There’s a Misallocation of Insurance Risk When We Use Ridesharing Services

Last year, Uber launched a nationwide public relations campaign emphasizing affordable rides and the need to modernize insurance rules. The campaign claims that many states’ legislatively mandated minimum insurance coverage for ridesharing vehicles—including New Jersey’s—is outdated and overly expensive, and that ridesharing companies are forced to pass their insurance costs on to their riders through higher fares.

Not coincidentally, N.J. State Senator Brian Stack introduced S4898 this past December. The bill would remove New Jersey’s $1.5 million Uninsured Motorist/Underinsured Motorist (UIM) coverage floor for transportation networks and their drivers when a driver is providing a prearranged ride. The bill would create a floor for UIM coverage that’s identical to the lower minimums applicable to personal auto insurance policies: $25,000 per person and $50,000 per accident for policies issued or renewed before January 1, 2026, and $35,000 per person and $70,000 per accident for policies issued or renewed after that date.

Uber’s public relations campaign and S4898 are shining a much-needed light on an issue many New Jerseyans know little about: the misallocation of insurance risk when any of us are injured while riding as passengers in a ridesharing vehicle. The unfortunate truth is that our own automobile insurance policies, if we have one, may not cover the injuries we suffer as a passenger in a ridesharing vehicle. When this happens, we’re at the mercy of the insurance coverage Uber or one of its drivers provides—the same coverage Uber and S4898 seek to reduce.

The sources of compensation that injured ridesharing passengers can recover from

As a preliminary matter, when a passenger in a ridesharing vehicle is injured in a crash, they typically might recover from three potential sources.

First, the injured passenger might recover from the at-fault driver’s liability policy—if they have one. This could be the ridesharing driver’s policy or another driver’s policy. As I noted above, the statutory minimums for liability policies are low, and most drivers prefer to purchase those coverage levels. 

Second, the injured passenger might recover under the ridesharing company’s UIM coverage if the other driver is at fault and the at-fault driver’s insurance policy denies or exhausts coverage for the crash.

Finally, the injured passenger might recover from their own auto insurance policy through their UIM coverage or Personal Injury Protection (PIP) if coverage under the first two sources of compensation are denied or exhausted.

Given New Jersey’s low statutory minimums for liability coverage, drivers’ liability policies in the state are often exhausted quickly when passengers suffer serious injuries. It’s precisely in those scenarios—low-limit, uninsured, or hit-and-run crashes—that UIM coverage was designed to function as a backstop. (More on that in a moment.) 

The adequacy of the UIM backstop is at the heart of Uber’s campaign and S4898.

The livery vehicle problem

The misallocation of insurance risk when using ridesharing services emerges when we first step into a ridesharing vehicle as a passenger. When we do, we’re not, under N.J. law, a passenger in a private automobile. Instead, we’re riding in a commercial, for-hire vehicle, known in the insurance world as a “livery vehicle.”

Many personal auto insurance policies contain exclusions that limit or eliminate coverage when the insured is riding in a vehicle that’s used for commercial purposes. The assumption is that the commercial use of a vehicle entails different and heightened risks that should be priced and insured separately.

As a result, a passenger injured while riding in a ridesharing vehicle may learn the hard way that certain insurance coverages they assumed would apply do not. They bear the risk of having to rely on the ridesharing service’s insurance policy, such as the ridesharing service’s UIM policy, to pay for medical treatment for injuries they suffered in a ridesharing vehicle.

The auto insurance “haves” versus “have-nots”

The misallocation of insurance risk in ridesharing vehicles continues when comparing the two types of ridesharing passengers: car owners who carry auto insurance and non-car owners.

As I explained above, when the former is injured while riding in a ridesharing vehicle, their own auto insurance policy could limit or eliminate its coverage for those injuries. But depending on the specific language of those policies, they might be able to use their PIP or UIM coverage to complement the ridesharing service’s UIM coverage to pay medical bills arising from injuries they suffered in a ridesharing vehicle.

But non-car owners who, naturally, don’t carry auto insurance won’t be as fortunate. Increasingly, younger residents and urban riders have eschewed car ownership, relying on ridesharing services as their primary mode of transportation when public transportation, their bikes, or their feet can’t get them where they need to go. These individuals rely heavily on a ridesharing service’s UIM coverage for injuries they suffer while riding in a ridesharing vehicle. This reliance can have grave consequences when a ridesharing passenger is catastrophically injured. Without a personal auto insurance policy coverage to fall back on, the limits of a ridesharing company’s insurance coverage effectively cap recovery—not to mention the limits of another driver’s liability policy—regardless of the severity of the harm.

UIM and PIP remain as important as ever

Regardless of whether Uber’s public relations campaign is successful or S4898 becomes law, understanding how auto insurance coverage applies to ridesharing accidents shows the importance of UIM coverage for car owners.

It’s no secret that many drivers on the road are inadequately insured. When an at-fault driver’s policy does not cover the harm caused, UIM coverage fills the gap, at least up to the limits purchased. In the ridesharing context, UIM coverage is often the difference between meaningful compensation and a catastrophic shortfall.

While not always applicable in ridesharing accidents, PIP remains a vital component of auto insurance policies. In a no-fault state like New Jersey, PIP coverage is designed to pay medical expenses regardless of who caused a crash, ensuring victims can access treatment promptly without waiting for liability disputes to resolve.

Drivers and passengers in private vehicles often take PIP for granted. But in a livery context, the applicable PIP coverage may be limited to the liability and UIM policies carried by the at-fault driver and the vehicle operator. If those limits are low, a seriously injured passenger can exhaust available medical benefits quickly and be forced to rely on health insurance, Medicaid, or personal resources.

A legislative change that would put profits ahead of personal safety

On the surface, Uber’s public relations campaign and support for S4898 make logical sense. Supporters of reforming New Jersey’s current $1.5 million UM/UIM floor for ridesharing passengers will tell you that the floor is disproportionate to claims experience, and it inflates the cost of doing business in New Jersey.

But the argument obscures a key distinction. Consumers choose the auto insurance coverage they want, weighing the pros and cons of their options, and deciding which limits and coverage best suit them. As ridesharing passengers, however, they have no such choice. They are the “beneficiaries” of a choice about insurance coverage driven by statute, corporate policy, and profit concerns.

Uber’s effort to “modernize” insurance requirements is part of a broader nationwide strategy to reduce mandatory coverage and, in turn, insurance premiums. Lower statutory insurance limits reduce the costs insurers pay and improve their margins. 

When limits are reduced, ridesharing companies absorb the additional profits they generate, but leave society holding the bag for the risk created by reduced insurance coverage. Injured passengers must choose between going into medical debt and not getting treatment for their injuries. Public benefit programs, like Medicaid, often have to pick up the tab for treating injured passengers. Medical providers feel it too, providing care that they may not get paid for. And the general public will eventually pay its unfair share through higher taxes and healthcare costs.

S4898 presents a policy choice about where New Jersey allocates the risk inherent in a popular and widely accessible mode of transportation. Ridesharing companies frame the issue in terms of efficiency and affordability. But the practical effect of reducing UM/UIM limits is to narrow the protection available to passengers who are injured through no fault of their own.

Uber and other ridesharing platforms set the terms of engagement, control their platforms, benefit from widespread consumer reliance on their services, and profit handsomely from it all. When ridesharing passengers are injured in a crash, should the financial consequences fall on the company that structured the transaction and that profits from it, or on passengers who had no meaningful opportunity to protect themselves?

There’s only one logical answer—and it’s not the one Uber or the supporters of S4898 are providing.

Craig M. Aronow, a co-founding partner at RAM Law in New Brunswick, concentrates his practice on representing individuals injured in truck crashes. He has been certified by the Supreme Court of New Jersey as a Civil Trial Attorney and received his Board Certification in Truck Accident Law. He can be reached at caronow@ram.law.

Reprinted with permission from the February 27, 2026, edition of the New Jersey Law Journal. © 2026 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.