When the transportation app Uber was officially launched in 2011, it was both praised for providing consumers with easier and less expensive transportation options and criticized as unfair competition and dangerous.
Fans of the service, and the similar app Lyft, immediately liked the cheaper fares and the ease of using their smartphone to arrange pick-ups. Some praised it for allowing individuals to make extra money using their cars.
Uber has since grown into a $40-billion company. It didn’t take long after the launch for some cracks to appear in this transportation revolution. Several media outlets and consumer safety groups started questioning the business practices of Uber, such as the screening process and qualifications for drivers. Questions also arose about whether those drivers are employees of Uber or independent contractors.
This new type of transportation arrangement also presented legal issues regarding who is responsible when something goes wrong.
These types of companies are referred to by lawmakers as Transportation Network Companies (TNC).
Taxicab companies are often highly regulated by state laws requiring training of drivers and proof of liability insurance. But Uber contended that it was only providing a platform in the new “sharing economy.” In other words, Uber was only providing a way for people who need a service to connect with people who provide a service, and therefore Uber couldn’t be held responsible or legally liable for the actions of the individuals using the platform.
Uber argued they were exempt from many of the regulations imposed by the states where they conducted business. In response, Uber faced heavy opposition and was even banned in some states and cities. State lawmakers struggled with the tension between innovation demanded by consumers and regulation of commercial activity that protects those same consumers. Uber then actively lobbied for laws more favorable to them.
These transportation companies also found themselves at odds with insurers, who have been quite clear that “personal automobile insurance is not intended to cover people who use their vehicles for commercial purposes,” according to an article in Insurance Journal.
A highly publicized fatal wreck involving an Uber driver and a 6-year old pedestrian in California brought into focus the issue of who caries liability insurance in a sharing economy.
At the time of the wreck, the Uber driver didn’t have a passenger but he was logged into the Uber app between rides. Uber had a liability policy providing up to $1 million in coverage but said they were not liable since the driver didn’t have a passenger.
That would mean the driver’s policy, which likely carried much less coverage, was the only policy from which the family of the little girl could recover. However, standard personal automobile insurance policies exclude coverage for people who use their vehicles for commercial purposes, meaning there would be no policy from which the family could recover.
Responding to negative publicity after the accident, Uber eventually backpedaled on its policy and said it would cover drivers with the app activated but not yet carrying a passenger.
The girls’ family settled a lawsuit against Uber in 2015. Terms were not disclosed.
North Carolina lawmakers addressed this issue in 2015 when they passed legislation requiring drivers transporting individuals via a Transportation Network Company, such as Uber and Lyft, to carry $1.5 million per accident in bodily injury coverage.
If the TNC driver is logged in to the app but not providing service, there must be $50,000 per person, $100,000 per accident coverage. The law further stated that the coverage could be maintained by the TNC driver, the TNC or any combination of the driver and company. The new law also says that “a TNC driver is an independent contractor and not an employee,” which would impact a drivers’ ability to make a workers’ compensation claim.
In a future blog post, one of my colleagues will talk about how workers’ compensation laws apply to Uber and Lyft drivers.
As our economy changes and new technology and services emerge, new legal issues arise.
Do you traditional taxicabs be replaced by Uber and other ride-sharing services? As the sharing economy grows and changes, what other novel legal issues will lawmakers be called upon to address? We’d love to know your thoughts.