Take Care Before You Share

Of the countless hot button issues surrounding emerging technologies, the “Sharing Economy” seems to be right at the epicenter. Transportation Network Companies (TNCs) such as Uber and short term property rental services like Airbnb have offered efficient and cost effective alternatives to traditional services, resulting in exponential growth in both the adoption and continued use of these platforms. As these technologies become increasingly widespread, more and more people are recognizing the potential for additional income that can be earned by sharing the very assets they use in their day-to-day lives in exchange for a fee. Also an emerging concept is the notion of financing the purchase of an asset (such as a home or vehicle) with the use of that asset itself. As attractive and simple as this additional earning power may seem, the potential pitfalls of what can happen if something goes wrong should not be overlooked.

For example, the standard auto policy in Ontario has a specific exclusion for carrying passengers for compensation. Under section 1.8 “Who and What We Won’t Cover”, it specifically states there is no coverage “if the automobile is used as a taxicab, bus, a sightseeing conveyance or to carry paying passengers.” Should someone use their own vehicle insured under a personal insurance policy to carry passengers as part of an agreement with a TNC, there would be no coverage for any vehicle damage, or bodily injury sustained by anyone inside the vehicle should an accident occur. The ramifications of a potentially uninsured loss are compounded by the fact that the driver may then become the target of litigation from the passenger, since there is no insurance from which to seek recovery for injuries.

Similarly, most standard home insurance policies in Canada exclude different variations of commercial activity taking place on the premises. Some insurers provide coverage for “occasional rentals”, however the definition of this type of activity may vary widely from company to company, and specific coverage may still be limited in its scope. This makes it all the more important to disclose this activity to your insurance company and verify if coverage exists, and what options are available should additional coverage be required.

A number of prominent home and ride-sharing companies have declared that they have large commercial liability policies in place that protect both the end user, as well as their “contracted” service providers. However, the coverage afforded by these policies is not always so straight forward. In many cases, the policies carried by these large companies are “contingent” policies, meaning that they only respond when another policy (e.g. personal auto or home policy) fails to respond. This leaves the potential for significant delays in claim settlements and payouts, as well as gaps in coverage. For example, a typical TNC contingent policy may afford coverage while a driver is carrying or en route to pick up a passenger that has hailed them with a ride-sharing app, but not when driving around awaiting a potential fair. This potentially leaves the driver uninsured during this stage of ride-sharing, as most personal insurers consider the act of driving around awaiting potential passengers a type of commercial vehicle use.

Are coverage options available at a personal level?

Yes – but some are very expensive, and some are very new and undeveloped.

Commercial or Landlord property policies are nothing new to those who make a living renting out dwellings to tenants, however the additional premium that insurers charge for these policies may be cost prohibitive to someone renting out their home on an occasional or short term basis. Similarly, individual commercial vehicle policies, which licensed taxi cabs are mandated to carry, are available to insure drivers who carry passengers for compensation, however these policies are usually several times the going rate of a personal auto policy.

Some insurers are now beginning to offer various coverage endorsements that will allow limited participation in Sharing Economy services. For instance, in early February 2016, Aviva Canada introduced an add-on available on their personal auto policies that protects ride-sharing drivers who perform these services for up to 20 hours per week, subject to certain eligibility criteria. Although this is certainly a step in the right direction, Aviva is one of the few (if only) options available at a personal level, and much is yet to be determined regarding rating and eligibility once the profitability of this coverage is eventually established with more data.

Key Takeaways:

  • The extra earning potential from sharing your home or vehicle is great, but the potential for coverage complications in the event of a loss are even greater
  • Most personal insurance policies exclude sharing economy activities
  • Many TNCs and property sharing communities have “contingent” liability policies to protect end users and “contracted” service providers, but complications still exist as to when coverage is triggered
  • Talk to your broker if you are considering sharing your home or automobile. Coverage options are still developing, and your broker can advise you if any of them make sense