Even as it faces new regulatory headaches in New York, transportation network company Lyft is making news this week with a major announcement today that should quiet at least some of its vocal critics: the company has begun offering primary commercial auto insurance coverage for its drivers.
Lyft already provided a $1 million excess liability policy, generally designed to kick in once a driver’s private passenger auto policy limits were exhausted, typically at $50,000 of coverage. However, given that some standard private passenger policies may exclude coverage for a driver while acting in a commercial capacity (or, at least, given general legal uncertainty about whether such coverage would be upheld in a dispute) Lyft’s policy had a unique structure that would allow it to “drop down” to cover the first dollar of loss in case the primary policy did not respond.
But given concerns from regulators in places like Virginia, New York, California and Seattle (largely egged on by local taxi associations) that even this “drop-down” coverage wasn’t sufficient, Lyft is just going all the way to offering primary coverage:
In response to that feedback from leaders in markets such as New York, California and Seattle, Lyft has voluntarily converted its policy from excess to be primary to a driver’s personal policy during the period from the time a driver accepts a ride request until the time the ride has ended in the app. This major change is part of our continued effort to set the highest standard for trust and safety in transportation.
The coverage is provided via James River Insurance Co., a Richmond, Va.-based surplus lines writer that is ultimately owned by Bermuda-based Franklin Holdings Ltd. According to statutory filings, the company had $165.0 million of policyholder surplus as of the end of the first quarter, and it hold an A- financial strength rating from A.M. Best Co.
It makes sense that this new kind of risk would require looking to the surplus lines market for a solution. But over the longer term, if car-sharing does indeed take hold as a major transportation option across a broad swath of American cities, we would expect admitted market insurers will be able to craft their own products to meet this emerging consumer need.
Though “hybrid” products could either from personal lines or commercial lines insurers, full-scale commercial auto insurance policies would likely be a bit of overkill for the limited amounts of commercial activity in which most car-sharing drivers engage. A far simpler solution would be for personal lines insurers to come forward with riders or endorsements that offer coverage for a nominal amount of commercial activity, provided they could appropriately price the coverage.
That’s where it is crucial that insurance regulators remain flexible to permit insurers to innovate and bring new products to market in a reasonable time frame.
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