Direct-Action Rideshare Claims Can Proceed, Georgia Appeals Court Rules
Most states do not recognize an injured party’s right to immediately assert a “direct action” against the insured driver’s insurance company because of a car wreck. Typically, in order to file a direct action against an insurer, the injured party must first file a lawsuit and obtain a court determination that the insured driver was, in fact, liable.
That has not always been the case in Georgia. For many years, the law allowed a plaintiff to file a direct action against the insurer of the alleged tortfeasor for any claim in tort or contract when the alleged tortfeasor was a “motor carrier” as defined by Georgia law. Recently, the relevant statutes, O.C.G.A. § 40-1-112 and O.C.G.A. § 40-2-140, were amended to narrow the circumstances under which a direction action can be filed against the insurer of a “motor carrier.” Under the revised laws, a claim can only be asserted against the insurer of a “motor carrier” when the “motor carrier” is insolvent or bankrupt or when service cannot be obtained against the driver or “motor carrier.”
In a matter of first impression under Georgia law, the Georgia Court of Appeals recently considered whether rideshare platforms like Lyft qualify as “motor carriers” under state law.
Georgia law defines “motor carrier” as:
“[e]very person owning, controlling, operating, or managing any motor vehicle, including the lessees, receivers, or trustees of such persons or receivers appointed by any court, used in the business of transporting for hire persons, household goods, or property or engaged in the activity of nonconsensual towing pursuant to Code Section 44-1-13 for hire over any public highway in this state.”
O.C.G. § 40-1-100 (12) (A). Certain taxi and limousine services are exempt from this definition, and as a result, the direct-action statute does not apply to them.
In 2015, the Georgia Legislature enacted a new law entitled, “Ride Share Network Services and Transportation Referral Services.” The 2015 law defines “ride share network service” to include “any person or entity that uses a digital network or Internet network to connect passengers to ride share drivers for the purpose of prearranged transportation for hire or for donation.”
If rideshare platforms are “motor carriers” — and if rideshare platforms are not exempt from the applicability of the direct-action statute like some taxi and limousine services — then rideshare platforms and drivers are subject to a different regulatory regime in Georgia than some of the taxi and limousine services with whom they compete for business.
Taking these issues up, the Georgia Court of Appeals held in a unanimous, precedential opinion issued on August 26 that ridesharing platforms are “motor carriers” under Georgia law, and thus are not exempt from the direct-action statute. Unlike insurers of some taxi and limousine services, insurers of rideshare companies and their drivers in Georgia can now be sued for claims against policyholders before there has been any judicial determination of their insureds’ liability, if a court determines that personal service on the rideshare company or driver cannot be effectuated after reasonable diligence.
The Georgia decision thus raises the specter of ushering in an era of increased direct claims against insurers of rideshare platforms and drivers by third-party plaintiffs.
Please contact Giles Rhodenhiser or any member of the Phelps Insurance team if you have questions or need advice or guidance.
