Playing Catch-up: The Legal Backstory of Ride Sharing Companies

By Georgia Ray
Georgia Ray is a sophomore in the College of Arts and Sciences majoring in Cognitive Science and Urban Studies.
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Whether it is a businessman headed to a meeting or a college student trying to avoid their designated driver responsibilities on the way to a party, one is likely to hear the phrase “I’ll call an Uber.” Ride sharing companies are one of the most innovative inventions of the 21st century,  revolutionizing the way that humans get around. Uber and Lyft are so interweaved into the fabric of daily life, especially for populations that would not typically own cars, that at this point it seems almost impossible to avoid them. By creating an unavoidable system, these companies have created a culture where the population does not question them, until they are forced to. A product’s market debut often beats its legal one, and ride sharing is no exception. When ride sharing companies took the market by storm, there were not regulations in place that specifically pertained to them and since their debut, society has been playing catch up, sometimes successfully, and sometimes not so successfully. This has created a complicated framework of legal regulations for ride sharing companies today that consumers and drivers alike are often woefully unaware of, but should take into account next time before they ride. 

Uber and Lyft have already faced their fair share of legal dilemmas since being on the market. One such lawsuit was filed under the Americans with Disabilities Act and it claimed that “While Uber offers wheelchair-accessible cars through its UberWAV service… these special cars, which typically have lifts and ramps for mobility devices, account for a tiny fraction of the 58,000 for-hire cars dispatched by Uber in New York City’s five boroughs.” [1] This is an example of a part of the population that the companies did not account for before launching their product (UberWAV itself was added after the initial service was released) and it is that oversight, that can get them in trouble. A similar lawsuit is being filed in Texas as well [2].

    Ride sharing companies and cars are also not held to the same standards as taxi drivers and this has caused a slew of problems relating to insurance, background checks, and overcrowding. In many cities, taxis have to purchase a “medallion” in order to operate. The idea behind this is that it keeps the supply and demand between those that want to ride and those offering rides in check. Ride sharing completely overrides this, and they entered the market too quick for legislators to reply. Additionally, as the Boston Globe reports, "Ride-sharing drivers… ‘don’t have insurance. They don’t have livery tags. They don’t have anything like that.’” [3] This means that it is cheaper for Uber drivers to get on the road, because they don’t have to purchase the medallion, but also cheaper because they don’t have to follow the rules and regulations that taxi drivers do like purchasing insurance or undergoing regular car inspections. This creates an unsafe and unfair environment. Unaccountability on the part of these companies also paves the way for legal gray area with regards to ride sharing, particularly relating to insurance. As an article by NBC explains, “A regular person can become an UberX driver; they're not licensed chauffeurs, and they use their own cars. UberX drivers can also use their existing personal auto insurance policy. They're not required to get commercial liability insurance. So if an UberX driver gets into an accident, an insurance company can deny the claim.” [4] These are only some of the issues that have already arisen with regards to ride sharing legality, and there are more that are sure to arise in the future.
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    Another legal issue that these companies have run into is whether their drivers are considered employees or independent contractors. When the apps were first released, this was not clarified. Since then, thanks to litigation, it has been made clear that the drivers are in fact independent contractors, but this means that on top of potential insurance issues that arise for Uber drivers, they would also not be allowed worker’s compensation if involved in an accident [5].

    Some states and cities are taking measures to try to implement the legal infrastructure needed to regulate these companies. The first state to do this was Colorado. In 2015, “Colorado’s  law [broke] new ground by requiring [ride sharing companies] or their drivers to carry primary insurance coverage for all commercial activity from the time the driver logs into the app until the passengers are dropped off and the driver logs off from the app and is no longer available to provide rides.” [6] This was a particularly important regulation as it helps to eliminate the insurance gap that can exist between companies and drivers. “Because the company coverage is not primary and [one’s] personal auto insurance does not provide coverage, it is not clear who pays for accidents. That means delays in compensating the victims, extra costs incurred with handling claims and the potential for litigation, costs that could wind up being reflected in the premiums of every driver in the state” [7] This is demonstrated in a case that occurred regarding a 6 year old pedestrian. The girl was hit by an Uber driver who was logged into the app, but had not picked up a passenger. Uber claimed that they were not responsible and their insurance would not provide compensation to the parents of the child, but the insurance of the driver could also not be held responsible because personal auto insurance is suspended when engaging in commercial activities [5]. This creates an insurance gap, that unless one lives in a state like Colorado that has directly addressed the issue, can continue to be a problem even today.


    Another place that has recently made moves towards further regulating this industry is New York City.  The New York Post reports that “the council, in a 39-6 vote, approved a one-year moratorium on the issuance of new for-hire-vehicle licenses while it studies the impact that the rapidly growing industry is having on the city.” [8] This means that NYC has mandated that no new cars enter the ride sharing market for a whole year until they are able to process their impact and implement necessary mandates. This is essentially putting the market on hold in an attempt to allow legal regulations to catch up.

    Even with all these efforts to regulate ride sharing, there are some that believe it shouldn’t be regulated at all. Economics21 proposes a different solution where taxis and ride sharing apps are both deregulated, in order to level the playing field, writing, “Superfluous rules and price caps have restricted entry and stifled competition. For the past 80 years, these regulations have served medallion holders and protected their businesses. Now that new services have been able to avoid them and offer more efficient alternatives, the rules are a hindrance on the same people they were created to protect.” [9] They suggest that these rules and regulations are a hinderance for anyone entering the market and propose that they be taken away all together.

    Moving forward, it is not clear how exactly these companies should be regulated. There is no clear cut answer and it is even harder to find one when they are operating day to day as such a staple in many people’s lives. That said, we need answers, and soon. Not only is this a problem for drivers and consumers as “Uber has been involved in legal action over several issues, and in more than 25 countries” [10], but it is also a problem for ride sharing companies themselves, because if they don’t figure out these issues, they may not survive. Given the rapid growth and new territory that these companies are experiencing, Investopedia states "it's not shocking to learn that Uber is facing many challenges as it grows.” [11] Challenges that, if left unanswered, could severely impact the company’s future.


    For now, what is important to remember is that there is still a lot of legal gray area pertaining to Uber and Lyft. As both a rider and a driver, you could encounter a situation that has not yet been addressed or regulated and that could incur costly litigation. Given the legal gap that exists in regards to insurance, I believe it is in a person’s best interest to avoid being a driver for these companies as one could incur undue cost burdens personally, that are not covered by insurance. As for a rider, there is still a lot left unsaid and unestablished, so, next time you need a ride home from the airport, maybe just call a cab.  

References:

[1] Hu, Winnie. “Uber Discriminates Against Riders With Disabilities, Suit Says.” The New York     Times, 18 July 2017, www.nytimes.com/2017/07/18/nyregion/uber-disabilities-lawsuit-            new-york-city.html.
[2] Dan J. Ramos, Laura Posadas, Tina Williams v. Uber Technologies, Inc; Lyft, Inc. Western             District of Texas San Antonio Division District Court. 2016.
[3] Newsham, Jack. “Uber, Lyft save big by avoiding regulations” The Boston Globe, 15                 December 2014, https://www.bostonglobe.com/business/2014/12/25/uber-lyft-save-big-            avoiding-regulations/pQAMk1KMOavlyZhWi4XIaJ/story.html
[4] Nicholson, Lucy. “States Warn of Rideshare Risks for Passengers” NBC News, 5 June 2014,             https://www.nbcnews.com/business/consumer/states-warn-rideshare-risks-passengers-            n116736
[5] Cybulski, Michael. “What you need to know about ride sharing services and the law” 17 June     2016, https://deutermanlaw.com/what-you-need-to-know-about-ride-sharing-services-            and-the-law/
[6] Mahrt, Nicole. “Colorado’s New Ride Sharing Law Takes Effect and Provides Certainty of             Insurance Coverage for TNC Drivers and Passengers” Property Casualty Insurers                 Association of America, 15 January 2015, https://www.pciaa.net/pciwebsite/cms/content/            viewpage?sitePageId=40151
[7] “Five Things Every Rideshare Driver Should Know Before Signing Up” Property Casualty             Insurers Association of America, http://www.pciaa.net/industry-issues/transportation-            network-companies/5-things-every-rideshare-driver-should-know-before-signing-up
[8] Fufaro, Danielle et al. “NYC to impose caps on Lyft and Uber” New York Post, 8 August             2018, https://nypost.com/2018/08/08/city-council-approves-sweeping-regulations-for-            ride-sharing-apps/
[9] Kemp, David. “Deregulate Taxis, Don't Regulate Uber” Economics21, 21 September 2017,             https://economics21.org/html/deregulate-taxis-dont-regulate-uber-2581.html
[10] “Sharing economy: rapid expansion, rise in legal issues” Digital Watch, Geneva Internet             Platform, 2018, https://dig.watch/trends/uber
[11] Page, Vanessa “4 Challenges Uber Will Face In The Next Years” Investopedia, 2014, https://        www.investopedia.com/articles/investing/072215/4-challenges-uber-will-face-next-            years.asp
Photo Credit: Unspash: Dan Gold https://unsplash.com/photos/kARZuSYMfrA


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