RelayRides, a car-sharing service that matches car owners with third-party renters, agreed to stop conducting business in New York State after receiving a cease-and-desist order from State Superintendent of Financial Services Benjamin M. Lawsky, who accused the rental service of false advertising and called its insurance coverage through Hudson Insurance Co. of New York “illegal and inadequate.”

Lawsky (pictured) also issued a consumer alert to warn potential New York RelayRides renters that the company's auto coverage could leave them financially accountable for an accident, despite the company's claims.

According to a press release from the New York State Department of Financial Services (DFS), RelayRides informs New Yorkers that they would not be liable for out-of-pocket expenses in the event the car being rented is stolen or involved in an accident, as it maintains a $1 million liability policy through Hudson for injury or damage to third parties.

However, the DFS notes that in New York State, an owner's personal liability policy provides coverage to any person who drives the vehicle with the owner's permission, and that state law does not permit an insurer to exclude coverage for a renter. That means an owner may be personally liable for any accident that occurs while the vehicle is being rented, and could be held personally liable for property damage, theft, bodily injury, or death that occurs during the rental.

The DFS also notes that in New York State, renting out a vehicle could violate the terms of an owner's personal liability policy, which could cause their insurer to cancel or not renew the policy, despite claims by RelayRides that participation in the rental agreement will not affect a vehicle owner's personal liability insurance. The DFS investigation into the company's insurance coverage is ongoing.

Special Reports /

New York State Orders RelayRides to Stop Renting Third-Party Autos

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