No Uninsured Motorist Coverage for Rideshare DriverA recent decision involving insurance coverage for a rideshare driver explains the temporal aspect of rideshare policies, which insure drivers during certain phases of the rideshare process. Here a driver sought uninsured motorist coverage under policies issued by James River Insurance Company, an insurer for transportation network company Uber, for injuries she sustained after dropping off a passenger.

James River issued two business auto policies that insured drivers during different stages of the ridesharing process. The “100 policy” insured drivers en route to pick up passengers and while transporting passengers to their destinations, as well as when engaged in different phases of the rideshare process while at airports. The “200 policy” insured drivers not at airports while logged on the Uber platform but before they accepted ride requests. Only the 100 policy provided uninsured motorist coverage.

The driver sought coverage under the 100 policy’s coverage that applied when a driver had logged and recorded acceptance of a ride request and was either en route to pick up passengers or traveling to a passenger’s final destination. The plaintiff rideshare driver was not engaged in either activity. She had dropped off a passenger when she was injured by an object ejected by an oncoming tractor-trailer; the truck did not stop and was never identified, hence leading to the uninsured motorist claim. The 200 policy would have provided coverage if the driver was logged on the Uber platform and available to receive ride requests off of airport premises, but the coverage grants did not include uninsured motorist coverage.

As this opinion illustrates, rideshare insurance policies typically tie insurance coverage to particular stages of the rideshare process. Unlike other business auto policies, which may insure a fleet of autos at all times, these insurance policies insure autos during certain stages of the rideshare process, and do not cover all claims involving a rideshare auto. To avoid needless disputes, insureds and insurers alike should carefully consider the scope of coverage offered in these types of policies when assessing coverage for an auto claim.

Notifying Your Excess Insurers: Don’t Let an Insurer Gamble with Your Company’s Bottom LineInformed insureds know the importance of notifying their primary insurer of an occurrence or a claim. But notice to the primary layer often does not suffice. If the plaintiff’s demand exceeds the limits in the primary insurance policy, an insured should notify the umbrella or excess insurer (and possibly further up the tower than just the first excess layer depending upon the circumstances). And even if the demand doesn’t exceed the primary limits, an insured may need to notify umbrella or excess insurers if certain thresholds are met. An insured’s assessment of potential liability and damages could also require notice above the primary layer – even if the primary insurer defends the case and assesses it as without merit. Don’t be the insured in Landmark American Insurance Company v. Deerfield Construction, where a primary insurer’s gambling spirit led to notice seven years late, on the eve of trial, and cost an insured more than a million dollars. The insured, Deerfield Construction, and not the excess insurer, Landmark, absorbed the loss above the $1 million primary layer in in a decision affirming summary judgment in Landmark’s favor.

To reach its conclusion, the appellate court applied Illinois’ five-factor test, which considers the policy language, the insured’s sophistication in commerce and insurance, the insured’s awareness of a triggering event, the insured’s diligence in ascertaining coverage, and prejudice to the insurer. In siding with Landmark, the court also considered the total picture:

When considering the totality of the circumstances, at some point common sense comes into play. Landmark did not receive notice until seven years after [the] accident. This was not a case of a slowly developing tort, where the parties could identify the genesis of the injury only years after the harmful activity occurred. This was an automobile accident.  Deerfield could have emailed, mailed a letter, or perhaps just have called Landmark to tell it about the accident as soon as it occurred . . . or it could have taken any of those steps when it was served with [the underlying] lawsuit. But it did not. The conclusion is irresistible that Deerfield’s notice was untimely and unreasonable as a matter of law.

In language that every insured hopes never to see, the court concludes that “some cases are not close, and this is one of them. Waiting five to seven years before telling an insurance company that its policy may be implicated in a suit is too long.”

So how does an insured avoid this situation? First, know your notice obligations under your primary, umbrella, and excess layer policies. And then comply with them. But what if the primary insurer believes the case can resolve within the primary limits, as did the primary insurer here? The primary insurer, American States, assumed Deerfield’s defense, and assessed the case as lacking merit. Even when the underlying plaintiff made an excess limits demand of $1.25 million, sufficient to reach Landmark’s policy, neither American States nor Deerfield notified Landmark.  Landmark learned about the case only six weeks before trial, and Landmark’s monitoring of the settlement negotiations and subsequent trial did not remedy that late notice. So if the primary insurer and even its counsel dismiss a case as non-meritorious, carefully consider the impact on your company’s finances before deferring notice. The court recognized American States’ “gambler’s spirit,” but the primary insurer gambled with Deerfield’s bottom line, not its own. The court also rejected Deerfield’s efforts to recover from American States, the broker, and defense counsel, leaving those disputes for another court and another day. And even if Deerfield recovers some portion of its loss from one or more of those entities, the cost and time involved will erode the value recovered. So, in most circumstances (granted not all), prompt and generous notice is the safest path forward for an insured. Don’t gamble with notice, or your company could be the one to pay.

The Wait for NFIP Reform ContinuesFor the 11th time in the last two years, the House has passed yet another short-term extension of the National Flood Insurance Program (NFIP). The NFIP remains the largest source of flood coverage in the U.S.; this extension through September 30, 2019, ensures that the program does not lapse during hurricane season.

The NFIP makes federally subsidized flood insurance available in special flood hazard areas for participating communities. NFIP policies can be purchased directly from the government or from private insurers through the “Write Your Own” program.  Many commercial policyholders rely on the NFIP to provide primary-level coverage for up to $500,000 for a commercial building, and up to an additional $500,000 for certain types of personal property. These single peril policies cover direct physical damage caused by flood based on the property’s actual cash value. NFIP does not provide business interruption coverage for lost profits due to a shutdown of an insured’s operations.

U.S. Rep. Maxine Waters (D-Calif.), chair of the House Committee on Financial Services, and U.S. Rep. Patrick McHenry (R-N.C.) proposed the most recent extension. They seek additional time to reach a bipartisan compromise that will end the short-term extensions. A bipartisan group of senators also recently wrote a letter to Chairman Mike Crapo (R-Idaho) and Ranking Member Sherrod Brown (D-Ohio) urging the Senate Banking Committee to reauthorize the NFIP and address the issues that have been pushed down the road with every temporary extension.

As now structured, the NFIP cannot cover the cost of flood losses, which have dramatically increased since the early 2000s. Stakeholders acknowledge the necessity of reform, but the timing and scope of that reform requires consensus between the political parties and states with competing interests based on their flood exposure. The clock starts ticking now.