Uber, the San Francisco-based ride-booking smartphone application, has been in both the news and the courts lately. An analysis of the insurance implications reveals serious issues.
The application matches a user to a driver. No cash changes hands as the application charges the user’s credit card. Uber takes 20 per cent with the driver taking the rest. To be a driver, you need a licence, a vehicle, and proof of insurance. You sign a contract with a Dutch company and get an iPhone with the application. GPS tracks your location and notifies you of nearby users.
The founders of Uber, a company said to be worth billions of dollars, are two Americans in Paris who had trouble hailing a cab. The company is not without controversy as it brings in surge pricing during high usage. Taxi drivers complain that Uber competes unfairly, and cities in Brazil, India, and Europe have banned it.
The service raises several legal and insurance issues. In May 2015, the Ontario Superior Court heard an injunction application against Uber brought by the City of Toronto. The court denied the injunction, holding that bylaws do not apply to a technical platform: “While the city made much of its ‘walk like a duck’ metaphor, the simple fact of the matter is that it does not require ducks to be licensed.”
Taxi and limousine drivers, meanwhile, have filed a $400-million class action lawsuit against the UberX service and its drivers. And on July 14, Toronto Police laid charges against 36 Uber drivers for offences contrary to the Highway Traffic Act.
Uber states: “Every ride on the UberX platform in Canada is backed by US$5 million of contingent auto liability insurance covering bodily injury and property damage . . . ridesharing partners are well covered in addition to any insurance coverage maintained by the driver.”
In
City of Toronto v. Uber Canada Inc., Uber sought an interim order sealing its insurance policy pursuant to the Courts of Justice Act. An affidavit sworn by Henry Fulder, insurance director for Uber, stated: “Even within the companies, the policy is shared only on a tightly restricted, need-to-know basis . . . disclosure would cause serious harm.” The affidavit described an “extensive history of negotiations” leading to a policy that is “not a typical ‘off the shelf’ product.”
The court rejected Uber’s application. The terms of Uber’s insurance policy, therefore, are unclear, something that creates a legal quagmire should one of its drivers be in an accident.
The standard Ontario auto insurance policy is clear. As per the general exclusion under s. 1.8.1, except for certain accident benefits coverage, there is no coverage if the automobile is used to carry paying passengers.
In the case of an existing policy where someone starts driving for Uber, the statutory condition in s. 8 applies: “The insured shall promptly notify the insurer or its agent in writing of any change in the risk material to the contract and within the insured’s knowledge.”
Failure to notify the insurer would likely void coverage. A New Brunswick case (
Goodwin v. CGU Insurance Co. of Canada) relieved the insurer from coverage when a cab driver used his personal vehicle to pick up a fare and got into an accident. “Where there has been a violation of a clearly worded exclusion to an automobile insurance policy, there is no coverage available to the insured or to any innocent third party irrespective of the circumstances,” the court wrote.
In Ontario, if an insurer had to honour a claim pursuant to the absolute liability provisions in s. 258 of the Insurance Act, it could seek repayment from the Uber driver personally. The standard owner’s policy states: “We may, on occasion, be required by law to make payments, even though we are not otherwise liable for them under this policy. If so, you or other insured persons will have to reimburse us upon demand for those payments.”
In
Winch v. Kedgh, the defendant drove a loaded cube van and caused an accident. The policy specifically excluded driving a vehicle weighing more than 4,500 kilograms. The Court of Appeal held that his actions “removed a condition precedent to the insuring agreement” and there was “no possibility of indemnity.”
It is, therefore, unlikely that absolute liability would apply to Uber driving given Goodwin. Plaintiffs may claim against their own uninsured coverage or the motor vehicle accident claims fund, but with serious injuries, the $200,000 limits may leave the Uber driver personally on the hook for any shortfall.
The implications, then, are quite serious unless Uber’s policy covers the gaps. Under what circumstances would Uber’s carrier refuse coverage? And if a negligent driver victimizes someone driving for Uber, would the carrier consider the driver to be uninsured? In that case, the driver would be unable to sue the negligent driver due to s. 267.6 of the Insurance Act unless he or she could prove coverage through Uber. These important questions require answers.
Taxi and limousine drivers must accept that competition isn’t going away. Hopefully, the relevant industries and our laws will respond in a timely and useful fashion to this new challenge.
For related content, see "
Uber facing a gamut of legal challenges."
Chella Turnbull, a lawyer practising personal injury litigation at Zuber & Co. LLP, is available at 416-646-3129 or [email protected].
