California Class-Action Challenges Allstate’s Rideshare Insurance Compliance

A class-action lawsuit filed in California alleges that Allstate and its subsidiary North Light undercut mandated insurance coverage for Lyft drivers and passengers, potentially exposing millions to financial risk. The suit claims these insurers marketed full, state-mandated liability coverage but instead delivered policies where uninsured and underinsured motorist (UM/UIM) coverage is secondary, violating California's regulatory requirements. This tactic allegedly allowed them to charge premiums while limiting claim payouts, effectively bypassing the state's $1 million UM/UIM coverage mandate for rideshare vehicles. California regulations stipulate that TNCs like Lyft must provide primary UM/UIM coverage from the moment a driver accepts a ride until it ends, differing from many other states' frameworks. The complaint highlights that Allstate and North Light's policies exclude key economic damages such as medical expenses and lost wages when occupational accident coverage applies, and reduce payouts if other insurance is available—even if that insurance does not pay. This approach deviates from state law designed to protect rideshare users from underinsurance gaps. The lawsuit also notes that North Light operates as a surplus lines insurer outside California's usual regulatory oversight and does not participate in the California Insurance Guarantee Association, raising concerns about claimants' protections if the insurer faces insolvency. California's stringent TNC insurance regulations aim to ensure comprehensive coverage for one of the nation's largest rideshare markets, and failures to comply could have broad market implications. Regulatory experts had previously identified UM/UIM coverage as essential for TNC policies due to the high risk of severe uninsured or underinsured motorist incidents involving rideshare drivers. Despite this, the insurers are accused of exploiting policy language to minimize their liabilities, contradicting regulatory intent and leaving riders vulnerable. The plaintiffs seek restitution for premiums paid, damages, and a legal ruling affirming compliance with state insurance laws. This case underscores the complex regulatory landscape within the U.S. rideshare insurance sector, highlighting potential coverage gaps when insurers structure policies to reduce payout obligations. It further emphasizes the importance of clear state mandates and enforcement to uphold consumer protections in the evolving mobility insurance market.