Growing number of states issue consumer alerts about insurance gaps with new ride-sharing companies

KANSAS CITY, Mo. - A growing number of states are issuing warnings to consumers about a new “ride-sharing” option that debuted last month in Kansas City to a combination of fanfare and controversy.

When Lyft launched in late April, Kansas City officials said the company was operating illegally because drivers and vehicles did not have the proper permits required of other transportation services like taxis and limos.

On Monday, the city’s Regulated Industries division told 41 Action News it has issued 15 citations to Lyft drivers.

But the debate doesn’t end there.

Around the country, nine different states have released consumer warnings about potential insurance gaps. The alerts advise both drivers and passengers to contact their insurance agents prior to agreeing to any ride-sharing arrangements.

For instance, an alert from the Minnesota Department of Commerce said most personal auto insurance policies contain exclusions when drivers use their personal cars for a business purpose.

“If you charge passengers a fee, you may not be covered if you get into an accident,” the release said, a piece of advice echoed by insurance regulators in other states.

According to the company’s web site, Lyft provides up to $1 million of excess liability coverage that kicks in when the driver’s personal insurance company is exhausted.

On Monday evening, Lyft sent us the following statement:

"Safety is Lyft’s number one priority. That’s why we created our first-of-its-kind $1,000,000 liability insurance policy and worked closely with regulators, personal insurance carriers, and other industry leaders to found the Peer-to-Peer Ridesharing Insurance Coalition.

"While we do expect personal insurance carriers to cover the time period prior to a driver carrying a passenger, in order to erase any uncertainty, Lyft voluntarily provides additional protection. Our contingent liability protection ensures backstop coverage to drivers for up to $100,000 per accident when they are in match mode and are not providing rides."

Count Kansas City Councilman Ed Ford among the skeptics. Ford, an attorney who has handled car accident cases, calls Lyft’s insurance coverage “murky at best.”

“I’ve read it three times and I’m not sure what coverage it would provide,” Ford told 41 Action News. “You might make decent money driving for this company, but one accident could not only wipe out everything you earn, but also your assets. So be very careful.”

After getting a call from 41 Action News, the Kansas Department of Insurance said it was reviewing state statutes regarding the new transportation option.

“On first review, it appears there are potential problems,” Department Spokesman Bob Hanson said. “We’ll continue monitoring it and issue an alert as needed.”

Chris Cline, a spokesman for Missouri’s Department of Insurance, Financial Institutions & Professional Registration, also encouraged consumers to communicate with insurance companies.

“It’s important that drivers and riders regularly review their policies to ensure they are adequately covered for the intended use of their vehicles, particularly now with new programs such as ride-sharing,” Cline said. 

Jim Camoriano, a spokesman for State Farm Insurance, told 41 Action News ride-sharing business models can vary greatly, just like the language in individual insurance policies and state insurance statutes.

“State Farm supports innovative methods of transportation that result in reduced fuel consumption and safer roads,” Camoriano said. “We continue to evaluate this evolving concept in the interest of continuing to meet our customers’ needs.”

Ryan Kath can be reached at ryan.kath@kshb.com. You can also follow him on Twitter or connect on Facebook.

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