A Lyft out of an Uber Mess

A Lyft Out Of An Uber Mess

The Transportation Network Companies (TNCs) have been dragged — kicking and screaming — into a closer approximation of an ethical business position. First they offered no coverage. Then they purchased excess auto liability policies. Then they added Uninsured Motorist and Underinsured Motorist coverage.  Our laws have long held that culpability in auto accidents should be assessed against those accountable. Why the TNCs have seemingly tried to dodge their responsibility is a mystery, as their financial responsibility is inevitable. They need a Lyft out of an Uber mess.

The regulators have danced around the issue while appearing partially blind by apparently eagerly checking the “insurance box” when such a position is patently ridiculous. Imagine providing a policy to your home’s mortgagee that includes coverage for half of the market value and covering only the peril of theft, while ignoring windstorm, fire, hail, and all the other common causes of home loss. Your mortgagee wouldn’t stand for it, and neither should the regulators allow the TNCs to provide inadequate coverage.

The TNCs started out by trying to avoid insurance expense by calling themselves “ride-sharing” companies. They did this with a purpose. Ride-sharing is allowing someone to ride in your car while you travel to a destination you would have gone to otherwise. That additional person (or persons) can share expenses. One common form of ride-sharing is a carpool to work. “Ride-sharing” is specifically allowed under a private passenger auto policy.  “Livery” is excluded, which is carrying a passenger for hire. The TNCs are not “ride-sharing” because “but for” the profit motive the passenger would not be in the car and/or the car would not be going to that particular destination.

They compounded this ruse by telling their drivers that the individual’s policy would cover “ride-sharing” which was technically true, but when taken in context, quite false.

The average cab, in the United States, pays about $1.00 per fare for auto insurance. It seems churlish for TNC’s to not keep enough of the gross fare to cover their expense, including adequate insurance. They have worked extremely hard to avoid rate regulation, which allows them to charge surge rates, so charging enough gross fares doesn’t seem overtaxing. Instead, they have actively engaged in activities that have resulted in their drivers avoiding proper disclosure to their individual private passenger auto carriers, action that has been described as insurance fraud.

I’ll try in this article to pass along information, but mostly I’ll ask questions that have been bothering me for some time.

Why did James River Insurance Company write the commercial auto insurance for Uber and Lyft after the liability policy became primary instead of excess?

James River Insurance Company is a non-admitted carrier in all states but one. A non-admitted carrier is also called a surplus lines company. A non-admitted carrier meets a lower standard to be approved to do business in a given state.  For example, they aren’t required to file rates or forms for approval. Admitted companies must have their rate/form filings approved in order to write business.

In many states, primary auto liability is not eligible for exportation to the surplus lines market. Non-admitted insurance companies are subject to fines and other disciplinary measures if they write primary auto liability in those states. Excess auto liability is eligible for exportation to the surplus lines market.

The same could be said of Nautilus Insurance Company, who is another non-admitted carrier providing coverage for TNCs. Since Nautilus is part of W.R Berkley Insurance Group, it is baffling why they didn’t issue the coverage in an admitted market.

There are many companies who will allow other companies to issue policies on their paper. This practice is usually used when a company like James River Insurance Company wishes to assume a primary auto liability risk in a state where they’re non-admitted. This common process is called “fronting.” It usually involves the fronting company receiving a fee plus one hundred percent reinsurance from the non-admitted market.

A certificate for a TNC in California shows National Fire and Marine, a Berkshire Hathaway company, as the carrier. That company is an admitted market and may well be “fronting” for another company.

More salient to my question, James River Insurance Company had at least limited experience as a primary auto carrier. Why would a company who rarely wrote auto insurance suddenly decide to take on a very esoteric auto risk? A check of their website on 12/22/2014 indicated the following.

James River Products


Years ago I was an excess and surplus lines underwriter (non-admitted). The list of coverage provided by James River Insurance Company is common for that industry. Writing primary auto would be unusual for a non-admitted market.

Insurance companies are highly reliant on reinsurance in most instances. Reinsurance is the formalized process of one insurance company sharing a risk it has assumed with another insurance company. The documentation of the reinsurance agreement is often called a treaty. Companies that don’t write primary auto insurance would probably have that kind of exposure excluded from their treaty.

In order for a company to change their treaty, the reinsurer(s) would have to agree and would certainly be diligent in determining if the insurance company had the underwriting acumen needed.

Of course, James River Insurance Company could have hired the auto underwriting talent, or may have decided to keep the entire risk in-house without reinsurance.

Nonetheless, it is extremely strange for an insurance company to step so far outside of its core discipline.

I have not seen the current policies for Uber and Lyft and can only rely on the certificates of insurance filed with the California PUC. The Uber certificate makes no mentioned on UM, UIM or PIP coverage, which are all important in my state of Minnesota. The Lyft certificate indicates the policy provides UM and UIM.

Why aren’t regulators requiring the individual drivers to meet statutory requirements for transportation providers?

The Uber site says, “We are not a transportation provider.” The TNCs have repeatedly asserted this position in trying to avoid regulation.

Uber Fine Print

Legally regulators have danced around the issue, and in the process have seemingly missed the logical point: If the TNCs are not “transportation providers” and someone is being hauled from point to point for profit, than the only logical conclusions is that the individual taxicab owners are “transportation providers” and should be individually regulated.

It’s possible drivers are using multiple TNCs. Which policy will respond when all of their apps are turned on? This confusion could be avoided through regulation of the individuals and not the TNCs.

Now that Erie Insurance Company has started to write an insurance policy to cover inadequate insurance, why don’t regulators recognize the problem of inadequate insurance?

Erie Insurance Company is a highly regarded insurance company. They’re known as one of the most conservative and service-oriented companies in the property and casualty business. There is simply no way they would sell an insurance policy that isn’t necessary.

One of the big holes that they fill is that period when a driver leaves his home to go to a part of town where fares would be more likely. “But for” his TNC related activities he wouldn’t be driving. Therefore, his private passenger auto carrier is well within their rights to deny coverage for a loss that occurs during that time.

That period is part of the transportation service and as such should be regulated.

TNC drivers are now hiding the fact of their TNC employment from their private passenger auto insurance companies, before and after claims occur.

With over 32,000 traffic deaths annually in the United States, adequate auto insurance is not a nicety. It is an underpinning of our social fabric.


The Lyft Agreement states;

You will defend, indemnify, and hold Us and Our officers, directors, employees, agents and any third parties harmless for any losses, costs, liabilities and expenses (including reasonable attorneys’ fees) relating to or arising out of Your use of the Service, including:

  1. Your breach of this Agreement or the documents it incorporates by reference; or
  2. Your violation of any law or the rights of a third party, including, without limitation, Drivers, Riders, other motorists, and pedestrians, as a result of Your own interaction with such third party,
  3. any allegation that any materials that You submit to Us or transmit to the Services or to Us infringe or otherwise violate the copyright, trademark, trade secret or other intellectual property or other rights of any third party;
  4. Your ownership, use or operation of a motor vehicle or passenger vehicle, including Your provision of rides to Riders; and/or
  5. any other activities in connection with the Services. This indemnity shall be applicable without regard to the negligence of any party, including any indemnified person.

The Uber Terms and Conditions states:

You agree to indemnify and hold Uber and its officers, directors, employees and agents, harmless from any and all claims, demands, losses, liabilities, and expenses (including attorneys’ fees), arising out of or in connection with: (i) your use of the Services; (ii) your breach or violation of any of these Terms; (iii) Uber’s use of your User Content; or (iv) your violation of the rights of any third party, including Third Party Providers.

Given these contractual terms how do regulators believe drivers and riders are properly covered?

If you were getting into a taxi and the driver handed you an agreement to sign that contained the above, would you sign, or get out?

As a rule, I tend toward favoring less regulation. However, in this instance it appears the TNCs are forcing the current taxi industry out of existence using the regulators as a blunt instrument.

If the regulators aren’t going to do their jobs, they should at least get out of the way and allow the free market to work.

You might also read this article about “ride-sharing.” You might also be interested in this discussion of Uber. Or you might want to read this earlier discussion.


For an update from the NAIC.


Other Enhanced Insurance articles related to the sharing economy:

Uber, Lyft, and AIRbnb are Innovative but are they good for Society

Are Uber and Lyft Innovators or Scofflaws

You Wouldn’t Trust a Cab without Insurance Would You

The Uber Risk of the Sharing Economy

Auto Insurance Coverage for Taxis

Have Uber and Lyft Used Insurance to Their Advantage

Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.

In January of 2016, GM announced a $500 million investment in Lyft.


While the majority of people want an agent involved in their purchase of insurance, many people want to see if they can save money by buying direct from the insurance company. Others want to try a direct quote to make sure the premium they’re now paying through their local agent is fair. If you want a quote for your coverage, click on the competitive quote button on the right side of this page.

Jim operates an insurance agent network called Insurance Partners, aggregating agents in the Midwest for over 25 years. He was National Agent of the Year for Metropolitan in 1993 and Midwest Agent of the Year for Travelers in 2011. He served as a founding board member of the Surplus Lines Association of Minnesota.

22 comments on “A Lyft out of an Uber Mess

    • Thanks.

      Reading their policy creates even more questions.

      I had read the Insurance Journal story. I noticed the premium amount. It doesn’t seem to jibe with the number of rides (fares) to date mentioned in some articles.

      • Uber just claimed that they are doing million rides a day. My very rough estimate is that it represents a premium of less than $200/year/car.

        Btw are you familiar with http://rideforhire.com
        It’s a searchable database of TNC cars in D.C. Metro Area. It was compiled by DC Cab Drivers so that insurance companies would use it to notify the Drivers that their Personal Auto Policy didn’t cover their TNC driving. I don’t know insurance companies ever used it.
        If such a searchable database was complied on a national level by cab drivers, would insurance companies use it to prevent Uber & Lyft from cost shifting their insurance onto the backs of personal policy holders at large?

        • Think about how crazy it is that James River is charging all of their TNCs (Uber and Lyft, at least) $18M for nine months coverage.

          A cab pays about $10K for one year’s premium. A cab does an average of 30 fares in a twelve hour day. That’s about a dollar per fare for insurance.

          Uber says they’re doing a million rides a day. James River should be charging Uber alone somewhere over $300 million per year.

          I don’t trust any figures put out by Uber. But . . . their valuation has to be based on some pretty big numbers.


  1. Jim,

    you have uncovered the largest insurance scam in history . No government agency will take it on . The estimated $300,000,000 is being paid by the insurance companies . I believe that number to be low .

    Check the drivers contract . They take responsibility for the insurance and James River will not pay the claim until you have a judgement on the driver . this would take years and most Uber drivers are not worth suing . Uber knows it is too expensive for the insurance companies to go through the process . This makes Enron look like choir boys.

      • No one is going to insure commercial vehicles for 100 to 200 a vehicle. I founded coach USA. I know a little bit about transportation. Your observation are correct. Now I have to prove it in federal court.

        • Their insurance is apparently charged on a mileage basis. Perhaps Uber and Lyft have policies that are audited at the end of the year and an additional whopping premium will be charged. I was an underwriter for years. Had I written this policy I would have had a monthly reporting form and charged according as it went along.


  2. Jim, your article helps pinpoint the insurance fraud.

    No carrier can legally issue a public auto liability policy “for hire” to an unregistered, non-permitted company who is operating unregulated in a regulated industry.
    Interestingly, James River went public (JRVR) last week underwritten by Goldman Sachs, a minority stockholder, and a major stock holder in UBER. The registration and prospectus seems invalid. Just alone, the figure of a $17M increase in premium from Uber and Lyft for the period of 1/1/14-9/30/14 seems invalid based upon leaked figures these companies purposely give to the media. Obviously, it is all part of the largest scam in the history of the US. Goldman Sachs, and Camp/Kalanick hyped up a business platform,”tap an app, vehicle comes in 10 minutes at the cheapest price of any taxi, black car service, or limo. The dog and pony show set up in the silicon valley and went like this: GET IN QUICK, GS is going to do an IPO bigger than Facebook. Investors recklessly wrote big checks to a private shell with no assets or operating history. James River owned by GS would write ONLY a GLSL commercial policy covering only Uber, NOT the driver or passenger. These companies deliberately mislead the drivers and the passengers on its websites and all social media marketing. Now, the number one violation is criminal violations of the RICO ACT. Certainly, the insurance coverage representation is most fraudulent as JR does not sell livery insurance to anyone. However part of the scam is to convince America the driver and passenger are covered when the app is on. There is no such thing as app/on app/off, peer to peer, or gap coverage. Therefore the JR IPO is misleading and the SEC regulators will look deeply as the forthcoming “comic book” Uber regristration and prospectus will never be passed on by Mary Jo White, SEC Chairman. The USDOJ is looking into all the violations of RICO, IRS Tax Code, Federal Trade Commission and the insurance laws plus others agencies, State and Federal.

    The bottom line is these companies will not comply with a single law anywhere and the public, both drivers and passengers, are unprotected and placed in harm’s way. No matter what insurance innovations come forth to allow these companies and their drivers to operate, Enforcement officials at all levels will not let Uber and Lyft operate freely without enforcement.
    Laws will have to be changed or amended to accommodate such business platforms without any regulatory costs. Of course it will never happen because would be deregulating the ground transportation and then chaos would occur.

    With this scam being pieced together by the Feds, soon they will shut it all down and prosecute those who a part of the concerted criminal conspiracy. Remember this, No insurance company can issue livery insurance but 24/7 commercial public auto liability coverage ( not a gap type) above primary insurance coverage which of course is excluded from all policies. No state regulatory agency can issue a state permit to anyone who does not have 24/7 commercial public auto coverage. America has awaken to these manipulative companies who are rogue operators refusing to comply and run under the guise of an app only company. No one is buying their BS.

    • Three points:

      1.) People are buying the BS. Supposedly Uber had 1,000,000 rides last week.

      2.) I’m not aware of laws prohibiting insurance companies from issuing an auto policy when a company doesn’t have the proper filing. It’s a chicken or egg thing in that most filings require the existence of insurance.

      3.) The coverage falls short for a variety of reasons beyond what you state. The policy’s symbol 10 refers to the specific relationship which I believe include the indemnification agreement that effectively holds Uber harmless. Plus there is all that time from leaving home to going to the area for the first pickup/ and going home after last ride.

      There are some very smart financial people who believe in Uber. It could be that I’ve looked at this and missed something. However, so far their practices regarding insurance have been terribly out of the ordinary.

      In my experience regulatory agencies are NORMALLY quite anal about insurance. In this instance they seem to bend. Odd.


      • The Oklahoma Insurance Commissioner seems indifferent s he says the James River broker for Uber and Lyft is based out of Ohio and he is registered to sell insurance in the State of Oklahoma. Currently, I am challenging the validity of the policy as the OKC attorneys have stated publicly they had an insurance expert review the policy for confirmation of the required coverage. However, I asked for the ID of the “expert” and the policy and they told me it is sealed by an Ohio court Judge. All unbelievable!! Suggestions?

          • Yes some of the original certificates show Marsh-Boston, and San Francisco office address. However who ever the Ohio broker is the OK IC is evasive with me and now I understand. I also have filed formal complaints with the OK AG a year ago and nothing. It appears we are going to force a showdown with the OK state Gov using the media. I can assure everyone Oklahoma citizens do not like cloak and dagger politics.

            I appreciate all your help.

            Thank you.
            Chuck Cotton

  3. Best article I’ve read on this subject. I’m a former insurance underwriter and I learned a lot from it.

    As for your finding the behavior of the regulators odd … I was/am a party to the California Public Utilities Commission (CPUC) hearings on whether or not to legalize Uber, Lyft and Sidecar and “odd” is definitely the word to describe them.

    A partial list of irregularities: (1) the CPUC legalized the tncs a week before the hearing began. (2) The first speaker, who was not a party to hearings, was a marketing VP for Uber who spoke for 40 minutes. We were not allowed to ask him questions. (3) The head of taxicabs for the city of San Francisco, who was a party to the hearings, had her talk cut off after 10 minutes. She was not allowed to complete her final sentence. (4) The CPUC refused to make Uber and lyft show the parties their insurance policies and then said that they (the CPUC) had read the policies and falsely claimed that they offered full coverage. (5) The CPUC knew that Sidecar had no insurance at the time and did nothing about it. … I could go on … and on.

    Of course it’s easy to claim that a governmental body that makes decisions you don’t like is corrupt but if the commissioners on that body aren’t corrupt they’re the stupidest people I’ve ever met in my life.

    Oh yes – the attorneys for Uber and Lyft greeted the judge presiding over the hearings by his first name when he walked into the room.

    • Thank you for your comments.

      I’m not at all surprised by your description of that “regulatory” meeting. This entire matter makes me feel sick.

      I’ve dealt with insurance regulators for years. About a third were corrupt, a third blinded by political ambition, and the other third wonderful people who actually cared about the people who elected them.


  4. Wow! Regulators have their work cut out for them. Based on what I have seen the rates charged and driver compensation paid, there is no way the drivers are paid enough to obtain the proper coverage. I will be very interested to see how all this plays out in court.

  5. Jim, what is your take on the “other insurance” clause in the James River policy? If a carrier, say for example, Metro Mile in California states there is no coverage when en-route to pick up a passenger, or while the passenger is on-board, does the James River policy provide coverage for the driver’s vehicle since technically there is no primary insurance in place at the time? Would James River be in the right to deny the claim citing no primary coverage?

    • I don’t have their policy so I’m not really able to say much.

      Excess liability policies are often based on a warrant of existence of primary coverage. In absence of a primary policy some excess policies drop down to a self-insured retention. Others policies are set aside as you suggest.

      From what I’ve read in the media Uber switched from an excess liability policy to a primary policy some time ago. It’s doubtful regulators would be so inept that they would accept an excess policy as primary coverage, doubtful . . . but possible.

      The entire Uber matter has gotten so far into the political realm that anything is possible. One can only imagine the lack of true service and the exorbitant prices people will pay when TNC’s dominate the market, especially if one TNC is allowed a monopoly or near monopoly.

  6. They are not covering the primary auto, nor are they doing anything illegal or incorrectly. 3 years in, with Uber and Lyft, it’s pretty evident. They’re providing HNOA, which many E & S carriers to provide. Remember, since they are an E & S carrier they are not required to file with the state. So they can pretty much write up a policy saying what they will and will not cover without hardly having to follow any rules. The question is, how long will it be before their claims catch up to them? The excess money they had 3 years ago can only last but so long.

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