It used to go without saying that you’re playing with fire when you lend your car to other people. In anyone’s circle of friends and family, there travels at least one cautionary tale about wanton car lending, passed down from generation to generation.
“I lent my car to a friend so he could pick up his mom at the airport he hit a priest at a crosswalk.”
“I let my friend borrow my car to go to the outlet mall in the suburbs and she broke an axle getting out of the garage.”
No qualms about blaming the victim here – if you lend your car, you’ve got it coming. Doing so for money makes no difference to this maxim.
New York Superintendent of Financial Services Benjamin M. Lawsky agrees. This week, he issued a press release ordering car-sharing service RelayRides to shut down in the state. RelayRides is a bit like AirBnb for cars; individuals rent their cars to strangers through the service. RelayRides takes care of insurance and vetting potential renters according to a few basic criteria. With these dual assurance, it stands to reason, you’ll do through RelayRides what no sane person would do without it.
Lawsky reminded RelayRides that New York insurance policies were drafted long before they came into existence:
RelayRides tells vehicle owners that the Hudson liability policy [provided by RelayRides] will cover the owner, and that the owner’s own policy will not be involved if there is an accident while a person is renting the vehicle. However, an owner’s personal liability insurance policy provides coverage to any person who drives the vehicle with the owner’s permission. New York law does not permit an insurer to exclude coverage for a renter. As a result, an owner may be personally liable for any accident that occurs while the vehicle is being rented.
Additionally, RelayRides advises renters to display Hudson ID cards in the event of an accident. In the event of an accident, however, New York law requires a vehicle operator to show a police officer and the other party involved in the accident the owner’s insurance ID card. Moreover, if the owner’s primary car insurer does not receive timely notice of the claim, then their insurer may not cover the damage, leaving the owner at greater risk of being personally financially responsible.
It would be a quick fix to allow insurers to exclude coverage for renters. It stands to reason that the more incidents the insurer doesn’t have to pay for, the better. On the other hand, what if the renter shreds the breaks, causing the owner to crash the car? We could spend hundreds of hours of experts’ and lawyers’ billable time to assign exact degree of blame for each incident, or we could just shut the whole thing down, which is usually the solution of first resort.
Perhaps the only solution workable solution is to require the participating owner to get all car insurance through RelayRides’ insurer. To do this, RelayRides would have to convince every other insurance company to forever cede their ability to sell to insurance to a subset of people who participate on a car sharing site with strong network effects. Good luck with that.
Unlike the Uber situation, in which black car services are attempting (and failing) to protect their monopoly for call-ahead service from a new smartphone app, the insurance companies and their regulators have a valid point. Regulations should catch up, but not be abolished. Insurance is one of those unsexy services necessary to the operation of a modern economy. A stable insurance market requires a degree of interoperability and reliability that only regulation can provide.
Let’s just hope they figure this out quickly, because Zipcar is expensive and the Fairway in Red Hook is too far from the dang train.