First presented at MB's Transportation Law Seminar
This paper is intended to serve as a brief update on two topics that we focused on in our previous papers: Uber and autonomous vehicles. Given the rapidly evolving nature of both of these topics, we thought it prudent to provide a brief update on latest developments along with their implications for the insurance industry.
It is nearly impossible to read, watch or listen to the news nowadays without encountering a story about the now ubiquitous ride-sharing company, "Uber" – which many of you are aware has revolutionized the taxi industry and is poised to do the same to the insurance industry. While formal regulation of the ridesharing industry remains non-existent, the resilience of Uber's executives, fuelled by increasing consumer demand, has made it clear that Uber is the new reality and it is here to stay.
An important example of an insurance company that has recently come to embrace this new reality is Aviva Canada. After announcing in October, 2015 that as of January 6, 2016, it would be cancelling the insurance policies of all customers found to be operating as Uber drivers (referred to as "Partners" in the Uber world), and, instead, launching a ridesharing insurance product for part-time Uber drivers. That product was subsequently approved by FSCO on February 2, 2016 and is currently being sold to eligible ridesharing drivers.
The product is added onto a driver's personal auto insurance policy and offers coverage from the moment a driver begins looking for passengers to the time they collect and drop them off. To be eligible, drivers must only operate a maximum of 20 hours per week, be contracted with a transportation network company, and have been licensed in Canada or the US for a minimum of 6 years. In order for the policyholder's vehicle to qualify, it cannot be utilized for commercial purposes, can only carry a maximum of 7 passengers (plus the driver), and must not be registered as a taxi or limousine.1
While Uber stands by its own policy of liability insurance offered to its drivers, a gap remains in coverage for full-time drivers or those that do not elect to purchase Aviva's policy. We can expect a more widely applicable product to roll out from Intact in the near future as Uber announced its formal relationship with the national insurer in September, 2015. Uber stated that it is taking the necessary actions to develop an insurance plan, specifically for the ridesharing industry.2 There is currently no indication as to when this product might be launched.
What are the current risks for insurers of Uber drivers and passengers caught by this gap in coverage? According to Ian Black, manager of Uber operations in Ontario, drivers, passengers, pedestrians and all third parties are covered by Uber's liability policy. In the event of a driver being sued as a result of an accident, his or her personal insurance policy would initially respond, and Uber's policy would cover any excess or denial of coverage.3
Denial of coverage is a very real risk for drivers who do not notify their insurer of their status as a driver, given their obligation under section 1.4.1 OAP 1 (Ontario Insurance Policy - standard for every private policy) to notify their insurer of any change that might increase risk. Under section 1.7.2 OAP 1, an insurer has the right to void a policy in the event that the insured risk has undergone a material change. Section 1.8.1 OAP 1 expressly denies coverage to insureds who use their vehicle as a taxicab or to carry paying passengers. However, the recent disclosure of Uber's insurance policy in the case of City of Toronto v. Uber Inc.4 revealed that it is actually a regular CGL policy that only protects the corporation that purchased it and not the drivers.5
This obviously has significant implications for the drivers, passengers and third parties, as well as their insurers. For the insurers of passengers and third party drivers, there is an increased risk of underinsured claims being made under the OPCF 44R endorsement of these policies and uninsured claims through s. 265 of the Insurance Act.
For the drivers themselves, there is personal exposure to damages in excess of the statutory minimum coverage,6 but also the loss of important accident benefits. While some accident benefits remain available under section 1.8.1 of OAP 1, despite the denial of liability coverage, drivers would no longer have access to income replacement benefits, non-earner benefits, lost education benefit, visitor's expenses and the housekeeping and home maintenance benefit.7 Additionally, while personal and commercial auto insurance policies include entitlement to a minimum amount of accident benefits, the same is not true of CGL policies.
More significantly for insurers of Uber passengers, coverage will fall to their personal automobile policy. In the event that they do not hold a policy themselves, passengers will have access to the Uber driver's personal policy without the restrictions that apply to the driver.8 The gap in coverage therefore, has very real implications for drivers as well as insurers.
In the meantime, a private member's bill that would make Uber legal in Ontario has passed second reading in the legislature and is currently being studied by a legislative committee.9 Enactment of this bill could not come any sooner for Uber drivers operating in Hamilton, Ontario as that city continues to actively enforce its bylaws. As of January 12, 2016, twenty-one Uber drivers had been tracked down and charged for driving without a taxi license.10 The $305 fine has not discouraged Uber drivers from continuing to operate, however, as they continue to be supported by the company and its customers.
In the face of all the roadblocks the ridesharing company continues to face, it has steadily grown and continues to make plans for the future. For example, Uber has committed itself to manufacturing an autonomous taxi service that would eventually replace its current driver-operated fleet.11 We will leave the implications of that model to be considered another day, but the point to be made is that Uber is more than a mere flash in the pan.
This was reaffirmed in the City of Toronto v. Uber Canada Inc. et al.12 decision where Uber successfully defended the City's attempt to bring the ridesharing service to a halt. As Uber continues however, so does the gap in coverage. The decision for insurers remains whether to develop a unique ridesharing product or, alternatively, to wait and see how regulations develop and respond accordingly.
The most significant development with regard to the regulation of autonomous vehicles in Canada is the Ontario government's announcement in October, 2015 that as of January 1, 2016 it would be the first province in the country to offer its roads to the testing of autonomous vehicles. The press release includes the following definition of "automated vehicles":
"automated vehicles are driverless or self-driving vehicles that are capable of detecting the surrounding environment using artificial intelligence, sensors and global positioning system coordinates"13
The significance of this definition is that if accurate, it means that autonomous cars are not just some future potentiality, but technically a present reality. Many of us on our way to work this morning may have unwittingly driven past cars on the DVP being operated entirely by computers with minimal to no human input. One such car is the Tesla Model S. Some of you will be aware of Tesla's autopilot feature which allows drivers of the Model S to take their hands off the wheel while their car automatically steers down the highway, changes lanes and adjusts speed in response to traffic.14 Although not fully autonomous, Tesla's autopilot feature is an example of semi-autonomous technology that is very close to being fully autonomous yet became available without any regulation.
Other examples of similar semi-autonomous technology include: brake assist, which detects when an impact is imminent and automatically applies the brakes; lane assist, which monitors lane markers and prevents a car from drifting into neighbouring lanes; park assist, which parallel parks a car at the push of a button; and summons, which allows Tesla and Range Rover owners to summon their vehicle out of the garage or a tight parking spot with the simple swipe of their smartphone. While many of these technologies are pre-programmed into vehicles, features such as Tesla's autopilot and summons became available via a simple software update voluntarily downloaded by the vehicles' owners in their driveways.
What this all means is that the cart is already effectively before the horse. The technology has outpaced regulation and the future has arrived right under our unsuspecting noses, not unlike it did with the ridesharing phenomenon. This begs the question therefore: should the insurance industry respond to autonomous cars in the same way Aviva and Intact have to ridesharing? Should products begin to be offered with reduced premiums to owners of semi-autonomous cars or should insurers wait for the implementation of the appropriate regulations before taking that step?
Manufacturers of autonomous cars have made it clear that it's not the technology that is slowing deployment of autonomous cars but rather the implementation of regulations.15 This is primarily because of the unsolved question around liability in the event of an accident - does liability fall on the software engineer, the manufacturer, the computer, or the driver?
The CEO of Volvo, Hakan Samuelsson, recently gave an answer to that question which may ultimately hasten the development of regulations: he announced in October, 2015 that Volvo will accept full liability whenever one of its cars is involved in an accident while in autonomous mode.16 This unprecedented move demonstrates Volvo's confidence in the safety of their technology as well as their desire to speed the pace of regulation along. Google and Mercedes have made similar commitments but Tesla and all other manufacturers of autonomous or semi-autonomous cars remain silent on the issue.17
Another significant development regarding liability is that the National Highway Traffic Safety Administration's (NHTSA) stated in a letter to Google in February, 2016 that, for regulatory purposes, it would interpret "driver" to mean the self-driving artificial intelligence system.18 Therefore, in the event of an accident, one would examine the self-driving system's actions to determine liability. This is precisely what manufacturer's had hoped for and it signals another important step toward implementation of regulation in the United States.
The Ontario government's move to open its roads to the testing of autonomous vehicles is a significant shift in the right direction as well. The technology has already arrived in semi-autonomous vehicles and it is only a short matter of time before manufacturers are prepared to further develop fully autonomous technology. The Ontario government's move signals the possibility that it may be the first province in the country to implement regulations - exactly when that occurs however, remains unclear.
As for whether insurers should begin offering products for owners of semi-autonomous and autonomous vehicles or wait and see what happens with regulation in Ontario — perhaps the answer lies in a middle-of-the-road approach wherein, much like Intact and Uber, insurers join forces with manufacturers to create a tailor-made insurance product for owners of autonomous vehicles. Whatever route insurers decide to take, the fact remains that, like Uber, autonomous technology has already arrived and will only grow in popularity regardless of the pace of regulation.
1 "Ride Sharing Insurance"
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