100,000 Uninsured Rides and Counting: In Good Hands with Lyft and Sidecar?

No matter what you may think of insurance companies, they are the best b.s. detectors in contemporary culture - out of necessity. Millions, if not billions, of their dollars depend upon the precise definition of words.

When I applied for positions as a "community driver" at Lyft and Sidecar, representatives of both companies told me that I didn't need commercial insurance because they were "not commercial enterprises." I called ten top rated insurance companies and asked them if they agreed with this statement. Not one of them did.

Progressive and All State would consider insuring my car as a business or commercial risk if I drove for Lyft or Sidecar. Geico, State Farm would not insure the car at all if I did so.

While it's true that auto insurance companies are required to cover a "vehicle used in an ordinary carpool on a ridesharing or cost sharing basis," none of the insurers I spoke with consider what Lyft and Sidecar do as ridesharing.

My Geico representative described ridesharing as "people sharing a ride back and forth to work or to an event or to the same location." The cost of the ride should be shared equally by passengers and driver. If the driver made a profit on the ride, it did not make any difference to her if you called the payment a "fee" or a "voluntary donation." A USAA rep simply said that he would not cover a car if it "transported individuals."

In comments to the California Public Utilities Commission, the Personal Insurance Federation of CA, which represents six of the largest insurance companies in the U.S. and who collectively insure the majority of personal lines auto insurance in California, explained the position of its members on the subject:

"It appears that the industry standard for personal auto insurance ... is to exempt from insurance coverage claims involving vehicles used for transporting passengers for a charge. Thus, in situations where a vehicle is insured as a private vehicle and is used to transport passengers for a fee, no insurance coverage would exist."

 " ... The issue before the CPUC is not ridesharing, but instead using a private passenger vehicle in a livery service. This is clearly NOT covered under a standard policy; if an accident occurs, coverage would NOT exist." (My capitalization.)

In short, the information that Lyft and Sidecar are giving their drivers and customers is false. If the vehicles using their apps do not have business or commercial insurance they are not insured and neither the drivers or the customers are covered if they are hurt in an accident.

What Million Dollar Guarantee?

Journalists have consistently missed the point about Lyft's and Sidecar's lack of insurance. But on September 4, 2012, reporter Zusha Elinson from the online paper, The Bay Citizen, wrote an article contrasting the low limits ($15,000-$30,000) of personal liability insurance to the $1,000,000 liability limits required of San Francisco taxicabs.

On September 6, 2012, Lyft and Sidecar announced that they too would provide their drivers with $1,000,000 liability insurance.


Lyft said that they would carry "excess liability per occurrence with an A++ insurer."

Sidecar offered a guarantee instead of insurance.

"The Guarantee provides for up to $1,000,000 in damages for covered losses in the event of an incident. These payments are subject to certain conditions, limitations and exclusion, the details of which can be found in our Program Terms available from Sidecar upon request."

"The Guarantee is not insurance and should not be considered as a replacement or stand-in for primary automobile insurance. The Guarantee does not cover certain excluded losses."

Both these policies (or whatever they are) would be what are often called umbrella policies because they would go into effect above the limits of the vehicle's existing insurance. If, for instance, an injured party was awarded $100,000, the driver's policy might cover the first $30,000 and the umbrella would cover the remaining $70,000.

Since few, if any, of Lyft and Sidecar's vehicles would actually be covered with "existing insurance" per state law, this raises a few interesting questions:

If a Lyft or Sidecar driver does not have the required commercial insurance and thus has no insurance, would the umbrella, the excess liability or the Guarantee, take effect at all? If they did, the driver would still be responsible for the first $30,000 or so in a bodily injury accident. If the umbrella did not take effect then the driver would be responsible for everything.

Given that people who use their own cars to make extra money aren't likely to have $30,000 handy, both the "excess liability" policy and the "Guarantee" are meaningless PR gimmicks.

Tracking down the Million Dollar Promises

During my three minute interview at Lyft, I asked their rep what A++ insurer provided the policy and if I could get a look at it. She told me with annoyance that no one had ever asked her that question before. I then asked her if she'd read the policy. My question clearly struck her as impertinent. "No," she snapped. "You can get it from the CEO."

This turned out to be a problem because Lyft's Facebook page showed no link to CEO John Zimmer. I did find a Facebook post from a speech he gave on transportation and asked my questions as a comment. When I checked back later, both Zimmer's post and my questions had disappeared.

I then wrote to Lyft and once again asked the name of the insurer and if there were any conditions or exclusions.

The next day I received this response from Lyft Admin:

"We appreciate the time you've taken to explore the Lyft community. We approve drivers through an ongoing assessment of several criteria including customer service orientation. At this time, we are adding you to our wait list and may contact you in the future as the community expands."

I'm still waiting for the name of that A++ insurer.

I found Sidecar's Guarantee on their webpage, clicked a link and asked to see the details of their conditions, limitations and exclusions.

I didn't get answer so I asked the same questions during orientation at Sidecar U three days later. The instructor referred me to Sidecar City Manager Chris Dally who gave me his card and assured me that he could answer my questions.

I called him the next day and asked about the exclusions.

"I'm not too familiar with what exclusion you're talking about," Mr. Dally said.  "... It is a little bit of legal speak in there ... It's pretty standard for terms and agreements and things like that ... The things I point you to are the terms of usage ... We'll let you know ... So I want to make sure you're feeling comfortable and again no driver should be doing this if they feel uncomfortable ..."

I asked if the Guarantee was an insurance policy.

"It's a guarantee," he said.

"Who guarantees it?

"It's a guarantee."

I followed up with an e-mail asking about the exclusions the next day.

Dally wrote back giving me the original support link where I'd started.

I tried it again. This time a guy name Max wrote back, also referring me to the original link and added:

 "I have forwarded this to our legal team to get more information for you regarding the Program Terms. You should hear back from us soon."

I'm still waiting.

Conclusion

The CPUC claims to have looked at Lyft's million dollar insurance policy and signed off on it - whatever that means. But CPUC apparently is not sharing this policy with anyone else at this time. In any case, as I've pointed out above, the policy is meaningless unless Lyft's drivers are already covered by commercial insurance.

The link to Sidecar's million dollar Guarantee can no longer be found on either the Sidecar webpage or their blog. This is appropriate because the "Guarantee" clearly never truly existed in the first place.

100,000 Uninsured Rides and Counting: If it looks like a duck and walks like a duck, will it bark if you call it a dog?

"The great enemy of clear language is insincerity," George Orwell.

Both Lyft and Sidcar have founded their businesses on the deliberate misuse and perversion of ordinary words. To understand how this works, first look at what the companies are actually doing, then look at what they say they are doing.

A passenger used a Lyft or Sidecar app to hail a driver. The driver accepts the ride, picks the person up and drives him or her to a location. The passenger pays a fee based on time and distance.  The driver gets paid 80% of the fee and the company keeps 20%. Both the company and the driver make a profit from the transactions.

In all fundamental ways, then, the services that Lyft and Sidecar provide work exactly like a taxicab, except for the fact that San Francisco taxis are legal, the drivers are trained and their vehicles are insured.

Lyft and Sidecar, however, claim that by calling customer's payment a "voluntary donation," a driver a "community driver" and a customer "member of the Lyft or Sidecar community" the experience is somehow legally different. But, what really changes? Nothing. As Tech Crunch writer Ryan Lawler put it in an article on Lyft,

"... the drivers aren't licensed ... and some would argue that the service isn't legal at all. It circumvents that with the 'donation' bit, but there's a kind of an understanding that if you don't give a donation you'll be rated poorly and maybe you'll have a hard time getting rides in the future."

Chris, the Lyft representative who interviewed me for a driving position, assured me that only one passenger in twenty thousand fails to pay. He added that, if a passenger didn't pay, Lyft drivers would never have to pick that person up again. A friend of mine tested the voluntary nature of the donation and did not pay two different Lyft drivers. Now she can no longer get a ride if she uses Lyft's app to hail one of their illegal cabs.

During a driver orientation at "Sidecar U," the instructor told me that more than 99% of all customers "donate." If they don't, Sidecar calls them up to ask, "What Happened?" Sort of like donating to the mafia, no?"

The instructor at Sidecar U also presented an arcane standard for profitability. She argued that the driver using their app is not considered to have made a profit until his or her car has covered the costs of one year’s worth of gas, maintenance and depreciation. Since every car and driver is different, this standard would be hard, if not impossible, to apply uniformly. The costs would increase with usage so the more drivers worked, the longer it would take to cover their car’s expenses. Does this means that the more they worked, the less they would make? I didn’t quite get it myself.

In order to avoid regulations, Sidecar and Lyft claim that their drivers are not their drivers and, in any case, their drivers don’t make a profit—despite the fact that making a profit is the very reason why people are turning their personal cars into taxis. 

Both companies even advertise that you can make money driving for them.

The Sidecar website says, “Make money with your car. Sidecar lets verified drivers make money giving people rides around town.” A Lyft ad says, “Make $22/hr and have fun driving your own car in SF.”

Politicians call this “wink wink nudge nudge.” Everybody knows that both companies and their drivers are making a profit. Everybody knows that the donation is a fare that needs to be paid. Everybody understands that the companies are speaking with forked tongues in order to circumvent taxicab and insurance regulations. The Lyft and Sidecar communities think this is awesome. All they are doing is breaking a few antiquated rules. It may be too bad for a few old-school cab drivers but it’s really cool for everyone else.

Or is it?

100,000 Uninsured Rides and Counting: Undercover at Lyft and Sidecar

Lyft (photo shows phone salespeople recruiting drivers at Lyft headquarters) and Sidecar are venture capital startups that advertise themselves as car-pooling services that use smart-phone apps to connect people who need rides with drivers in the community “who have extra space in their cars.”

Both companies claim to do intensive evaluations of drivers, including criminal background checks and thorough inspections of the vehicles that provide transportation services through their apps. They also tell their drivers that their cars "do not need to be covered by commercial liability insurance.”

I decided to check out their hype because I’m the ideal person to do so. I’ve been an insurance underwriter, a driving instructor, a blogger, and I’ve logged over a million miles as a cab driver. My research included talking to representatives from the top ten rated insurance companies, interviewing people who have been Lyft or Sidecar drivers or customers, and applying for a driving position at the two companies. Both Lyft and Sidecar initially approved me but later changed their minds when I started asking them detailed questions about their contracts and insurance.

What I learned was that almost every claim that they make is either misleading or false. Their interviewing process is a joke. They don’t ask for social security numbers and they don’t fingerprint the applicants so they can’t be conducting criminal background checks. Nor do these companies make mechanical inspections of the cars. In the case of Sidecar, they don’t even look at the vehicle. Most importantly, insurance companies consider neither Lyft"s or Sidecar's ridesharing services so their cars are required to carry commercial insurance. Since most of their cars don’t, they are uninsured vehicles.

In reality then, Lyft and Sidecar are illegal transportation for hire services that use double-talk to exploit the underemployed, and subvert laws and regulations designed to protect drivers, passengers and the public. Furthermore, when drivers and passengers accept the terms of service necessary to download their apps, they waive their rights to sue Lyft or Sidecar in perpetuity. Their passengers also agree to come to the legal defense (at their own expense) of Lyft or sidecar if the companies are sued for negligence.

If you were to be a car, what kind of car would you be and why?

I've had many careers in my life but my interviews at these companies marked the first times that I've ever applied for a job and not been asked what skills or experience qualified me to do the work.

Sidecar conducted an online video interview with me. The most profound question they asked was:

If you were to be a car, what kind of car would you be? And why?”

The other Sidecar questions were:

“Who are you and why would you make an awesome Sidecar community driver?” 

“Where are some of your favorite places to hang out and why?”

“How did you hear about us?”

During a phone interview, Lyft representative Chris did ask me if I’d ever had a DUI or a criminal record. He then returned to in-depth community ridesharing form to finish up with:

“How would your friends describe your personality?”

“Do you smoke in your car?”

“For a more important question, who would you most want to ride in your car for ten minutes?”

Both companies did check to see if my driver’s license was valid and my auto insurance was up to date. They also looked at my vehicle ownership card. Neither company fingerprinted me or asked for my social security number - necessities for doing a criminal background check.

I had an “in person” interview at Lyft that lasted three minutes. There was no training session. An interviewer/inspector, who looked more like a fashionista then a mechanic, glanced at my car. She sat in the front seat to see if it was clean and made sure that the lights and turn signals worked before taking my photograph standing next to the car. She did not drive the car or ride in it, check the tires, check the VIN #, open the hood, look under the car or do any kind of mechanical inspection.

There was no “in person” interview at Sidecar. Instead, I attended Sidecar U for an hour and a half where most of the time was devoted to explaining how to use the app and noting the best times to drive. The fact that Sidecar was not liable for auto insurance was briefly mentioned and driving safely was encouraged. The instructor proudly told us that Sidecar now had over five hundred vehicles in San Francisco.

I was told to upload a photo (left) of my car to their website where they must have done the mechanical inspection because they certainly didn’t do so in person.

On the basis of these intensive interviews, I was approved along with three other divers at Lyft and with eighteen others at Sidecar.

Next: If it looks like a duck and walks like a duck, will it bark if you call it a dog?  The art of double-talk and a look at Lyft's and Sidecar's insurance, or lack thereof.