Bridging the Gap: Ohio Taps the Breaks on Ride-Sharing Service Companies
By: Acacia M. Perko
March 2017 - On March 23, 2016, Ohio's House Bill 237 governing ride-sharing service companies took effect. Now coined Transportation Network Companies (“TNC”), these companies generally provide their drivers with insurance coverage from the time they accept a customer’s ride request to the time that customer exits the driver’s vehicle. However, drivers are not covered by either the TNCs commercial insurance or their personal insurance while they are logged into the TNC’s network and awaiting a customer’s ride request. Now, fourteen newly enacted statutes and an amendment to Revised Code Section 4509.103 bridge this “gap” period and impose new regulations on TNCs and their drivers. First, the new law mandates minimum coverage and requires TNCs to defend claims. Second, TNCs must obtain a permit to conduct business in Ohio and must require their drivers abide by zero-tolerance drug and alcohol provisions. Third, TNC drivers are specifically excluded from classification as “employees” under existing minimum wage laws, workers’ compensation, and unemployment laws. We expect the statute to impact insurance companies, TNCs and TNC drivers across the board and increase coverage litigation in the ride-share industry.
Under the new law, TNC drivers must maintain minimum coverage during the “gap” period in the amount of $50,000 for bodily injury or death of a person, $100,000 for bodily injury or death of two or more persons, and $25,000 for property damage. They must also maintain minimum coverage of $1 Million, for bodily injury or death of one or more persons and property damage, from the point they accept a customer’s ride request to the point when that customer exits the TNC driver’s vehicle. TNC drivers must carry and provide proof of this minimum coverage to persons involved in an accident or law enforcement. Notably, the minimum coverage may be satisfied by either a policy maintained by the TNC driver personally, a policy maintained by the TNC, or a combination of both.
Additionally, the new law requires TNCs to pay and defend all claims in the event a TNC driver fails to maintain the necessary coverage. TNCs are precluded from requiring a driver’s private insurer to first deny coverage before providing coverage itself. In fact, the new law specifically permits private automobile insurance providers to exclude “any and all coverage afforded . . . for any loss or injury that occurs while a [TNC] driver is logged on to the [TNC’s] digital network or while the driver is providing [TNC] services.” Should a coverage dispute arise, TNCs and private automobile insurance providers will exchange information regarding the precise time when a driver logged on and off of the TNC’s digital network in the hours before and after an accident to determine claim coverage.
In order to conduct business in Ohio, TNCs must obtain permits with the Ohio Public Utilities Commission. TNCs must also disclose: (1) how fares are calculated; (2) TNC rates; (3) estimated fares; and (4) photographs of drivers and the driver’s license plate. TNCs are also required to (1) prominently display the TNC’s name on the vehicle providing the service; (2) provide customers with a receipt following service; (3) provide proof of insurance; and (4) conduct background checks on all prospective drivers. Further, TNCs must prohibit TNC drivers from consuming any alcohol or drug of abuse, not including prescribed medications, while transporting passengers or even while logged on to the TNC digital network.
While recent court decisions in at least one state have classified TNC drivers as employees, Section 4925.10 expressly classifies TNC drivers as non-employees, unless agreed otherwise by contract, for purposes of Ohio laws regarding minimum fair wage standards, workers’ compensation, unemployment, semimonthly payment of wages, and whistle blower protection. Because TNC drivers are not employees for purposes of these code sections, TNC drivers will not be afforded the protection and benefits under those laws as employees unless a written contract classifies them differently.
In sum, insurance companies, TNCs, and TNC drivers should expect:
- Changes in private and commercial insurance policies addressing coverage for TNC drivers;
- Potentially higher insurance premium rates for additional coverage;
- Increased scrutiny of written contracts between TNCs and their drivers;
- Increased scrutiny of TNCs actions and actions of their drivers; and
- Increased coverage litigation in the ride-sharing industry.
If you have questions about this amendment to Ohio Revised Code 4509.103 and the new code sections, would like a copy of it, or have a general insurance or business question, do not hesitate to contact a member of our General Casualty/Excess & Surplus Insurance Group.