Permissive Use, a Rideshare App, and the Coverage Gap
Dana Reyes holds a personal auto policy with 100/300/50 liability limits, a $500 collision deductible, and no transportation network endorsement. Her brother-in-law Marcus, who lives in another household, borrows the car for a week while his own is repaired. On Tuesday evening Marcus opens a rideshare app, accepts a request, and is four blocks from the pickup when he rear-ends a minivan, injuring two children; the minivan carrier demands $85,000. Marcus is not listed on the policy, although Dana's application listed only herself and her husband as operators, and the policy contains no named-driver exclusion. The rideshare company's $1 million commercial policy covers drivers only while they are engaged in a prearranged ride. Marcus also has a suspended license for an unpaid ticket, which the app's background check missed. Dana's carrier must decide within 30 days whether to defend Marcus and whether to tender to the rideshare carrier.
1. Is Marcus an insured for this loss? Analyze permissive use, the business-use exclusion, and the pre-pickup gap.
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Probably yes, and the insurer should defend under a reservation of rights while it resolves the question. The liability grant covers the owner and any person using the covered auto with permission. Marcus had permission for a week of personal use. That is not permission to carry paying passengers, but most jurisdictions follow an initial-permission rule under which a minor deviation from the scope of permission does not void coverage.
The business-use exclusion is the harder issue. It is written to exclude carrying persons or property for a fee; at impact Marcus had accepted a request but was carrying nobody and had earned nothing, so the exclusion's terms are not comfortably met. Some states have amended the exclusion to reach the entire time the app is on, which is why the form's exact wording and the state matter. There is a separate defense in the reasonable-belief condition, since a driver with a suspended license may not satisfy it. None of this eliminates the duty to defend, which is broader than the duty to indemnify.
2. How should the adjuster handle the tender to the rideshare carrier and the priority of coverage?
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Send a written tender to the rideshare carrier with the request record and the app's trip log, because that policy covers only a prearranged ride. The timestamp places Marcus before pickup, so expect a denial, but the tender preserves contribution rights if the rideshare carrier later accepts. On priority, the personal policy is primary for the period the rideshare policy does not cover. If both respond, the other-insurance clauses govern, and most personal auto forms make their coverage excess when a covered auto is used by a non-owner.
The undisclosed operator and suspended license raise a separate question. The application listed only Dana and her husband, so the carrier should ask whether it would have rated or declined Marcus. Rescission after a loss is difficult: it generally requires a material misrepresentation in the application itself, made with the intent the state requires, and proof that the insurer relied on it. Treat this as a rating and recovery issue rather than an automatic denial, and never let the investigation delay the defense.
3. The two injured children include one with a serious fracture. What should the adjuster do first, and why?
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Tender the $100,000 per-person limit immediately if liability is reasonably clear, and do not wait for the coverage dispute to resolve. The injured child's damages could exceed the per-person limit, which creates a genuine exposure to a bad-faith or excess-judgment claim if the carrier delays a clear liability payment while arguing about Marcus. Confirm liability facts from the police report, the app log, and witness statements, and check whether comparative fault applies.
Document the reasoning: the coverage dispute concerns who is insured and whether an exclusion applies, not whether Marcus was negligent. Where the insured's liability is clear and the claim exceeds the limit, the carrier's duty to settle within limits is triggered independent of the reservation of rights, and an unreasonable delay can expose it for the entire judgment. Pay the per-person limit, obtain a release to the extent available, notify the rideshare carrier of the payment, and continue the declaratory action on the remaining exposure.