New York Gov. Andrew M. Cuomo’s administration has announced that an investigation by New York’s Department of Financial Services (DFS) exposed that the car-sharing service RelayRides put New Yorkers at risk through violations such as false advertising and unlicensed insurance activity.

As a result of the investigation, RelayRides will pay a $200,000 to the DFS. RelayRides is a peer-to-peer car-sharing service that allows people to rent out their vehicles to third parties in exchange for a fee.

“Our administration will not tolerate when companies break the law and jeopardize New Yorkers’ safety,” said Cuomo. “We will continue to take an active role in protecting consumers by preventing false advertising and misleading business practices.”

Last May, the DFS directed RelayRides to cease operating in New York for its repeated violations of law. RelayRides represented that consumers would not be financially liable for accidents or thefts that occurred while using the service, which was not true, according to the DFS.

RelayRides sold insurance and adjusted insurance claims without being licensed by the DFS, which is a violation of New York’s 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, the 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.

In a typical RelayRides rental transaction, the company maintained a $1 million liability insurance policy for injury or damage to third parties. The policy was issued by Hudson Insurance Co., a New York insurer.

RelayRides told vehicle owners that the Hudson liability policy would cover the owner and that the owner’s own policy would not be involved — if there was an accident while a person was renting the vehicle, according to the DFS.

However, an owner’s personal liability insurance policy provides coverage to any person who drives the vehicle with the owner’s permission. New York law does not permit an insurer to exclude coverage for a renter. As a result, an owner may have been personally liable for any accident that occurred while the vehicle was being rented, says the DFS.

In addition, RelayRides misrepresented to vehicle owners that their participation in the program would not result in their personal liability insurers cancelling or not renewing their personal liability insurance. However, standard New York liability policies do not permit the use of vehicles in commercial enterprises, according to the DFS.

RelayRides also failed to disclose to owners that renting out a personal vehicle could constitute a commercial use of that vehicle, potentially causing car owners to violate standard provisions of New York vehicle leasing and finance agreements.

In addition to the $200,000 penalty, RelayRides has signed a consent order that it will not conduct any business in New York until it submits a business plan that the DFS determines is no longer inconsistent with New York’s insurance law.

RelayRides also agreed that the DFS will have enhanced oversight over its operations if it starts operating in New York in the future: RelayRides will submit all of its advertisements and consumer disclosures to the DFS monthly for review of potential false and misleading statements, according to the DFS.

DFS is continuing its investigation into Hudson Insurance Co., which issued the group liability policy sold to RelayRides’ consumers.

Issued by the New York State Department of Financial Services’ Financial Frauds and Consumer Protection Division, click here for the full consent order signed by RelayRides: