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California Law Keeps Insurance Coverage for Cars in Sharing Networks

Posted on in Car Accidents

In September 2010, California Governor Arnold Schwarzenegger signed Assembly Bill 1871 into law. Effective on January, 1, 2011, the law allows people who are part of a car-sharing network to provide their own vehicles for rental use by members of the network.

Old Insurance Impediment

For years, insurance complications prevented people from offering their cars for use in car-sharing networks like Zip Car and CityCarShare. Most car insurance policies state that receiving payment for renting one's vehicle to others constitutes a "commercial use" of the vehicle, which can invalidate the insurance policy.

Therefore, if someone was in an accident in the rented car, the owner of the car could be held personally liable for any damage, injury or death that occurred. This was a significant impediment to car-sharing and rental programs in California.

New Car-Sharing Insurance Law

The new car-sharing law prevents a private car from being classified as a commercial vehicle for insurance purposes solely on the basis that it is used for personal vehicle sharing. It also prohibits insurance companies from cancelling, voiding, terminating, rescinding or non-renewing an insurance policy simply because the vehicle was made available for personal vehicle sharing in a car-sharing network.

While insurance companies may not invalidate a policy because the insured vehicle is used in a car-sharing network, the law authorizes the insurer to exclude any and all coverage while the vehicle is in use by another person in a personal vehicle sharing program.

Assembly Member Dave Jones, who authored the bill, thinks the change could have a profound impact. He said, "The new law will help car owners shrink the cost of owning their vehicles, reduce the need for some people to buy cars, improving parking and traffic congestion, and help the environment."

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