Washington Law May Facilitate Car Sharing

Auto Insurance is an enigma all its own. Aside from many states requiring that all drivers carry it, the specifics of individual policies can be confusing. Add to that the fact that policies may be limited to certain drivers, and you begin to understand the legal conundrum that people can find themselves in when they attempt to enter into a car sharing arrangement.

Consumers may be more familiar with companies such as Zip Car, which provide a vehicle to people when they want one, so that they don't have to deal with the hassle of a traditional car rental, or owning a car when they don't really use it that often. These companies are responsible for providing the insurance policies for the cars they lend out. What isn't always clear, is how insurance policies apply to cars that individuals loan to these companies, or that they "co-own" with other parties.

Until Washington passed a new law to address the issue, consumers who wished to lend their cars out to such car sharing agreements risked having their policies invalidated, because such use was considered commercial, rather than individual.

The law works by transferring liability from the individual to the car sharing entity during the time when the car is being used by someone other than the individual.  The  bill defines a "personal vehicle-sharing program" as "a legal entity qualified to do business in this state that facilitates the sharing of private passenger motor vehicles for noncommercial use by individuals within this state." These programs are "considered the vehicle owner for all purposes," and assume liability once the vehicle's registered owner turns it over to the program for sharing uses.

Supporters of the measure argue that, "This bill provides certainty in the marketplace for insurance companies, brings businesses into the state, helps the environment, reduces the pressure for more transportation investments, and puts money into people's pockets."

This is one of many legal issues that presents itself in the area of sharing programs, whereby a group of individuals may jointly purchase a car, home, boat, or recreational vehicle, in the realization that it not only makes economic and environmental sense, but each person would probably not be able to use the product for a fraction of the time anyway. Timeshares are probably the most analogous to this situation.

I anticipate that a flood of these sharing laws will be passed in the coming years, as legislatures attempt to address the  various developments in this area.