Ridesharing: Too good to be true?

The new ridesharing economy is revolutionizing the way we get around. In New York and other major cities around the U.S. and the world, activating a smartphone or online app will summon a driver within minutes. Payment for the entire trip, including tip, is charged to a previously recorded credit card. Gone is the hassle of standing out on a street corner to hail a cab. And the savings are considerable-riding with UberX or Lyft can be up to 20 percent cheaper than using a taxi in New York. If rider demand remains high and ridesharing rates remain low, choosing Lyft or UberX as your mode of transportation may actually be more economical than owning a car. But Ridesharing’s benefits are not without risk, and you should know what you’re getting into when you call for a car.

Rider Beware

Companies like Uber and Lyft are not transportation businesses. They are tech companies that rely on communications networks to connect drivers with passengers. Drivers for UberX and Lyft operate their own vehicles and carry their own insurance. UberBlack, a more traditional, upscale limousine service utilizes vehicles like Lincoln Town Cars and Cadillac Escalades . Typically, most automobile insurance policies contain exclusions for liability arising out of the use of the car as a public or livery conveyance. Although Uber and Lyft claim to carry $1 million in ‘excess insurance’ per incident, the driver’s own insurance is the first line of coverage. Last New Year’s Eve, a 6 year-old San Francisco girl was struck and killed by an Uber driver. At first, the company declined to apply the excess coverage because the driver was not engaged in a pick-up or drop-off when the fatality occurred. Uber now states that the $1 million coverage is allowed anytime that the driver’s Uber app is turned on, whether or not he is taking part in a pick-up or drop-off. The issue of proper insurance coverage in relation to ridesharing is still unsettled and in need of further analysis and regulation.

The Liability Puzzle

UberX and Lyft consider their drivers to be independent contractors rather than employees. This means that, in the event of a lawsuit, ridesharing companies might disavow responsibility for any harm caused by a driver’s actions. In addition to questions of liability arising out of serious or fatal accidents, there have been other troubling incidents involving drivers for ridesharing companies. Some drivers have been accused of fondling and stalking passengers and otherwise behaving bizarrely or inappropriately. UberX maintains a rating system for both drivers and passengers in an effort to weed out undesirable, dangerous, or unreliable individuals. But whether these companies can be sued directly for failure to adequately screen their drivers is still uncertain. The New York Taxi and Limousine Commission (TLC) requires commercial drivers to undergo drug testing and background checks , take driving courses and have their vehicles inspected regularly. Neither UberX nor Lyft utilize professional drivers. UberBlack requires its drivers to be licensed by the TLC. UberX drivers must be twenty-three years of age or older, have a valid driver’s license and insurance coverage, and maintain their full/midsize cars in excellent condition. Lyft, as a result of a recent court ruling, has agreed to have its drivers licensed by the TLC. Neither Lyft nor UberX are required to provide handicap accessible vehicles. Unlike taxis in some U.S. cities, UberX and Lyft cars are not equipped with tamper-proof video cameras.

Early Days

The ridesharing economy is a recent innovation. So far, consumers seem to like the convenience and lower cost of using UberX and Lyft. Many questions remain as to the status of ridesharing drivers in relation to their companies and how liability for accidents and other damages will be shared between the drivers and the companies. A number of commentators and observers are calling for tighter regulation and increased monitoring of ridesharing operations. The challenge is to maintain the informal, lower-cost character of ridesharing while ensuring that its liability coverage and the quality of its drivers approach professional standards.