No Coverage for Independent Rideshare Driver (PA)
Ridesharing is a common and convenient mode of transportation. In 2015, the Pennsylvania General Assembly enacted the “Ridesharing Arrangements Act”, an amendment of a law passed in 1982 designed to encourage ridesharing. Under the Ridesharing Arrangements Act, any “provision in an insurance policy which deny coverage for any motor vehicle used for commercial purposes or as a public or livery conveyance shall not apply to a vehicle used in a ridesharing arrangement.” 55 P.S. § 695.5(a).
Recently, the Superior Court of Pennsylvania considered whether the Ridesharing Arrangements Act voided an auto policy exclusion that precluded coverage to an insured “FOR DAMAGES ARISING OUT OF THE OWNERSHIP, MAINTENANCE, OR USE OF A VEHICLE WHILE IT IS BEING USED TO CARRY PERSONS FOR A CHARGE. This exclusion does not apply to the use of a private passenger car on a share-the-expense basis” (“Auto Exclusion”).
In Harley v. Riders’ Club Cooperation, the Superior Court reaffirmed the trial court’s rationale and holding that the insurer, State Farm Mutual Automobile Insurance Company (“State Farm”), was legally permitted to disclaim coverage because the Ridesharing Arrangements Act did not apply, and therefore, did not void the policy’s Auto Exclusion.
According to the trial court, the defendant, Riders’ Club Cooperation (“Riders’ Club”), is a not-for-profit cooperation providing transportation services to its members. Members of Riders’ Club serve as the drivers. Riders’ Club requires the drivers to enter agreements, which classify them as independent contractors, obligates them to obtain/maintain personal insurance coverage, and requires them to driver their own cars when transporting Riders’ Club members. In exchange for their transportation services, the drivers are entitled to receive 75% of the fee paid for each ride provided.
In September 2015, Paul Butler (“Butler”), a member of Riders’ Club, was contacted by Riders’ Club to drive fellow Riders’ Club member, Erin McDonald (“McDonald”), and her nurse, Dana Harley (“Harley”), to McDonald’s school. While transporting McDonald and Harley, Butler struck the rear of a school bus. Unfortunately, Harley sustained injuries from the accident and ultimately asserted a claim for damages against Butler.
At the time of the accident, Butler was insured by State Farm. In reliance on the above-referenced Auto Exclusion, State Farm disclaimed coverage because “Butler’s vehicle was being used to carry persons for a charge.” Subsequently, Harley initiated a declaratory judgment action arguing that the exclusion was void and unenforceable under the Ridesharing Arrangements Act.
The trial court’s decision hinged on whether Butler’s vehicle was being used in a “ridesharing arrangement” and whether Riders’ Club qualified as “ridesharing operator” at the time of the accident. Ultimately, the trial court held that Butler’s car was not being used in a “ridesharing arrangement” because Riders’ Club did not operate or control Butler’s car. Although Butler was a member of Riders’ Club, he was classified as an independent contractor. Accordingly, as a matter of law, Butler’s actions could not be imputed to Riders’ Club. Riders’ Club’s only role involved contacting Butler to determine his availability to drive McDonald and Harley – Riders’ Club merely instructed Butler as to the time, location, and date for the ride. Moreover, Riders’ Club only collected and distributed paid fees to its drivers and did not dictate routes or speed. In further support of its conclusion, the trial court focused on how Riders’ Club organized its services to avoid potential legal liabilities and other responsibilities flowing from a master-servant relationship in its agreements with the drivers. Without any “ridesharing operator”, a “ridesharing arrangement” did not exist. Accordingly, the Auto Exclusion applied to bar coverage to Butler for the accident.
The concept of ridesharing poses numerous questions about the relationship between operators and drivers and whether policies provide or bar coverage. In this case, all of the parties agreed Butler was an independent contractor. Yet, this begs the question as to whether it would have been the same result if Butler was classified as an agent of Riders’ Club. While many questions remain unanswered, this non-precedential decision provides a glimpse into the potential direction Pennsylvania Courts are taking in the context of rideshare arrangements and insurance coverage.
Thanks to Lauren Berenbaum for her contribution to this post. Please email Vito A. Pinto with any questions.