Car-Sharing Startup RelayRides Hit With $200K Fine From New York State For Insurance Violations

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RelayRides, the startup that runs a peer-to-peer marketplace for people to share their cars, has been ordered to pay a $200,000 fine to New York State after an investigation by the state’s Department of Financial Services found that the company “put New Yorkers at risk through false advertising, unlicensed insurance activity, and other violations,” Governor Andrew Cuomo’s office announced today.

The Department of Financial Services explained the violations thusly:

“RelayRides represented that consumers would not be financially liable for accidents or thefts that occurred while using the service, which was not true. …The company sold insurance and adjusted insurance claims without being licensed by DFS, which is a violation of New York Insurance Law. Moreover, RelayRides misrepresented to New Yorkers that they would not be liable for out-of-pocket expenses in the event that the car is stolen or involved in an accident. In fact, DFS’s investigation uncovered that those claims were not true and that New Yorkers could be held personally liable for property damage, theft, bodily injury, or death that occurs during the rental.”

Along with paying the fee, RelayRides has also agreed to no longer conduct business in New York until it “submits a business plan that DFS determines is no longer inconsistent with New York State Insurance Law.” RelayRides’ operations in New York have been suspended since May 2013 due to the insurance law investigation.

$200,000 may not seem like a huge amount of money for a company that’s raised some $18 million in venture capital, but it is a symbolic blow in a larger battle between regulators and startups in the so-called “sharing economy.” This past weekend, for example, the Austin Police Department publicly warned South By Southwest attendees against using transportation services such as Uber.