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After fatal Lyft crash, insurance coverage questions arise

A Lyft passenger was killed in an accident near Sacramento, Calif., over the weekend, but it looks like the ride-sharing service's insurance will cover it.

Lyft distinguishes its cars with a fuzzy pink mustache. Lyft

Shane Holland was killed in a car crash last weekend. While more than 30,000 car crashes claim lives in the US every year, this was the first death of a ride-sharing passenger.

The crash happened early Saturday morning outside Sacramento, Calif., in a heavy downpour. Driving on Interstate 80, Lyft driver Shanti Adhikari, 31, swerved to avoid a car in the middle lanes that had stalled after being rear-ended by another vehicle that drove away. The Lyft car carrying Holland and a friend veered onto the right shoulder, hit a tree, and then whipped around to hit another tree, the California Highway Patrol confirmed with CNET. Holland, 24, died on impact.

The CHP is investigating the multi-car crash to figure out which driver was at fault. "It's going to take us awhile to figure out who's at fault, probably a couple of weeks," CHP Officer Chad Hertzell told CNET.

Since coming on the scene over the past few years, ride sharing companies -- which let regular folks become impromptu taxi drivers using their personal cars -- have grappled with how to provide insurance that adequately covers passengers. The fatal accident highlights an important issue confronting all ride-sharing users: Who will pay for medical and other costs if they're hurt while using the service? That's because liability insurance coverage hinges on factors such as who is at fault during an accident.

At stake in this case is how Lyft's insurance will cover the accident. The ride-sharing service offers a $1 million liability insurance policy, which pays when drivers have been found to be "at fault" or negligent. Chances are that Lyft's insurance will cover the accident if the CHP determines Adhikari was at fault. If the hit-and-run driver is considered at fault, Lyft will also likely cover the crash with its $1 million uninsured/underinsured motorist policy.

"Lyft's $1M liability policy, which includes uninsured/underinsured liability coverage, is designed to provide coverage for Lyft drivers to protect passengers and third-parties in unfortunate and tragic accidents such as this one," Lyft spokeswoman Erin Simpson said in an emailed statement.

Lyft's insurance wasn't always as comprehensive. But in July the company changed its policy to completely ensure passengers are covered while using the ride-sharing service.

"As of July 2014, our $1 million liability and uninsured/underinsured policies apply as primary to a driver's personal automobile insurance policy when matched with a passenger," Simpson said. "This means that from the moment drivers accept a ride request and are on their way to pick up a passenger to the moment the ride ends, they are protected by a commercial insurance policy for liability up to $1 million per incident."

Corrected at 8:55 p.m. PT to clarify Lyft's insurance policy.