Christopher Low
Christopher Low

The emergence of Ride Sharing businesses has resulted in challenges which our Auto Insurance wordings across Canada have previously been unable to address. This is largely due to the fact that under an Auto Insurance Owners form, the operations of transporting passengers for a fare are restricted.

Alberta has now become the first province to address the insurance needs of Ride for Hire companies through a new policy; the Standard Policy Form (SPF) 9 (Transportation Network Form) which is used in conjunction with the Standard Policy Form (SPF) 1 (Owners Form). This has been achieved through the Transportation Safety Amendment Act which, allows the Government of Alberta to regulate the responsibilities of Transportation Network Companies and their drivers. It would be prudent to note that Transportation Network Companies that do not comply with regulations are subject to penalties of up to $50,000.

The main points of focus of this regulation are the clarification of the scope and regulations the Transportation Network Companies must undertake to operate in Alberta. To become candidates for hire, the drivers must possess a Class 1, 2 or 4 operator’s license. Also, a police check must be completed. Insurance requirements along with Legal definitions for this class of business have also been addressed.

 TNC or Transportation Network Company is now used to define the Ride Sharing industry. A Transportation Network Company is defined as a corporation, partnership, association or other entity or individual that connects passenger(s) with transportation network drivers for pre-arranged transportation exclusively through the offering, use or operation of a transportation network.

This is not to be confused with a Taxi service. Traditionally a taxi service employs commercial vehicles which operate full time, connected to passengers from a dispatch service. They may also use dispatch, hail and private call services. TNCs can only pick up passengers pre-arranged through the TNC app. A TNC vehicle is used for commercial operation, but the vehicle is classified for personal use, licensed, registered and insured to the individual driver.

TNCs will require insurance for their specific TNC activities. This is achieved in three periods as listed below:

  •          Period 1 - begins when a driver opens the app on their phone*.

      (* Period 1 is still considered to be a personal exposure covered by the SPF 1. If the SPF 1 Insurer denies coverage, the SPF 9 will provide contingent Third Party Liability cover up to 1 million.)

  •          Period 2 - is when the driver secures a fare or passenger.
  •          Period 3 - is when a passenger is in the car with the TNC driver.

The process is mandated to “Start & End” with the app. The TNC driver cannot accept passengers “hailing” them from the street.

Below is a table highlighting the above mentioned periods and how the SPF 9 will respond.

 

Use period of vehicle

SPF 9 policy coverage

Report claim to

Period 0: Personal use, driver is not logged onto a TNC Network for the purpose of providing transportation services.

None

Only driver's own insurer

Period 1Driver has logged onto a TNC Network for the purpose of providing transportation services but has not accepted a ride request

$1,000,000 Third Party Liability. This coverage is contingent on driver's own insurer denying coverage for an accident occurring during this period. Statutory Accident Benefits as provided for in the Auto Accident Insurance Benefits Regulations. No physical damage coverage (ex. Collision)

Both TNC Insurer and Driver's own Insurer

Period 2Driver has accepted a ride request and is en route to pick up passengers.

$2,000,000 Third Party Liability coverage. Statutory accident benefits as provided for in the Automobile Accident Insurance Benefits Regulations. Optional Physical Damage coverage (ex. Collision)

Only TNC Insurer

Period 3Passenger(s) are in the vehicle, being transported, and ending when the last passenger departs from the vehicle.

$2,000,000 Third Party Liability coverage. Statutory accident benefits as provided for in the Automobile Accident Insurance Benefits Regulations. Optional Physical Damage coverage (ex. Collision)

Only TNC Insurer

 

The Exposures of the new TNC operations can be separated into two classes:

 

Personal Exposure:

Defined by the table above, Period 0 is when the TNC driver operates as a regular personal risk. It is when Period 1 commences which is defined as (No passenger, no ride) that the SPF 9 is specifically designed to provide Contingent 1 million Third Party Lability coverage.

 

Commercial Exposure:

The commercial portion of the exposure begins when the driver has secured a fare (Period 2). When the passenger enters the vehicle is defined as Period 3. In both of these periods the second portion of the SPF 9 will commence. This is detailed with coverages of 2 million Third Party Liability, Statutory Accident Benefits and Optional Physical Damage cover.

As with all operations, the insurer must be made aware that the vehicle in operation by the TNC driver will be used for hire.
As the newly created SPF 9 is for TNC operations, any claim outside of this description will not be covered. This is highlighted in the Insuring Agreement of the SPF 9. Physical Damage to the vehicle can be addressed under the SPF 9 which can provide optional coverage during periods 2 & 3.

Currently all licensed insurers in the province of Alberta are able to provide the SPF 9. Whether they choose to venture into this segment is a different story. It will be interesting to see the results from this new class of business going forward.

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