COVERAGE CORNER

VEHICLE-SHARING: WHEN YOUR PERSONAL AUTO INSUREDS TAKE ON HERTZ

By Kevin C. Amrhein, CIC, CBIA

Happy New Year! My hope is that by the end of this year everyone will recall 2022 as the year we all felt safe enough to finally get the #%^* out of the house and see the world.

As the travel economy continues to rebound, companies that not long ago were about to tap out are experiencing a lucrative renaissance.

One industry that relies almost solely on a booming travel economy is vehicle-sharing. The concept is simple: you travel to a city and need some wheels. Hertz and the like have supply shortages and/or rising rental costs (in what world does “Economy” equal $169/day?!). You decide to check out a vehicle-sharing app like Turo and voila! Page after page of personally owned vehicles listed for your renting pleasure.

It’s the sharing-economy model: convenience for the renter, income for the owner. But any sharing exposure is not without risk, and when it comes to vehicle-sharing, the risk to the owner is substantial.

If you decide to put your wheels to work for you and become a host on a vehicle-sharing platform like Turo, it’s important to consider what your personal auto insurance has to say about it.

IT SAYS … IN A WORD … YUCK

It’s no surprise that a personal auto insurer takes umbrage when a vehicle underwritten for personal use becomes an income stream for an insured. The ISO Personal Auto Policy (PAP) was never intended to cover an insured’s rental car enterprise and is adequately fortified against this exposure.

Some believe the long-standing language commonly referred to as the “Public or Livery Conveyance” exclusion is far-reaching enough to eliminate coverage in all sections of the vehicle owner’s PAP. To remove any doubt, the 2018 version of the ISO PAP includes language designed to clearly target the personal vehicle-sharing exposure. Here’s language as it appears in Part A – Liability Exclusions (note that this exclusion is not exclusive to Liability – similar language appears in each section of the policy):

Part A –

Liability Coverage, Exclusion A.10:

10. For the ownership, maintenance or use of “your covered auto” while:

a. Enrolled in a personal vehicle sharing program under the terms of a written agreement; and

b. Being used in connection with such personal vehicle sharing program by anyone other than you or any “family member”.

Worth noting is the word “and”. Thus, for this exclusion to kick in, two things must happen. First, the owner must enroll the vehicle so it can be listed on the app as available for rent. Second, the accident must occur while operated by the renter.

OK, MY PAP IS AWOL. I STILL WANT TO GET RICH RENTING OUT MY CAR.

While some personal auto insurers may have coverage solutions available, the ISO does not currently have an endorsement to amend the owner’s PAP to cover vehicle-sharing. The most likely insurance solutions are 1) protection through the app, or 2) commercial auto insurance.

Regarding #1: as an example, Turo advertises both “insurance” and “vehicle protection” as available to owners. “Insurance” refers to liability coverage currently underwritten through its own insurance agency in partnership with Liberty Mutual. According to Turo’s website, liability insurance is included with all protection options at a limit of $750,000 unless specifically stated otherwise. In contrast, “vehicle protection” – which incorporates reimbursement for physical damage and loss of use options – is arranged with Turo directly. Owners are required to choose one of the protection options. The broader the protection option selected, the greater the percentage of the rental fee retained by Turo. For example, Turo currently refers to its broadest protection option as the “60 Plan.” Should the owner select this option, the owner keeps 60% of the rental price.

Regarding #2: should an owner obtain commercial auto insurance underwritten for rental exposure, he/she may reject Turo’s protection options and retain a greater percentage of the rental fee.

It should come as no surprise that both the insurance and vehicle protection plans include extensive terms, conditions, and exceptions which owners should carefully review before renting.

TAKEAWAYS FOR THE AGENT

▲ Vehicle-sharing apps are common. It’s likely that Turo – the space’s largest player – has a presence in your community and that (whether they’ve told you or not) you have personal auto insureds listing a vehicle.

▲ Agents must be cautious when asked to detail an app’s insurance protection. Details of such protection are typically buried in contracts that agents don’t have access to or control.

▲ Agents should clearly communicate that the owner’s PAP will not cover accidents which occur during a rental. That’s all for now. Until the next round … cheers!

Kevin C Amrhein, CIC, is IA&B's education consultant. He works with our CISR and CIC programs, as well as our special topic seminars and live webinars. Catch him at one of our upcoming professional training offerings: IABforME.com