Uber, Lyft and New York Loss Transfer
Ridesharing has officially arrived in New York, and confusion over New York no-fault insurance and PIP Loss Transfer has arrived with it.
On June 29, 2017, the New York State Assembly approved and Governor Andrew Cuomo signed the state’s $153 billion budget, which included changes in state law providing for ridesharing and starting a rule-making process that will allow rideshare companies to expand statewide – and expand they did.
Prior to the passage of the law, people wanting a ride were limited to calling a livery operator or a service regulated by a local Taxi and Limousine Commission. With the passage of its 2018 fiscal budget, New York has amended its ridesharing (a/k/a: “ride-hailing”, “ride-sourcing” or “e-dispatch”) laws to provide that Uber and Lyft driver-partners are covered by Uber’s group ridesharing insurance while connected to the Digital Network. Rideshare insurance has evolved to meet the modern world of insurance coverage. Prior to this, Uber, Lyft and other ride-hailing apps had to operate in New York City under the city’s rules for livery taxis.
Rideshare companies like Uber and Lyft are also known as TNC companies. TNC stands for “Transportation Network Company”, a term defined in a recently enacted part of the State Vehicle & Traffic Law. A TNC, sometimes known as a Mobility Service Provider (MSP), is an organization that pairs passengers via websites and mobile apps with drivers who provide such services using their personal, non-commercial vehicles. TNCs cannot accept a street-hail. Payment must be through the app and drivers accepting cash from a passenger for a ride is considered illegal. Law enforcement are operating stings to catch unaware drivers, and fines can be as much as $2,000. Interestingly, the new legislation itself excluded New York City, which means a TNC must still be authorized by the New York City Taxi & Limousine Commission to operate in New York City.
The TNC insurance coverage rules are intuitive. While New York Uber drivers are online via the Uber app waiting for a rideshare request, they are covered by Uber’s liability insurance policy, providing indemnity for liability to third persons if they are at fault in an accident. Coverage minimum limits are $50,000 per person/$100,000 per accident, with $25,000 in property damage liability per accident. They are also covered by Personal Injury Protection (PIP) (no-fault) at $50,000, as well as UM/UIM coverage at $25,000/$50,000.
While New York Uber drivers contacted via the Uber app are driving to pick up a rider, but before the rider gets into their vehicles, they are covered by third-party liability coverage at minimum limits of $1.25 million, UM/UIM motorist coverage of $1.25 million, PIP (no-fault) of $50,000 and contingent collision and comprehensive coverage, provided the driver maintains auto insurance that includes collision coverage for that vehicle while not on an Uber trip. Once a rider is picked up, the Uber driver has the same coverage in those amounts as when driving to pick up the rider, plus the rider is covered once he or she enters the vehicle. When driving the vehicle for personal use, not connected to the Digital Network, no coverage is provided by Uber. Lyft provides similar insurance with slightly different limits.
PIP no-fault benefits are available to the Uber driver and passenger as set forth above before and after a rider is picked up. New York’s no-fault scheme, contained in Article 51 of its Consolidated Laws (Comprehensive Motor Vehicle Insurance Reparations), requires vehicle owners to carry insurance with $50,000 minimum limits that covers basic economic loss, i.e., first-party benefits, because of personal injury arising from the use or operation of a motor vehicle. Basic economic loss includes, among other things: (1) medical expenses; (2) lost earnings up to $2,000 per month for three years; and (3) out-of-pocket expenses up to $25 per day for one year. N.Y. Ins. Law § 5102(a).
Third-party tort claims are limited by New York’s no-fault laws, and a PIP carrier who has paid benefits to a driver or passenger has no traditional subrogation rights. If both vehicles involved in an accident involve “covered persons,” they cannot sue each other in tort for losses that should be covered by PIP no-fault benefits. However, if either one of the motor vehicles involved (1) weighs more than 6,500 lbs. unloaded, or (2) is used principally for the transportation of persons (e.g., taxi, bus) or property for hire (e.g., FedEx, delivery truck), a compensation insurer is free to pursue a loss transfer against the negligent motorist’s vehicle insurer for the recovery of the $50,000 first-party benefits it became obligated to pay under § 5102(b)(2). N.Y. Ins. Law § 5105(a). Loss transfer must be pursued through arbitration, and the vehicle meeting the livery condition need not be the negligent vehicle to trigger the loss transfer exception.
Loss transfer is an opportunity for a PIP carrier to recover from the negligent motorist’s insurer the first-party benefits it paid because of an accident. Unfortunately, when PIP benefits are paid to an Uber driver or rider, there is significant confusion regarding whether loss transfer will be allowed. Is one of the motor vehicles involved “used principally for the transportation of persons or property for hire”? There can be no question that a TNC vehicle is a vehicle used for the transportation of persons for hire. Whether such a private vehicle is used “principally” for this purpose is another issue.
On one hand, a liability carrier may argue that an Uber vehicle is not used “principally” for hauling riders – most of the time it is used as a personal vehicle. Therefore, loss transfer is neither available or appropriate. In In re Philadelphia Ins. Co., 948 N.Y.S.2d 501 (N.Y. App. 2012), the court said there is a paucity of decisions interpreting the phrase “for hire” in the loss transfer context. It admitted that the statute is “inartfully drafted” and does not limit the universe of vehicles to which it applies only to “taxis and buses, and livery vehicles.”
That case dealt with a minivan, and the evidence established that the minivan owner was not in the business of transporting members of the public for compensation. The court said the term “vehicle for hire” is commonly understood and defined in other contexts as a vehicle held out to the public for the provision of transportation services in exchange for a fee. The court also noted that the phrase “used principally for the transportation of persons or property for hire” typically refers to vehicles operated by drivers who are required to have a certification or license and are subject to specialized licensing, insurance, safety and other requirements. However, there is little to guide us on what the term “principally” means.
In a New York County trial court order, the court – reviewing a finding of an arbitrator that loss transfer applied – looked at the sufficiency of evidence that a vehicle was “a motor vehicle used principally for the transportation of persons or property for hire.” The arbitrator found evidentiary support that the vehicle was registered or used as a livery for hire. However, the Supreme Court said the vehicle had to be “principally” used as a vehicle for hire. DTG Operations, Inc. v. AutoOne Ins. Co., 2014 WL 4743462 (N.Y. Sup. 2014).
The court determined that there was sufficient evidentiary support for the arbitrator’s finding that it was “principally” used for livery, based on the examination under oath submitted by the PIP insurer. While the other side argued that such testimony did not show that the vehicle was “principally” used for hire or livery, the PIP carrier submitted documentary evidence showing that the vehicle was registered as “Livery Use” in 2006, 2007, 2008, 2009 and 2011, and in 2010 until five days before the accident. It upheld the arbitrator’s decision, stating that “it cannot be said that the arbitrator’s determination as to the livery use of the vehicle was ‘arbitrary and capricious or unsupported by any reasonable hypothesis’.”
In a 2008 case, a minivan registered as a passenger vehicle and bearing livery license plates belonging to a commercial vehicle, was being used to transport wheelchair passengers for a company engaged in the business of such transportation. Progressive Northeastern Ins. Co v. New York State Ins. Fund, 870 N.Y.S.2d 478 (N.Y. Sup. 2008).
Vacating the arbitration award allowing loss transfer, the Court found the record devoid of evidence establishing that the principal use of the minivan was as a “vehicle for hire.” The Court concluded that simply finding that vehicle was being used “at the time” as a vehicle for hire, was inadequate to support the award and “in disregard of the standard prescribed by the legislature.”
Determining what “principally” means could be a task of monumental proportions. Is it determined based on total hours driven, distance driven or something else? Does the portion of time that a person is looking to be hired with the app on, but without a paying rider, count toward the “livery” time or the “non-livery” time?
Therefore, as the argument goes, the vehicle must be shown to be used primarily as a livery vehicle and not simply on the date of the accident. If the vehicle is registered as a regular passenger vehicle but was used as a livery vehicle on the date of loss, that should be taken into consideration when applying for loss transfer.
On the other hand, it could be argued that the defining characteristic of a TNC vehicle changes once the Uber app is activated and the vehicle is actively operating as a vehicle for hire. Therefore, when a vehicle is operating with the app on, or is transporting a rider, it transforms into a vehicle which primarily is one of livery. Section 5105 was drafted at a time when taxi cabs and livery vehicles for hire were highly-regulated and easily-identified.
Unless and until § 5105 is amended to clarify the issue, based solely on the wording of the statute itself, the stronger argument would seem to be that the loss transfer plaintiff has the burden of proving that the vehicle was principally used for the transportation of people. The original no-fault legislation, enacted in 1973, did not include an exemption for vehicles of a certain weight or those used for hire in § 674 (now § 5105). A bill introduced in 1977 attempted to amend § 674(1) as follows:
Such right to recover shall exist, however, only if at least one of the motor vehicles involved is: (a) used principally for the transportation of persons or property for hire or other commercial purpose; or (b) is hauling any vehicle not propelled by its own power. (Emphasis added) S.A. 55748 1977-1978 Regular Sessions (N.Y. 1977).
The tow truck exception didn’t make it into the final statute, but the “principally” requirement did. It may turn out that the arbitrator and the courts will need to look at each case individually, requiring a fact-finding as to the percentage of time the TNC vehicle is used as a private vehicle as opposed to an Uber vehicle. The term “principally” would seem to connote that the percentage for the latter be more than 50% to qualify for loss transfer.
According to Lawrence Fuchsberg, Principal Attorney at the New York Department of Insurance, the perplexing issue of Loss Transfer Arbitration and ride-sharing apps is currently under review. If the New York legislature wants to adapt their laws to fulfil their original intent of allowing such a loss involving a livery vehicle to be transferred to the at-fault party, it will need to amend § 5105 to accommodate the fast-moving rideshare industry.
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