More than 65 million passengers (about twice the population of California) used rideshare services in 2021, with projected growth at 7% each year. Where there are cars and riders, accidents follow, and where there are accidents, the question becomes who must pay for the loss? The Court of Appeals of Kentucky may have completed part of that puzzle in an April 2024 opinion, deciding that a Lyft driver could not collect underinsured motorist benefits (UIM) from either Lyft or her own auto policy with Erie.
Background
Lyft driver Kimberly Rogers suffered injuries from a February 2022 accident, which occurred while on her way to pick up a Lyft passenger. She sought UIM from Lyft and its carrier, Allstate. The Allstate policy did not provide UIM, but Rogers argued that a regulation required it to do so. Agreeing with the trial court, the Court of Appeals held that the regulation only requires carriers to follow the Kentucky UIM statute. While that statute mandates that carriers offer UIM coverage, insureds may choose not to accept it. Allstate offered the coverage, but Lyft did not accept it, so Rogers did not have it through Lyft or Allstate.
Rogers’ policy with Erie included language addressing risk posed by ridesharing and excluded injuries to anyone using or occupying “any ‘auto we insure’ while hired by or rented to others for a fee, or while available for hire by the public.”
Rogers first argued that this exception was ambiguous because her vehicle was not available to the public, like a taxi, but was available only to Lyft users. The Court of Appeals said that the vehicle had been hired at the time of the accident, so Rogers could not reasonably expect any coverage at all.
Rogers next pointed to an exception to the for-hire exclusion, which returned coverage to vehicles used for business. But the court noted that the exception required the insured to disclose that the vehicle is to be used for business. Erie’s declarations page did not show Rogers’ vehicle to be used for business. The court also rejected an ambiguity argument related to the exception which regranted coverage when the policy holder was driving the vehicle to work. Rogers argued it was reasonable to interpret that exception to cover her while she was on her way to pick up the Lyft user. The court said that “to work” used in an auto policy commonly means driving to and from work, not driving to pick up a fare.
Finally, the court rejected Rogers’ argument that public policy should override the policy language, saying that Kentucky case law allows reasonable exclusions to UIM coverage. Using a vehicle for business entails a different risk than personal use, so Erie reasonably excluded that risk.
Conclusion
As the court noted, Rogers could have avoided this result by disclosing to Erie that her vehicle would be used for business and confirming that the declarations page reflected that. Some insurers also offer specific rideshare insurance that covers drivers while waiting for a ride request, while transporting passengers, and while en route to a fare.
When technology spurs new ways of doing business, properly insuring that business can be a challenge. At least in Kentucky, the burden of getting the proper insurance for the ridesharing business is on the drivers.
This article originally appeared on Freeman Mathis & Gary LLP.
Barry M. Miller is a Partner at Freeman Mathis & Gary LLP. bmiller@fmglaw.com