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RelayRides Accident Raises Questions on Liabilities of Car Sharing

You set and post the price on the company’s Web site, and the company handles the background checks on renters, the reservations and collecting the money. It, and similar peer-to-peer car-sharing companies, keep some of the money before handing over the rest to you.

Any prudent car owner would worry about the liability insurance implications here, and RelayRides provides $1 million of it to the owner of the car. The company does this because your own insurance company may not cover damage that occurs when you’re essentially running a business by renting out your car. Indeed, USAA and Allstate told me last month that they were troubled enough by the personal car-sharing movement that they might decline to renew policies if they found out that customers put their vehicles in a car-sharing pool.

In response, a RelayRides spokesman said in March that the company had been operating in Massachusetts, where the company began, “without any problems” related to people losing their insurance.

Here’s what RelayRides did not say, however, about a much bigger insurance problem it already had on its hands: a little more than a month before it sent me that statement, a RelayRides renter crashed into another car and died at the scene. The four young adults in the car that was hit were all injured badly enough (multiple facial fractures, no use of hands for weeks, injured hip) that their claims could exceed $1 million, putting the owner who had rented out her car at some financial risk.

So if you’re thinking of tossing your car keys to any random person who turns up on the Web, it’s worth learning a little more about the complicated case of that owner, a 24-year-old former Google systems administrator and a current M.I.T undergraduate (and still a part-time Googler) named Liz Fong-Jones. Her experience demonstrates that using the Web to share your car is nothing at all like sharing your vacation pictures or household tools, and that it may be wise to temper the collective lust for innovation by more carefully considering the need for protection in case something terrible happens.

THE OWNER Ms. Fong-Jones’s saga began in early February with a phone call from a RelayRides executive letting her know that her 2003 Honda Civic Hybrid had been in an accident in Boston and was damaged beyond repair.

She got a check to cover replacement costs and thought that was the end of it. “RelayRides was supposed to step in for any claims that happened,” she said.

Unfortunately, Patrick Fortuna, the man who had driven her vehicle, was dead and couldn’t tell the injured parties that he had rented the car (and had insurance) through RelayRides. So Ms. Fong-Jones eventually heard from her own insurance company, Commerce, which had heard about the accident from one of the plaintiffs’ lawyers who eventually became involved.

THE INJURIES Riding in a 2008 Honda early in the morning on Feb. 5 were Jessica Luisi, Veronica Hodges, Jenna Reilly and Kevan Knecht. According to a preliminary police report, their car was hit by an oncoming car that seemed to have been traveling south in their northbound lane. The report concluded that Mr. Fortuna would be found at fault.

Ms. Luisi had injuries to her right hip and left knee, among other areas of her body, according to an account that Mr. Knecht’s sister posted online, while Ms. Hodges had broken both wrists, one arm and one hand. Many of the bones in Mr. Knecht’s face had been broken, while Ms. Reilly needed stitches on her face and has suffered from concussion syndrome, according to her lawyer.

Besides seeking reimbursement for medical bills (Mr. Knecht’s alone are nearing $100,000, according to his lawyer, William Doyle Jr.), the injured people could also file pain-and-suffering suits. “If somebody crosses the center line and plows into your car, it does a number on you in terms of how you feel about getting into a car,” said Jonathan Karon, Ms. Hodges’s lawyer.

THE INSURANCE If there is any good news in this, it’s that there is a lot of insurance coverage. RelayRides has $1 million in coverage per incident (though not per person), while Ms. Fong-Jones has $300,000 in coverage.

Assuming that Mr. Fortuna was indeed at fault, the questions then revolve around how high the claims or legal judgments may go and which insurance company will pay. It is early to be estimating, though one of the lawyers for the victims has suggested that the claims may total somewhere around $1.2 million to $1.5 million.

Let’s assume that the lawyer is not exaggerating, and that the total amount exceeds RelayRides’ $1 million coverage. Who pays, and how much?

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