Electric Scooter Sharing Programs: Balancing Convenience with Coverage

Electric scooter (e-scooter) sharing programs continue to flourish in cities worldwide, including hundreds in the U.S., Europe, and new expansions into Canada. E-scooter companies, such as Bird and Lime, put “dockless” electric scooters on city sidewalks for riders to pick up, use and set down at their destination.

Scooters represent a burgeoning trend known as “micromobility,” the use of light vehicles as an alternative to cars. The surge shows no signs of easing: some studies predict that the shared micromobility fleet will reach 39.6 million vehicles by 2023.

As these programs spread, so do their inherent risks. Self-operated rented electric scooters are roaming around cities yet to provision dedicated paths, at speeds up to 15-20 miles per hour. Just last month, a man riding a rented scooter in San Diego, California hit a tree and later died from his injuries.

Following a slew of accidents, some cities, like Beverly Hills, California, have banned e-scooters and more are exploring options to control them. This is just one sign among many that this bold new world of riding comes with the risks inherent in operating any vehicle, as well as a few new ones. Like any emerging business, scooter sharing companies are still evolving, exploring how they can be both profitable and protected.

Easy access for riders but limited protection for service providers

Scooter sharing programs generally work via a phone app allowing a user to rent and unlock a scooter wherever he or she finds one—the scooters are placed and tracked by apps throughout cities in which there are programs. Once a rider unlocks a scooter, it can be used until he or she ends the ride via the app.

Riders sign waivers, agreeing to abide by arbitration and giving up the right to sue, which does protect sharing companies to some extent, said Adrian Smith, Managing Director, Burns & Wilcox Brokerage, Chicago, Illinois. However, waivers may only involve rider injuries, and scooters pose many other risks, Smith added. Riders may crash into pedestrians, other riders, or damage property.

Oftentimes, they are not contained in racks like rental bicycles; e-scooters can create trip hazards on sidewalks and limit access to building entrances. Such barriers present significant challenges for persons living with disabilities. The sharing company could be held liable for restricted access, injuries or damages involving its e-scooters.

“Waivers may only involve rider injuries, and scooters pose many other risks. Riders may crash into pedestrians, other riders, or damage property.” – Adrian Smith, Burns & Wilcox Brokerage

Some of these exposures may be included in a sharing company’s General Liability Insurance policy, however insurers have little data with which to assess risk. “Over the last 18 months we have seen an increase in these types of risks,” Smith explained. “However since this is still an emerging risk and a new class of business, there really isn’t a lot of credible loss experience.”

Perhaps the closest comparable businesses are bicycle- and car-sharing programs, which carry their own complex set of exposures. However, determining adequate coverage for scooter rental services involves additional considerations.

Paths to comprehensive coverage are complex and unique

Scooter rental companies’ newness can make them difficult to insure. “There is a push from insurers to really look at the size and the financial backing of these new entities,” Smith said. “If the scooter platforms cannot take a reasonably large deductible/retention, the question is whether or not they really have a business plan that is strong enough, and financial backing behind their platform that is powerful enough to really make it viable.”

Financial viability could potentially be an even larger question in Canada, where e-scooters are less popular and often provided by local entrepreneurs partnering with larger companies. Nevertheless, even larger, well-funded platforms face obstacles as insurers and governments play catch-up. Things will continue to evolve, particularly with state laws, Smith said.

Bird and Lime are actively lobbying for state laws that favor e-scooter sharing services. Additionally, the Centers for Disease Control is conducting the first epidemiological study of dockless scooters in Austin, Texas, and the results have the potential to change laws and ordinances governing their use.

Exposures to e-scooter risks come from many fronts

“When something goes wrong, it goes wrong in a big way. Ultimately it could get into the court system, go beyond arbitration and end up in front of a jury.”  – Smith

A study published in January concluded e-scooter use-related injuries are common and reflect poor adherence to safety guidelines, like helmet use. According to Consumer Reports, Bird and Lime e-scooters were involved in 470 injuries between July 2017 and 2018. And as programs expand, the related death toll rises: a March 21 article in the San Antonio Express-News reported a total of seven scooter-related deaths in the U.S. between August 2018 and March 15, 2019.

“When something goes wrong, it goes wrong in a big way,” Smith said. “Ultimately it could get into the court system, go beyond arbitration and end up in front of a jury.” A class-action lawsuit filed against e-scooter sharing companies in October 2018 illustrates the considerable and potential consequences resulting from such exposures.

General Liability Insurance coverage can help protect sharing companies against exposures from third parties, but companies also benefit from carefully regulating aspects of their operations, according to Smith. For example some companies are implementing quality assurance measures for scooter manufacturers and mechanics. Scooter sharing companies are also weighing the relative safety and cost-saving benefits of using solar docks to secure and charge their fleet.

Coverage need assessment is tricky, but vital

Given the current environment in which scooter sharing companies operate, Commercial General Liability Insurance is essential and a good starting point to ensure proper coverage, Smith said. General Liability Insurance policies can help scooter sharing companies manage costs incurred from injuries to third parties, he explained, such as collisions with pedestrians or someone tripping over a scooter lying on a sidewalk.

Scooter sharing companies’ liability for injuries and property damage continues to be reassessed and revised, Smith said. For example, Los Angeles has already taken steps to regulate the level of commercial General Liability Insurance scooter companies must hold, and to establish scooter speed limits and parking zones. Insurance experts are in the best position to assess companies’ shifting needs and inform coverage decisions.

 As with any coverage need, an insurance broker or agent must be consulted. Click here to forward this article to your insurance broker or agent to ask if you need this coverage, or share this with clients to start the conversation and ensure proper protection.

This information was provided by Burns & Wilcox, North America’s leading wholesale insurance broker and underwriting manager. Burns & Wilcox works exclusively with retail insurance brokers and agents to assist clients like you with their specialty insurance needs. Ask your insurance broker or agent about General Liability Insurance coverage that might be right for you.