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Uber and Lyft are legal in Houston, but what about insurance?

After nearly a year of debate in the Houston City Council, ordinance permitting ridesharing apps such as Uber and Lyft* to operate legally in Houston became effective last week. Previously, ridesharing operators were considered to be operating unlicensed taxis in violation of Houston’s vehicles for hire ordinances, and their attempts to change the law were opposed by traditional taxi companies and drivers as well as other interest groups. The argument covered topics ranging from accessibility to the disabled to driver compensation to driver background checks,* but perhaps no topic was more important from a public protection standpoint than insurance.

Rideshare services like Uber, Lyft, and Sidecar allow customers to use smartphone apps to request rides from for hire drivers using their own private cars. From there, business models have varied, but all three leading companies currently use standard mileage and time rates-similar to traditional taxi meters except these are calculated using the GPS on the rider’s or driver’s smartphone-where the fare is charged to the rider’s credit card and a portion paid to the driver.

The rideshare companies-not unlike many taxi services-steadfastly take the position that their drivers are not employees and that the company is therefore not liable for damage or injuries caused by a driver who gets in an accident. However, unlike traditional licensed taxi drivers, rideshare drivers are often part-time and carry only their standard personal auto insurance rather than commercial insurance.

The lack of commercial coverage is what has opponents of ridesharing concerned: If you read your personal auto insurance policy, you will almost certainly see that liability coverage is excluded when the vehicle is “being used to carry persons for a fee.” That means that if you are carrying a fare for Uber and injure someone in a wreck, your personal auto insurance will probably not cover their claim even if you are sued.

Fortunately, section 46-508 of the new Houston ordinance addressed this issue. Rideshare companies, called “transportation network companies” in the ordinance, are required to carry at least $1 million “per accident” in commercial auto liability coverage covering each of their drivers from the time the driver accepts a trip request through the app to the time the driver drops the passenger off at the passenger’s final destination. The company is also required to provide at least the minimum coverage required of private drivers (currently $30,000 “per person” and $60,000 “per accident” for bodily injury and $25,000 for property damage) for any other time the driver is logged into the app and available to accept trip requests.

This insurance requirement is in line with those passed in other jurisdictions, and Uber and Lyft already carry such insurance policies. However, there are some circumstances that could result in the coverage being voided. For instance, one part of the new ordinance that has confused some observers is the prohibition against a driver providing a passenger with his or her direct phone number or email address to enable a direct request for service. One reason for this requirement is probably to preserve insurance coverage-if an Uber driver is hired without the use of the Uber app, then the driver will likely not be covered by Uber’s insurance. Partly for the same reason, rideshare drivers are also prohibited from accepting street hails or, without an airport use permit which carries its own insurance requirements, from picking up or dropping off passengers at any Houston airport.

Like any other legal issue involving a brand new industry, insurance issues for rideshare apps will probably be unsettled for some time, and it may be important for an injured party to consult with an attorney knowledgeable in insurance law in the event of a coverage dispute. If you or someone you know has been injured in an accident involving a rideshare driver, contact an attorney at Abraham, Watkins, Nichols, Agosto, Aziz & Stogner by calling 713-396-3964 or toll free at 800-594-4884.

* Lyft has recently announced that it will be withdrawing from the Houston market on Nov. 20-less than three weeks after its service became legal-due to the expense of the state background checks required of drivers by the ordinance.

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