Grey Areas in Peer Rental Insurance Begin to Clarify

Les polices d’assurance actuelles sont-elles au pas avec les temps – en particulier, avec l’autopartage en peer-to-peer, de plus en plus populaire?


Liz Fong-Jones joined car sharing program Relay Rides because her car was sitting parked most of the time. An environmentally-minded M.I.T student and one-time Google employee, she saw that by renting it out, she could maximize the car’s use and potentially lessen the number of cars on the road. What she didn’t see was that she was about to become the subject of a debate about insurance and liability in the sharing economy. The man who rented Fong-Jones’s car was found at fault in an accident in which he was killed and four people in the other car were seriously injured. Insurance claims may exceed Relay Rides’ million dollar policy.

Commercial use of a personal vehicle is generally not covered by basic auto insurance and in most places, companies reserve the right to cancel or non-renew customers who rent their vehicles out. California, Washington and Oregon have all passed legislation that specifically prohibits insurance companies from canceling insurance policies and takes liability off of car owners who are car sharing. In states where no legislation has been passed, liability enters a grey area if insurance doesn’t cover car sharing and a claim exceeds the car sharing company’s insurance.

Shelby Clark, CEO and chief community officer of Relay Rides feels that an accident in a car sharing vehicle would be treated like an accident in any other vehicle; that liability would rest on who was at fault. In such a case, when damages exceed coverage, one of two things happens: there’s a settlement for the insurance limit or else they go after the person at fault’s estate, which may result in the claim going unpaid or the creation of a payment plan.

Using a personal car for commercial purposes is nothing new in the insurance world. Pizza delivery businesses and real estate agents do it all the time – the individuals or businesses simply add additional coverage to their policy. What is new is the idea of people renting out their vehicles. Insurance companies don’t prohibit you from renting your vehicle, they just don’t cover it, and they reserve the right to cancel or non-renew insurance policies if a personal vehicle is being rented out.

There is no independent data being collected on this right now, but according to Clark, insurance companies are not canceling or non-renewing policies of customer who rent their personal cars out.

“People are already using their cars for commercial purposes and they’re not canceling insurance policies, mainly because it’s for a risk that they don’t cover,” he says. “Why would you turn away paying customers over a risk that you don’t have exposure to? An insurance company has the right to cancel your insurance policy if you rent out your car, but we think it’s very unlikely that that would happen.”

[…] the insurance arrangement for peer-to-peer car sharing in the U.S. could be much better.

“I think other countries are doing an awesome job working with insurance companies and offering insurance in a much better way than in America,” says Kohli. “In Australia and Europe, are the ones who are providing insurance on behalf of the insurance company. If the car owner wants to rent their vehicle out, they have to buy insurance from the car sharing company on behalf of the insurance company, at a higher price. This way,” he continues, “the insurance companies are more liable to participate because now they’re getting all these cars shifting to their company and they’re getting the higher cost. That is a really good model.”


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Francesca Musiani

Chercheuse postdoctorale, MINES ParisTech Yahoo! Fellow in Residence, Georgetown University

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