage when an incident arises out of this transportation activity. Just What IS Public or Livery Conveyance? It is interesting that these organizations help individuals provide ridesharing opportunities to other individuals. The websites for these organizations use the consumer friendly term of ridesharing opportunities, not the business term of public or livery conveyance. It all seems so innocent, doesn t it?! From the insurance industry side this ridesharing activity appears to be public or livery conveyance and subject to policy exclusionary language. Just how DOES a court determine whether a public or livery conveyance activity has been provided and thus excluded under a personal auto policy? One court (Elliot v. Behner, 1939) stated the following regarding the public or livery conveyance activity: The term public or livery conveyance means a vehicle used indiscriminately in conveying the public, and not limited to certain persons and particular occasions or governed by special terms. The words public conveyance imply the holding out of the vehicle to the general public for carrying passengers for hire. The words livery conveyance have about the same meaning.

3 3 Numerous other court cases referenced this particular discussion. Is the client holding himself out to the public or can your client decline to provide a ride? Are there special terms? Does the mobile app constitute holding oneself out to the general public? Whether this activity is truly a public or livery conveyance activity or not will be determined in court. I foresee a personal auto carrier denying any damages and defense arising out of the activity. The insured will then have to seek a declaratory judgment just to obtain defense of the incident. If the defense is mandated, I m sure that the company will still deny the claim and a court case will be necessary to determine if damages are covered or not under the personal auto policy. I know that if my client asked me if this was covered under the personal auto policy, I would suggest that a BAP does cover such an activity. Vehicle Sharing For Hire Opportunities and the MAP There are other methods of making money through the ownership of a automobile. If one doesn t want to be paid for providing rides, one can be paid for allowing the use of one s vehicle... an innocent sounding means of renting your vehicle to someone else. Relay Rides and FlightCar Businesses Over the last couple years I have written Tech Talks regarding the MAP and organizations that allow the insured to rent his/her car to others. The insured is not the driver and is not acting as a taxi the insured is Hertz/ Avis in disguise! Someone pays to use their car. Eligibility for a personal auto policy described in the AIB/MAIP and most voluntary carrier private passenger auto manuals does NOT allow this activity. The AIB/MAIP rule is Rule 27 and it states: A. A motor vehicle of the private passenger or station wagon type that is owned or leased under contract for a continuous period of at least twelve months by one or more individuals, excluding (1) partnerships, (2) corporations, (3) unincorporated business associations, and (4) other legal business entities with a federal employer identification number, and is not used as a public or livery conveyance nor rented to others. A vehicle which meets the conditions of Rule 31, regarding the transportation of fellow employees, students or others for consideration, is included in this definition, provided such vehicle is not registered for carrying passengers for hire. Actually, the eligibility rule states that public or livery conveyance activity is not allowed under the MAP nor is rental to others. Public or livery conveyance is excluded under the MAP as previously discussed but rental to others is NOT! The MAP merely requires that the driver of the vehicle have the consent of the owner. If the insured has rented or provided his vehicle to another for a fee then obviously the insured has granted consent. The only option that a carrier would have to deny claims in this rental situation when you allow someone to drive your car for a fee - would be through General Provision 18 Failure to Furnish Information.

4 4 18. False Information If you or someone on your behalf gives us false, deceptive, misleading or incomplete information in any application or policy change request and if such false, deceptive, misleading or incomplete information increases our risk of loss, we may refuse to pay claims under any or all of the Optional Insurance Parts of this policy. Such information includes the description and the place of garaging of the vehicles to be insured, the names of all household members and customary operators required to be listed and the answers given for all listed operators. We may also limit our payments to those amounts that we are required to sell under Part 3 and Part 4 of this policy. The carrier would have to argue you either lied or gave incomplete information regarding your business use on the original application or failed to note this new increased risk of business loss on the renewal application or when making any other change to the policy. A more specific exclusion would make the claims adjuster s job much easier! New Vehicle Sharing Exclusionary Endorsement... Just in case the Failure to Furnish Information Provision falls short in court, the personal auto industry has created another exclusion to seal the deal. ISO Personal Vehicle Sharing Exclusion ISO created the Personal Vehicle Sharing Program Exclusion Endorsement PP for the national PAP. It is infinitely MORE specific and thorough than the MA counterpart. All parts of the national PAP (A, B, C and D) will exclude your covered auto while: a. Enrolled in a personal vehicle sharing program under the terms of a written agreement; and b. Being used in connection with such personal vehicle sharing program by anyone other than you or any family member. AIB Created a Personal Vehicle Sharing Exclusion Endorsement M-0108S The MA version is short and sweet. It states: We will not pay any claim for injury or property damage under the policy, while Your Auto is being used in a personal vehicle sharing program. Such programs allow the use of your auto by a person other than you or a household member under an agreement and with payment to you. This Exclusion does not apply to Personal Injury Protection. Citizens/Hanover, Plymouth Rock, Quincy Mutual and Vermont Mutual have filed the AIB M-108-S Personal Vehicle Sharing Exclusion endorsement. Safety Insurance Company has their own endorsement SVE , but it is the same language as M-0108-S. Commerce Insurance has their own with a little bit different wording and form number CIC I would imagine before too long, all personal auto carriers will file such an endorsement. I wonder if there will be a ride-sharing endorsement that will be created that might fill in the cracks of proving whether the vehicle is a public or livery conveyance or not. I have no opinion one way or the other about any of these organizations. I just want an insurance policy in place when an incident happens. And, my motto in life is ain t nothing like having my OWN coverage.

5 5 I applaud the entrepreneurship of your insureds, but when people perform business activities they need business coverage. Unendorsed personal insurance policies such as the homeowners, auto or personal umbrella are not designed or priced to respond to business activities. The class 30 rate under the MAP does NOT remove the public or livery conveyance exclusion nor the new Vehicle Sharing Exclusion. Endorsements and premiums for business endorsements available under the homeowners or personal umbrella products do NOT provide coverage for every type of potential business activity a personal lines client might provide. We need to teach our clients to CALL US before they become involved in any money making activities so that we can make sure that there IS an insurance policy active and available should things go awry! * * * * * Good luck! If I can be of service to you, please call me, Irene Morrill, Vice President of Technical Affairs at or me at imorrill@massagent.com. This article has been developed expressly for the members of MAIA. Reprint by other than members without the express permission of the author is not permitted.