Buckle Up How Uber Lyft Airbnb and Other

“Buckle Up” – How Uber, Lyft, Airbnb, and Other Sharing Economy Companies are Driving an Evolution in Coverage Issues Northeast Ohio RIMS Regional Conference – October 5, 2017 Presented by Heather Harkness, Kristen Peed and Mike Brink Key. Bank name and logo are trademarks of Key. Corp. Opinions expressed are those of the speakers and do not necessarily represent those of Key. Bank. 1

Today’s Goals • Overview of the Sharing Economy’s Rapid Growth and Disruption of the Insurance Industry • Address the Evolving Impact on Auto and Homeowners Policies • Compare the TNC Insurance Compromise Model Bill with Ohio HB 237 • Identify Coverage Issues • Discuss “Hot Topic” Liability Issues and Trends • Q & A 2

Notable Sharing Economy Stats • Uber has roughly 40 million monthly riders and it has provided more than 2 billion rides since its launch. It provides 3 million+ rides each day across nearly 675 cities in 83 countries. • 55% of the U. S. population has access to Uber. • Uber accounted for 6% of all business traveler expenses in 2016. 3

Notable Sharing Economy Stats • Airbnb is on pace for 100 million nights booked through its platform in 2017. • Morgan Stanley predicts that 23% of all bookings this year will be made by business travelers. • Airbnb currently operates in 65, 000+ cities and 191 countries. 4

Drivers of Change for Ridesharing • Population becoming more urbanized • Young people are driving less and choosing not to hold a license • Public transportation is on the rise • Telecommuting is becoming more widespread • Car ownership is expensive • Aging population 5

Moving from Ownership to Use Model • The sharing economy is upending traditional notions of private ownership. • But this new model is shifting risk off of corporate balance sheets and onto the shoulders of individuals who drive for Uber/Lyft or host for Airbnb. • As the sharing economy grows, questions about where legal liability should – or will – fall when a tort occurs become more complicated. 6

Insurers and Companies Will Need to Evolve • Some industry analysts predict that over time each ridesharing vehicle will replace as many as 15 privately-owned vehicles. • Product offerings and marketing targeted to Millennials (Insurers) • Risk management programs/corporate travel policy updates (Employers) • Insurance placements (Employers) 7

The Business Use Exclusion Precludes Coverage for Ridesharing Claims • Personal auto policies contain a business-use exclusion that explicitly forbids the use of one’s personal vehicle for hire, commercial use, or livery. • According to a leaked GEICO memo, employees are instructed to “Please Group Reject the policy” of customers involved in ridesharing. • The largest auto insurers are likely insuring tens of thousands of Uber and Lyft drivers. 8

Ridesharing = Increase in Fraud • Auto policies require the policyholder to give notice of an accident or loss. • This creates a Catch-22 for ridesharing drivers: If they’re in an on-duty accident, they won’t want to tell their personal insurer. But knowledge of an accident is essential to how an insurer calculates premiums and risks for each driver. 9

New Business Use Exclusion 10

The Business Use Exclusion Precludes Coverage for Ridesharing Claims • But what happens if the driver who rear-ends you at the next light is driving for Uber or Lyft? – Will there be insurance to cover your injuries? – The ridesharing driver’s passenger’s injuries? – The ridesharing driver’s injuries? – Damage to the vehicles? 11

Ridesharing Coverage Pre-Model Bill • A personal auto policy is typically suspended for the entire time the ridesharing app is on. • Uber resisted providing coverage for its drivers for nearly 4 years before caving to regulatory and public pressure. Today, both Uber and Lyft provide coverage, but only for the period of time between accepting the ride and dropping off the passenger. This leaves a coverage gap for the period in between rides. 12

When is it a Commercial Vehicle? 13

TNC Insurance Compromise Model Bill Drafted to Address The Coverage Gap • The model bill requires that drivers have state mandated coverage, which typically includes liability and may include UM/UIM coverage, at all times while logged onto the TNC’s platform. • Currently 48 states and the District of Columbia have enacted TNC insurance laws in some form. – Oregon and Vermont have no TNC legislation • Ohio HB 237 became effective on March 23, 2016. 14

Mandated Coverage Under the Bill • Logged in to app but not engaged in prearranged ride (period 1 aka the coverage “gap” period) – primary liability insurance in the amount of $50 K person for bodily injury or death – $100 K per accident for bodily injury or death – $25 K for property damage • En route to picking up a rider and/or engaged in transporting the rider (periods 2 and 3) – primary liability insurance in the amount of $1 M for both bodily injury and property damage 15

Key Features of the Model Bill • Mandatory requirements may be satisfied by either the TNC’s insurance or by the driver’s own insurance. • Importantly, if the TNC driver does not have the required insurance through her personal insurance, then the TNC shall provide the required coverage. • Insurance maintained by the TNC cannot be conditioned on the driver’s insurance company first denying a claim. 16

Additional Key Features • It provides a right of contribution among multiple insurers that provide auto insurance to the same driver in satisfaction of these requirements. – According to one study, 58% of ridesharing drivers are simultaneously logged into the Uber and Lyft aps as they cruise for riders. • It imposes a duty to cooperate upon the TNC in a claims investigation and also requires the TNC to timely exchange information (e. g. , driving log for the insured ridesharing driver) with the insurer. 17

Ohio HB 237 • Does not create an • TNC shall disclose the obligation for an insurer precise times that its to offer, provide, or issue driver logged on and off a policy or endorsement of ridesharing app. that includes coverage for • Requires TNC to conduct TNC activities. a local and national criminal background • In a claims investigation, check, obtain a driving the TNC and any insurer history report, and providing coverage under confirm that the applicant the statute shall fully cooperate in exchanging is not listed on any information. national sex offender registry. 18

Auto Liability Claims Handling • CLAIMS: Initial investigation is extremely important - Driver working for multiple TNCs? (Lyft & Uber app on at the same time) - Was the app on? Passenger in the vehicle? - Multiple passengers? - Permissive user issues? (Was the driver the actual Uber Driver? ) - Was the driver DUI? • SUBROGATION: Insurers should have a statutory right to subrogate TNC’s for claims erroneously paid (insurer did not have knowledge the driver was working for a TNC at the time of loss) 19

Case Study: Death of Sophia Liu • Uber originally denied the claim as the driver had the app on (Period 2) but did not yet have a passenger in the vehicle • Driver charged with vehicular manslaughter • Driver sues Uber (Syed Muzzafar v. Uber) • $500, 000 in medicals and Uber injury coverage only $100, 000 20

Changes To Coverage • • • Can eliminate the business use exclusion Others are written like commercial auto policies But most are structured as supplemental insurance, designed to provide “gap coverage” between the time the driver logs into the TNC network and the time when the ride is accepted. Hybrid Policies? Offer a policy to passengers only (Millenials in NY city who don’t have a car/driver’s license) 21

Implications and Effects on Self. Insured Companies Cons • Blurring of personal & commercial lines as personal assets are used for commercial purposes • Operating within the scope of employment • Vicarious liability Pros 22

New Ridesharing Products • Grange – Provides ridesharing gap coverage in Ohio • Metromile – “Per mile” insurance available to Uber drivers in CA, IL, and WA. A tracking device allows Metromile to track the insured’s Uber rides and to subtract those business miles. • Farmers Insurance Group – The company’s rideshare endorsement extends existing coverage to CA ridesharing drivers during the gap period for an 8% surcharge. 23

Other Policy Coverage Issues • Physical Altercations – San Francisco case involving an Uber driver who attacked a passenger with a hammer. The driver was charged with assault and battery. Do the liabilities intended for car accidents cover physical attacks by a ridesharing driver? – Michael Oher (Carolina Panthers OT, The Blind Side) was charged with assaulting an Uber driver in Nashville in April 2017. • Third-Party Drivers – What happens if a non-ridesharing driver causes or is involved in the accident? Who do you file a claim with? 24

Airbnb/Homesharing Rentals • A typical homeowner’s ISO HO-3 policy is designed around one’s risk profile, not the risk profiles of guests and renters, and is not designed to protect rental or vacation property. • March 1, 2017 ISO HO 06 53 Home-sharing Host Activities Amendatory Endorsement – All property and liability coverage for a home used in a homesharing service is excluded. 25

Airbnb Host Protection Insurance • This program provides primary coverage in the amount of $1 M for Airbnb hosts in the U. S. and, if applicable, their landlords, if a guest is accidentally injured during a stay. • The coverage is excess over any other applicable insurance that will respond to an occurrence (e. g. , ISO HO 06 63 endorsement). If there is no other policy, the policy underlying the Host Protection Insurance will act as primary. 26

Airbnb Host Protection Insurance Coverage Exclusions • Notably, there is no coverage for intentional acts, nor does this policy include a schedule for jewelry, electronics, artwork, or other valuables. • Other coverage exclusions: loss of earnings, personal and advertising injury, fungi/bacteria, Chinese drywall, communicable diseases, acts of terrorism, product liability, pollution, asbestos, lead or silica, or insured v. insured (i. e. , host sues Airbnb or vice versa) 27

Coverage Exclusions Triggered by Homesharing • A typical homeowner’s policy will often exclude property of “roomers, boarders, and tenants. ” – ISO HO 06 53 Homesharing Host Activities Amendatory Endorsement • State laws, local ordinances, and zoning regulations may trigger the illegal/criminal acts exclusions contained in a typical homeowner/renter or policy. • Lease terms and condo/homeowners association restrictions may also implicate the illegal/criminal acts exclusions contained in the typical policy. 28

Airbnb Concerns • Unlike hotels, Airbnb rentals pose safety and health concerns due to a lack of regulation involving fire safety, food hygiene, and insurance. • Schumacher v. Airbnb Inc. , et al. , Case No. 4: 15 -cv -05734 (N. D. Cal. ) – hidden camera 29

Background Checks ≠ Safety • Uber outsources background checks to a third party, but that vendor does not require fingerprints and it does not scan FBI/DOJ databases. – Kalamazoo, Michigan killing spree – One Uber driver, who was previously convicted of second-degree murder and spent 26 years in prison, provided rides to more than 1, 110 Uber customers. – Numerous reports and charges of assault, rape, and kidnapping against female passengers 30

Uber Continues to Morph • Uber. EATS – restaurant food delivery • Uber. RUSH – same-day package delivery “faster than you can imagine” • Uber. HEALTH – free flu shot for up to 10 people with purchase of a $10 wellness pack (potential for privacy violation and negligence claims) 31

Drizly • Company motto: “We demand convenience in all facets of life — shopping for clothes, groceries, furniture. Why should shopping for alcohol be any different? ” • “Drizly brings the liquor store right to your smartphone. By partnering with local retailers, the beverages come to you when and where you want them. ” • Drizly currently operates in 68 markets across the U. S. and Canada (including Akron, Columbus, Cleveland, and Middletown). 32

Q & A 33