RelayRides, a peer-to-peer marketplace where people can share their cars has been ordered by the state of New York to pay a $200,000 fine for insurance violations.
The state’s Department of Financial Services discovered that RelayRides put New Yorkers at risk with unlicensed insurance activity, false advertising, and additional violations according to Govenor Andrew Cuomo’s office.
The Department of Financial Services explained the violations by saying “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.”
RelayRides has agreed not to conduct business in New York until it submits a business plan consistent with the New York State Insurance Law, in addition to paying the fee.
The startup has raised $18 million in venture capital, so although $200,000 comparatively small to the amount of funding they have raised, the fine still serves as a reminder of the bigger battle going on between state regulators and startups in the sharing economy.
The insurance law investigation resulted in RelayRides receiving a cease-and-desist notice in May of 2013, the company’s operations has been suspended ever since.