Ridesharing has officially arrived in New York, and confusion over New York no-fault insurance and PIP Loss Transfer arrived with it. On June 29, 2017, the New York State Assembly approved, and Governor Andrew Cuomo signed, the state’s $153 billion budget, which included changes in state law providing for ridesharing and starting a rule-making process that will allow rideshare companies to expand statewide—and expand they did. Prior to the passage of the law, people wanting a ride were limited to calling a livery operator or a service regulated by a local Taxi and Limousine Commission. With the passage of its 2018 fiscal budget, New York has amended its ridesharing (a/k/a, “ride-hailing”, “ride-sourcing”, or “e-dispatch”) laws to provide that Uber and Lyft driver-partners are covered by Uber’s group ridesharing insurance while connected to the Digital Network. Rideshare insurance has evolved to meet the modern world of insurance coverage. Prior to this, Uber, Lyft, and other ride-hailing apps had to operate in New York City under the city’s rules for livery taxis.
Rideshare companies like Uber and Lyft are also known as TNC companies. TNC stands for “Transportation Network Company”, a term defined in a recently enacted part of the State Vehicle & Traffic Law. A TNC, sometimes known as a Mobility Service Provider (MSP), is an organization that pairs passengers via websites and mobile apps with drivers who provide such services, using their personal, non-commercial vehicles. TNCs cannot accept a street-hail. Payment must be through the app and drivers accepting cash from a passenger for a ride is considered illegal.” Law enforcement are operating stings to catch unaware drivers and fines can be as much as $2,000. Interestingly, the new legislation itself excluded New York City, which means a TNC must still be authorized by the New York City Taxi & Limousine Commission to operate in New York City.
The TNC insurance coverage rules are intuitive. While New York Uber drivers are online via the Uber app waiting for a rideshare request, they are covered by Uber’s liability insurance policy, providing indemnity for liability to third persons if they are at fault in an accident. Coverage minimum limits are $50,000 per person/$100,000 per accident, with $25,000 in property damage liability per accident. They are also covered by Personal Injury Protection (PIP) (no-fault) at $50,000, as well as UM/UIM coverage at $25,000/$50,000.
While New York Uber drivers—contacted via the Uber app—are driving to pick up a rider, but before the rider gets into their vehicles, they are covered by third-party liability coverage at minimum limits of $1.25 million, UM/UIM motorist coverage of $1.25 million, PIP (no-fault) of $50,000, and contingent collision and comprehensive coverage, provided the driver maintains auto insurance that includes collision coverage for that vehicle while not on an Uber trip. Once a rider is picked up, the Uber driver has the same coverage in those amounts as when driving to pick up the rider, plus the rider is covered once he or she enters the vehicle. When driving the vehicle for personal use, not connected to the Digital Network, no coverage is provided by Uber. Lyft provides similar insurance, with slightly different limits.
PIP no-fault benefits are available to the Uber driver and passenger as set forth above before and after a rider is picked up. New York’s no-fault scheme, contained in Article 51 of its Consolidated Laws (Comprehensive Motor Vehicle Insurance Reparations), requires vehicle owners to carry insurance with $50,000 minimum limits that covers basic economic loss, i.e., first-party benefits, because of personal injury arising from the use or operation of a motor vehicle. Basic economic loss includes, among other things: (1) medical expenses; (2) lost earnings up to $2,000 per month for three years; and (3) out-of-pocket expenses up to $25 per day for one year. N.Y. Ins. Law § 5102(a).
Third-party tort claims are limited by New York’s no-fault laws, and a PIP carrier who has paid benefits to a driver or passenger has no traditional subrogation rights. If both vehicles involved in an accident involve “covered persons” they cannot sue each other in tort for losses that should be covered by PIP no-fault benefits. However, if either one of the motor vehicles involved (1) weighs more than 6,500 lbs. unloaded, or (2) is used principally for the transportation of persons (e.g., taxi, bus) or property for hire (e.g., FedEx, delivery truck), a PIP carrier is free to pursue a loss transfer against the negligent motorist’s vehicle insurer for the recovery of the $50,000 first-party benefits it became obligated to pay under § 5102(b)(2). N.Y. Ins. Law § 5105(a). Loss transfer must be pursued through arbitration, and the vehicle meeting the livery condition need not be the negligent vehicle to trigger the loss transfer exception.
Loss transfer is an opportunity for a PIP carrier to recover from the negligent motorist’s insurer the first-party benefits it paid because of an accident. Unfortunately, when PIP benefits are paid to an Uber driver or rider, there has been significant confusion regarding whether loss transfer would be allowed. The biggest issue was whether one of the motor vehicles involved was “used principally for the transportation of persons or property for hire”? There can be no question that a TNC vehicle is a vehicle used for the transportation of persons for hire. Whether such a private vehicle is used “principally” for this purpose is another issue.
Argument That Uber Vehicle Must Be “Principally” Used For Livery
On one hand, a liability carrier may argue that an Uber vehicle is not used “principally” for hauling riders – most of the time it is used as a personal vehicle. Therefore, loss transfer is neither available or appropriate. In In re Philadelphia Ins. Co., 948 N.Y.S.2d 501 (N.Y. App. 2012), the court said there is a paucity of decisions interpreting the phrase “for hire” in the loss transfer context. It admitted that the statute is “inartfully drafted” and does not limit the universe of vehicles to which it applies only to “taxis and buses, and livery vehicles.” That case dealt with a minivan, and the evidence established that the minivan owner was not in the business of transporting members of the public for compensation. The court said the term “vehicle for hire” is commonly understood and defined in other contexts as a vehicle held out to the public for the provision of transportation services in exchange for a fee. The court also noted that the phrase “used principally for the transportation of persons or property for hire” typically refers to vehicles operated by drivers who are required to have a certification or license, and are subject to specialized licensing, insurance, safety, and other requirements. However, there is little to guide us on what the term “principally” means.
In a New York County trial court order, the court – reviewing a finding of an arbitrator that loss transfer applied, looked at the sufficiency of evidence that a vehicle was “a motor vehicle used principally for the transportation of persons or property for hire.” The arbitrator found evidentiary support that the vehicle was registered or used as a livery for hire. However, the Supreme Court said the vehicle had to be “principally” used as a vehicle for hire. DTG Operations, Inc. v. AutoOne Ins. Co., 2014 WL 4743462 (N.Y. Sup. 2014). The court determined that there was sufficient evidentiary support for the arbitrator’s finding that it was “principally” used for livery, based on the examination under oath submitted by the PIP insurer. While the other side argued that such testimony did not show that the vehicle was “principally” used for hire or livery, the PIP carrier submitted documentary evidence showing that the vehicle was registered as “Livery Use” in 2006, 2007, 2008, 2009, and 2011, and in 2010 until five days before the accident. It upheld the arbitrator’s decision, stating that “it cannot be said that the arbitrator’s determination as to the livery use of the vehicle was ‘arbitrary and capricious or unsupported by any reasonable hypothesis’.”
In a 2008 case, a minivan registered as a passenger vehicle and bearing livery license plates belonging to a commercial vehicle, was being used to transport wheelchair passengers for a company engaged in the business of such transportation. Progressive Northeastern Ins. Co v. New York State Ins. Fund, 870 N.Y.S.2d 478 (N.Y. Sup. 2008). Vacating the arbitration award allowing loss transfer, the Court found the record devoid of evidence establishing that the principal use of the minivan was as a “vehicle for hire.” The Court concluded that simply finding that vehicle was being used “at the time” as a vehicle for hire, was inadequate to support the award and “in disregard of the standard prescribed by the legislature.”
Determining what “principally” means could be a task of monumental proportions. Is it determined based on total hours driven, distance driven, or something else? Does the portion of time that a person is looking to be hired with the app on, but without a paying rider, count toward the “livery” time or the “non-livery” time?
Therefore, as the argument goes, the vehicle must be shown to be used primarily as a livery vehicle and not simply on the date of the accident. If the vehicle is registered as a regular passenger vehicle but was used as a livery vehicle on the date of loss, that should be taken into consideration when applying for loss transfer.
Argument That Uber Vehicle Need Not Be “Principally” Used For Livery
On the other hand, it could be argued that the defining characteristic of a TNC vehicle changes once the Uber app is activated and the vehicle is actively operating as a vehicle for hire. Therefore, when a vehicle is operating with the app on, or is transporting a rider, it transforms into a vehicle which primarily is one of livery. Section 5105 was drafted at a time when taxi cabs and livery vehicles for hire were highly-regulated and easily-identified. According to Lawrence Fuchsery, Principal Attorney at the New York Department of Insurance, the perplexing issue of Loss Transfer Arbitration and ride-sharing apps had been under review and we were all waiting on some direction. That direction came on April 12, 2019.
New York Department of Financial Services Circular Letter No. 4
On April 12, 2019, the New York Department of Financial Services issued “Insurance Circular Letter No. 4.” The letter addressed TNC vehicles and the application of Insurance Law § 5105 (the “intercompany loss transfer provisions”) to Uber, Lyft, and other TNC companies. Part AAA of Chapter 59 of the Law of 2017 added a new VTL Article 44-B to govern the operations of TNC vehicles. VTL Article 44-B applies to a TNC vehicle while the TNC driver is: (1) logged onto the TNC’s digital network; or (2) engaged in a TNC prearranged trip as those terms are defined in VTL § 1691.
Circular Letter No. 4 finally addressed the question of whether a TNC vehicle is a vehicle used principally for the transportation of persons for hire under Insurance Law § 5105. It opined that an insurer should not invoke the intercompany loss transfer provisions under Insurance Law § 5105 solely based on one of the vehicles being a TNC vehicle.
The Department believes that the Legislature intended to exempt TNC vehicles from the intercompany loss transfer provisions under Insurance Law § 5105. The definition of “TNC vehicle”, as set forth in VTL § 1691, specifically excludes a taxicab, livery vehicle, black car, limousine, luxury limousine, and a for-hire vehicle. VTL § 1692(1) further states that neither a TNC nor a TNC driver shall be deemed to provide taxicab or for-hire vehicle service while operating as a TNC or TNC driver pursuant to Article 44-B. In addition, Part AAA of Chapter 59 exempted TNC vehicles from many of the laws that generally apply to for-hire vehicles and subjected TNC vehicles to new requirements under new VTL Article 44-B and amendments to the Insurance Law and other laws. For example, Part AAA amended the Insurance Law to prohibit the use of a vehicle as a TNC vehicle from being considered when determining whether the vehicle is being used predominantly for non-business purposes under Insurance Law § 3425.
For these reasons, the letter says that a no-fault insurer or compensation carrier may not invoke the intercompany loss transfer provisions under Insurance Law § 5105 solely based on one of the vehicles being a TNC vehicle, because a TNC vehicle is not a “for-hire” vehicle under VTL §§ 1691 and 1692 and, therefore, is not “a vehicle used principally for the transportation of persons for hire” within the meaning of Insurance Law § 5105. However, it should be noted that trips originating in New York City or any county or city that enacts a local law pursuant to General Municipal Law § 182 remain subject to all the laws that generally apply to for-hire vehicles and remain subject to the intercompany loss transfer provisions of Insurance Law § 5105. Therefore, the only issue that the Circular Letter addresses is whether the simple fact that one of the vehicles is under dispatch to a TNC is a factor to be used in evaluating whether Loss Transfer is available under § 5105. The Circular Letter concludes that it is not. When evaluating whether or not Loss Transfer is available, you address whatever facts there are other than the vehicle is under dispatch to a TNC. In other words, simply being under dispatch to a TNC alone does not trigger Loss Transfer. As the Circular Letter says, “trips originating in New York City or any county or city that enacts a local law pursuant to General Municipal Law § 182 remain subject to all the laws that generally apply to for-hire vehicles and remain subject to the intercompany loss transfer provisions of Insurance Law § 5105.”
A copy of Circular Letter No. 4, authored by General Counsel Nathanial Dorfman, can be viewed HERE. For a complete chart on Med Pay and PIP insurance subrogation laws in all 50 states, see HERE. For any questions on automobile insurance subrogation, contact Gary Wickert at email@example.com.