Questions over ride-share firm's insurance protection

One of the flash points in the fight over Uber's high-tech, innovative, disruptive arrival in Philadelphia is old-fashioned auto insurance.

When riders use a smartphone app to summon UberX - a private car with a private driver - how are they protected in case of an accident?

Uber says it provides $1 million in coverage for its passengers and drivers, much more than traditional taxis do.

Regulators in Philadelphia and Harrisburg contend the ride-share company relies too heavily on drivers' personal insurance policies and doesn't fully protect the public.

For customers who just want to get from Point A to Point B easily, quickly, and cheaply, the debate may seem irrelevant: Who cares about coverage? Just get me to the train on time.

But insurance may be key to Uber's victory or defeat in its bid to bring "ride-sharing" to Philadelphia and the rest of Pennsylvania. It is the focus of much of the legislative debate in Harrisburg over proposed ride-share laws, and it is one of the main points of contention with regulators.

The battle revolves around how much insurance Uber provides, when it is in effect, and how drivers and riders tap into it.

In a recommendation in September against Uber's application to operate in Pennsylvania, two administrative law judges for the state Public Utility Commission wrote that Uber's filing "doesn't propose adequate insurance or adequate insurance education and training for Applicant's drivers, its passengers and the general public, and it leaves unanswered several crucial insurance-related issues."

"As such," they said, Uber's application "fails to truly protect the public."

Uber's insurance policy provides primary coverage when an UberX driver is actively responding to a rider's electronic hail and providing a ride. Before that, Uber's insurance is secondary, and drivers must first submit claims to personal auto insurers.

Most insurers include a "livery exclusion" in personal auto policies, saying they won't cover claims for vehicles used for hire.

That means "pursuing a claim will be needlessly chaotic and expensive for consumers," Samuel Marshall, president of the Insurance Federation of Pennsylvania, told a state House committee last month.

The insurance federation also blasted Uber's insurance coverage in asking the PUC to reject the application to operate in Pennsylania.

Uber "has been reluctant, incomplete, evasive, obtuse and disingenuous in describing its insurance coverage and its communications with its drivers about that coverage and related insurance issues," the federation said in a legal filing.

"It wants the commission's approval without establishing those protections, suggesting its services are so compelling and needed that the commission should allow those protections to be addressed later or not at all."

Uber says its $1 million coverage, provided by James River Insurance of Richmond, Va., offers better insurance coverage than traditional taxis have. And company officials noted that Philadelphia taxis faced an insurance crisis of their own last month, when hundreds of cabs were temporarily ordered off the streets when their insurer collapsed in insolvency.

Uber's lawyers told the PUC last month that Uber "proposes to provide primary liability insurance coverage for all vehicles operating on the platform from the time the app is on and the operator has logged into the system until transportation services have been completed."

That would be broader coverage than Uber now provides. Uber currently relies on a driver's personal insurance to provide primary coverage until a driver accepts a passenger's electronic hail.

Marshall, of the insurance federation, has warned that private drivers could lose their insurance if they carry passengers for hire.

But insurance-industry officials said they aren't aware of any drivers having policies canceled because of driving for Uber or another ride-sharing company. That includes the companies that insured the UberX drivers nabbed by the Philadelphia Parking Authority for operating illegal taxis last month: State Farm, Allstate, Nationwide, and Liberty Mutual.

(Taxis and limousines are regulated by the Parking Authority in Philadelphia, and by the PUC in the rest of the state.)

Right now, the insurance companies say they are watching and waiting.

"Commercial ride-sharing is a relatively new phenomenon, and we are monitoring the situation to see whether and to what extent we will underwrite against customers who participate in ride-sharing programs," said Julia Reusch, a spokeswoman for Allstate Insurance Co. in Malvern.

Because personal auto insurers do not ask their customers if they drive for UberX or other ride-share operators, they "have no idea of the risks they are taking on," said the insurance trade publication Auto Insurance Report.

Michael Consedine, Pennsylvania's insurance commissioner, told the PUC that ride-share companies such as Uber "leverage rapidly growing technology, allowing individuals to earn an income while providing greater access to public transportation.

"However, we must strike the right balance between harnessing such innovation and potential for job growth and protecting consumers from the risks that may exist when participating in these programs."