“Sharing Economy” Raises New Liability Questions

Categories: Insurance

The New York Times is following a story that involves liability issues in a fatal car crash that was caused by a driver who was using a car from a “car sharing” service known as RelayRides.

RelayRides is one of dozens of businesses that are popping up to help out in this economy. The business serves as an online matching service that allows individuals to rent their cars by the hour to other people who need one. Most renters have lost their cars to the bank or simply can’t afford to own one due to high gas or insurance costs. The concept is to make transportation available to everyone, but when you put cars on the road, there is liability involved.

While RelayRides has a $1,000,000 blanket insurance policy to cover accidents, in the case of one driver who crashed into a car carrying four people, that amount of insurance is simply not going to be enough. The insurance company that covered the “loaner” has denied claims based on the situation, and that’s bringing attention to dozens of businesses that help consumers rent or “share” everything from rooms in their home to a cubicle in their office space.

The idea of renting out your stuff for money or renting from others who “have” when you “have not” is catching on in what has been dubbed the “sharing economy.” The idea sounds good, but the liability issues it raises are confusing, and as the RelayRides example shows, there are not a lot of precedents for the type of concerns that can arise.

You have some people with a lot, and others who have nothing. Eliminating the expensive middle man (the typical business that supplies goods and services) seems like a great idea and a way to provide goods or even services without having to spend a lot or qualify for credit. For example, Person A “loans” their car to Person B for a day and an agreed upon fee. They are matched through an internet based service.

While it’s not a lot different than loaning your car to your friend or sister, when there is money exchanging hands, it is different. Even if your insurance covers other drivers of your vehicle, if you “rent” your vehicle, your insurance company may decide that’s not a “normal situation” and they could deny a claim if an accident occurs.

This situation is gathering attention, and FastCompany called 2012 the year when this sort of sharing economy will gain popularity. The RelayRides situation will help determine future rulings on whether or not insurance companies are liable when a terrible accident occurs under these sorts of situations, and it’s definitely an issue we’re keeping our eyes on at Van Sant & Associates. Stay tuned!

David Van Sant is a personal injury lawyer in Atlanta who works to help accident victims get the compensation and care they deserve.