Ridesharing: should you?

April 20th, 2015

Ridesharing – using your personal vehicle to transport others for compensation – has received significant media attention in recent months. A great deal of controversy and confusion surrounds companies like Uber, who help facilitate paid ridesharing.

People like the idea of ridesharing, but reliable information regarding the legality and insurance implications of that activity is hard to come by. We’re about to change that.

Is ridesharing legal?

Even though some cities and provinces are currently working to ban Uber, this isn’t the only problem facing individuals who choose to generate income by providing ridesharing services in their personal vehicle.

The greater problem is this: whether or not services like Uber are legal, your personal insurance policy and Class 5 license prohibit the use of your vehicle for hire – and your car lease most likely bans it as well.

Does my personal car insurance cover me while transporting Uber passengers?

Unlikely. To our knowledge, no personal insurer in Alberta currently covers private vehicles being used to transport passengers for compensation. This includes paid ridesharing, whether or not a service like Uber is involved.

Why? The Alberta government has imposed a standard auto insurance policy, which is the only auto policy insurers can sell for regular personal auto insurance in Alberta. This means that your basic personal auto insurance coverage and exclusions are the same regardless of which company sells you a personal auto insurance policy.

This exclusion can be found under General Conditions, 8(c) in the Alberta Standard Automobile Policy S.P.F. No. 1: “…the insurer shall not be liable under this Policy while the automobile is used…for carrying passengers for compensation or hire.”

My insurance company says they’re developing coverage for Uber drivers.

Given the popularity of services like Uber, it makes sense that insurers will develop new coverages in order to meet the needs of their clients. However, insurance is only one part of the equation. The other side of the issue, which few are talking about, is the fact that your coverage is void if you drive your vehicle illegally, no matter what kind of coverage you purchase.

Why does this matter? This is where your driver’s license comes into play. Most Albertans have a standard Class 5 operator’s license, which does not permit the driver to transport passengers for hire.

This means that operating your vehicle for hire, as a Class 5 license holder, is in contravention of your license’s restrictions – which may void your insurance and may be a ticketable offense if you’re pulled over.

The rideshare company I’m using has a $5,000,000 insurance policy. Does that make up for my own insurance policy’s exclusions? Not necessarily. One of the most visible ridesharing app providers currently claims that they provide $5,000,000 of contingent auto liability insurance for passengers, pedestrians and other third parties. This sounds impressive, but look carefully: they provide liability insurance to third parties. This means that the coverage they provide might cover injuries or property damage to others if you are involved in an incident, but it likely will not cover damage to your own vehicle.

This is similar to carrying Liability-only insurance on your own policy: it covers other people for injuries or damage you cause, but it doesn’t cover you for any damage to your own vehicle.

One more thing: if you’ve leased your vehicle, you have another serious problem. Lease contracts typically contain a clause defining permissible use of the vehicle, commonly stipulating, “you must not use or permit the use of the vehicle…for transportation of any persons.” They can do this because the leasing company owns the vehicle and has the right to determine how it can be used by the person who leases it.

As you know, violating the terms of your contract is cause for the vehicle to be seized. Depending on the terms of your contract, this could expose you to additional financial consequences, in addition to losing your mobility.

What’s the final word? For the moment, “wait and see.” At this point in time, one or more of the above concerns is likely to affect ordinary people who decide to use their vehicles for ridesharing purposes. As tempting as it may be to make a fast buck or two using services like Uber, you’re better off avoiding the possible legal, financial and personal safety concerns that arise out of ridesharing activity.

Blog Author: Stefan Tirschler | Account Executive | Rogers Signature Service

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