In recent months, controversy over the potential “uninsured” status of drivers for app-based transportation network companies like Uber and Lyft has finally started to settle down. Those two services — the largest, thus far, in this growing field — both have announced that they have secured commercial insurance policies that will cover their drivers from the moment they agree to accept a fare until he or she arrives at his or her final destination.

Such developments, in concert with the adoption of regulatory frameworks covering TNCs by such jurisdictions as Colorado, California, Illinois and the District of Columbia, had seemingly settled what was initially an issue of immense controversy; namely, who would cover ride-sharing drivers and would such coverage be personal or commercial? The major TNCs, having backed off their earlier contention that rides for hire would be covered under drivers’ personal insurance policies, seemingly provided the answer: “We will cover them.” Which is fortunate, as most of the major personal insurers had an answer of their own: “We will not.”

But perhaps that conclusion was a bit too hasty. A lingering issue that has come to the surface in each state that thus far has looked to regulate TNCs is how to treat the period when a driver has an app “on,” but is not in transit with a passenger and has not even agreed to provide a ride. Does driving around with an Uber app on constitute “commercial activity,” as it would with a taxi driver roaming the streets to pick up fares? Or is this more akin to driving with a GPS, which would fall more on the “personal” side of the personal/commercial divide?

This is not just an abstract theoretical, and there are big stakes involved for how courts, regulators, lawmakers and insurers themselves answer the question. If this period (which California Insurance Commissioner Dave Jones has helpfully dubbed “Period 1”) counts as commercial activity, then TNC drivers may be subject to the same heightened standards of care as other professionals, and face consequently greater liability. This is of particular interest if, as some have speculated, the “surge” pricing schemes some TNCs promote might inadvertantly provide incentive for drivers to speed quickly and recklessly to areas of town where fares are most profitable.

States have been split on how to treat Period 1. Thus far, all that have passed TNC frameworks require there be coverage during this period, although the mandatory limits have been significantly lower (matching the general limits required of all drivers on the road) and in Colorado, at least, the TNC isn’t required to provide it. Such confusion opens a potential coverage gap, should both the TNC and the driver’s own personal policy each deny responsibility during the period.

While the personal lines industry as a whole continues to be firm in its contention that it should not be required to provide coverage during Period 1, interestingly, two notable insurers are now stepping forward with products to fill the gap.

USAA was first to market, announcing a pilot product to cover ridesharing drivers in Colorado from the moment they turn on their app until they are matched with a passenger. The product launches in February, and will cost $6 to $8 a month or $40 to $50 for a six-month policy. Farmers followed shortly thereafter, announcing that they would begin offering an optional endorsement to new and existing customers to cover ridesharing, starting Feb. 16. The company estimates the endorsement will add about 25 percent to an insured’s premium.

This is wonderful news, and I hope it won’t be excessive back-patting to say that it’s a development we predicted would happen eventually. It also underscores our primary advice to regulators and lawmakers looking to address this still emerging field — tread lightly.

It’s still very much unclear how these markets will emerge and what shape they will take. Overly prescriptive regulatory regimes risk cementing into place a limited conception of what business models are possible, and locking out competitors who imagine new and better ways of doing things. Focus on how best to identify and address genuine consumer harms, but otherwise, stay out of the way and let the markets figure it out themselves.

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