NCOIL Attempts to Regulate Peer-to-Peer Car Sharing Insurance

New model legislation proposed by the National Conference of Insurance Legislators (NCOIL) aims to regulate the peer-to-peer car sharing industry. Peer-to-peer car sharing will allow individuals to rent another person’s vehicle without the use of a rental car company. This creates an opportunity for vehicle owners to make extra money during the times that the vehicle is not in use. Peer-to-peer car sharing is a growing business, and major companies in the auto industry such as General Motors are now moving into the car sharing space.

States across the country have begun to draft statutes and regulations to try and regulate this growing industry. Thirty-four states have either passed legislation or have proposed bills regulating peer-to-peer programs. Many of these bills address the issue of taxing peer-to-peer car sharing transactions, but others are focused on ensuring that adequate insurance coverage or financial responsibility is maintained throughout the car sharing experience. Most personal auto policies exclude renting or car-sharing vehicles from coverage. Therefore, when the owner of a car allows another individual to use the car through a peer-to-peer car sharing program, any liability that arises would likely not be covered under the owner’s personal auto insurance policy with resulting issues.

To combat the insurance issue, NCOIL’s new model legislation seeks to provide clarity as to what the insurance requirements will be for the three parties involved in a peer-to-peer car sharing transaction:

1. the shared vehicle owner;
2. the shared vehicle driver; and
3. the peer-to-peer car sharing program.

The model act can be broken down into three separate sections. First, definitions are provided to define what constitutes a peer-to-peer car sharing program, along with the applicable periods where insurance coverage is required. The second section outlines the insurance or financial adequacy requirements placed upon the peer-to-peer car sharing program, shared vehicle owner, and shared vehicle driver. Finally, the third section provides consumer disclosures that are required to be made prior to a peer-to-peer car sharing transaction.

The definition section of the model act defines a peer-to-peer car sharing program as a “person or entity that connects vehicle owners with drivers to facilitate the sharing of vehicles for financial consideration. Peer-to-peer car sharing program is not a Transportation Network Company [. . .]” This definition clearly removes both rental car companies and transportation network companies such as Uber or Lyft. This helps specifically identify what types of companies will be affected by the legislation and avoid putting unnecessary regulations on companies who are not the intended subject to this statute.

The model act also identifies the period the legislation will apply. The “car sharing period” is the period that begins with the shared vehicle being delivered to the shared vehicle driver and ends with the expiration of the agreed-upon sharing period or when the vehicle is returned to an agreed-upon location. Any other time will not be covered under this statute.

The second section states the financial responsibility requirements that must be maintained by the parties. Under the proposed law, peer-to-peer car sharing programs will be required to ensure that during the car sharing period, adequate financial responsibility is provided in an amount that is not less than the state’s minimum coverage. Changes to the bill have inserted clarifying language which allows for self-insurance instead of a required insurance policy issued to a peer-to-peer company. If an insurance policy is maintained, this coverage must either:

1. recognize that the vehicle is shared through a peer-to-peer car sharing program; or
2. not exclude the use of a shared vehicle by a shared driver.

Any party to the transaction, or a combination of all three, can obtain this coverage. Many peer-to-peer car sharing programs offer insurance that will provide coverage during the car sharing period. The coverage maintained in accordance with this statute will be primary during the car sharing period.

In the event of a dispute between who was in control of the car and a failure to maintain the adequate records, the peer-to-peer car sharing program will assume primary liability. Additionally, the peer-to-peer car sharing program cannot limit its responsibility by requiring another insurer to deny a claim prior to assuming liability. By including this section, an effort is being made to prevent unnecessary delays in the making of claims payments by the peer-to-peer car sharing program.

The model statute also makes the effort to clarify other insurance issues that may arise out of a peer-to-peer car sharing transaction. First, the statute specifically exempts both the vehicle owner and the peer-to-peer car sharing program from any vicarious liability that may come up under any state or local law. This will help protect both parties in the event the shared car driver causes an accident.

Second, insurers can seek contribution from the peer-to-peer car sharing program if a claim is made against a shared vehicle owner or driver and the policy specifically excludes coverage for a car sharing program. This should help shift the responsibility back to the peer-to-peer car sharing program to ensure that proper coverage is maintained by all participants in the transaction.

Finally, the law grants an insurable interest in the shared vehicle to the peer-to-peer car sharing program during the car sharing period. This specifically grants the program the right to obtain an insurance policy for the car during that time period. Without this, peer-to-peer car sharing programs may run into regulatory issues in obtaining necessary coverage.

The last section outlines consumer protection requirements that must be met by the peer-to-peer car sharing program to ensure fair treatment to the vehicle owner and driver. This includes disclosures that state:

1. Any right the peer-to-peer car sharing program must seek indemnification from the shared vehicle owner or driver for a breach of the terms and conditions;
2. That a motor vehicle liability policy issued to the driver or owner does not provide a defense for any claim asserted by the peer-to-peer car sharing program;
3. That the peer-to-peer car sharing program’s insurance coverage is only in effect during the sharing period;
4. The daily rate, fees, and any insurance or protection costs that are charged to the owner or driver;
5. That the owner’s personal motor vehicle liability insurance may not provide coverage for a shared vehicle; and
6. An emergency telephone number to personnel capable of fielding roadside assistance.

Peer-to-peer car sharing programs are also responsible for determining that the shared vehicle driver possesses a valid driver’s license. States will include these consumer protections to ensure that all parties in the transaction are fully informed of any risks that may arise during the car sharing period.

This model legislation will help to provide a standard form which states can begin to create necessary regulations to the peer-to-peer car sharing industry. These requirements will be a guideline for how states can impose adequate consumer protections without causing unnecessary burdens on growing businesses.