Uber and Ride-App Car Services
More questions than answers
Uber and other ride app companies (e.g., Lyft) have opened new frontiers not only in transportation but in car accident law. This article will discuss some of the challenges. I shall refer to Uber, the giant of the industry, but these issues apply to all other ride app companies.
I. Uber’s Claim of Non-Liability
Uber claims that it has no liability for accidents. Uber’s position has been that it merely is a booking agent for the ride and that the car’s owner and driver has sole
responsibility for an accident. The car that picks you up is owned by the driver. The driver is not an Uber employee. He is an independent contractor, and Uber’s “take” is part of the fare, generally 30%. Uber does not withhold payroll taxes for the drivers. The drivers are paid on a “gross” basis by Uber with no tax deductions.
As a result, Uber asserts that it has no liability for a motor vehicle accident of one of its drivers. Under New York Vehicle and Traffic Law, the owner and operator of a vehicle are jointly and severally liable for an accident. There is no provision for holding another party liable unless the owner or operator is an employee in the course of the employee’s business. E.g., if I were to have my employee use his personal vehicle for a business trip for my office, then the employee could be deemed to acting on behalf of the employer. The crucial element is whether the driver is an employee of Uber or an independent contractor. Uber’s steadfast position is that the drivers are not employees.
The independent contractor defense has been used by local, small car service companies which have a similar business model. The neighborhood car service would merely book the trips with the drivers who owned their own cars. The customer books a ride by phone or by phone app. The fare is shared between the driver and the car service base. The law protected the small mom and pop car services in the neighborhoods. Typically, the neighborhood car service would have little to no assets. It operated out of a rented storefront with beat-up furniture and a bunch of phone lines and a computer. However, in comparison, Uber is a multibillion corporation.
The ultimate test is whether Uber exercises enough control over the drivers’ workday in setting hours, work rules, and working conditions.
This defense will be tested in the courts. There is an argument that the driver is an employee of Uber in that Uber exercises a degree of control and direction over the employee. E.g., Uber and the driver share the fare. Also, each driver is furthering the Uber brand which is for the benefit of Uber. The drivers use Uber logos and insignias in their cars. Furthermore, Uber controls the drivers by prescribing the type of car, the standard of cleanliness, and the code of conduct toward passengers. The courts may want to take a second look at the independent contractor defense which protects the mom and pop car services.
In this same vein, Uber drivers have sought to be deemed employees in various class action litigations. They seek the protections of employment, such as workers’ compensation, social security contributions by Uber, and overtime pay. If the courts were to rule that Uber is an employer, then hundreds of millions of dollars in payroll taxes could have to be collected and remitted by Uber. Uber would have to match the Social Security payments made by its drivers, and this would result a tax liability to Uber in the hundreds of millions of dollars. This is a looming issue hanging-over Uber.
II. Apps and Accidents
Uber has come under fire from safety groups for its business model of using apps. Often, a driver will start looking at his cell phone toward the end of a job in order to get the “jump” on the next job. There are often more drivers available than there are jobs. Therefore, a driver may be distracted while driving in the race to get the next job.
In a San Francisco case involving the death of a child, there was a claim that the Uber driver was distracted by the phone app when he struck the girl in the crosswalk. In this case Uber agreed to settle for an undisclosed amount. As indicated above, it is Uber’s firm position that it is not responsible for the drivers’ accidents.
If you see a driver fiddling with his cell phone while driving, tell him to cease until your ride is finished.
III. Uber’s Insurance
Q: Do Uber cars carry more insurance than required for livery cars?
A: It is unclear.
In order to work in New York City, Uber drivers must register their vehicles as livery vehicles with the Taxi and Limousine Commission (“TLC”). Livery vehicles include yellow medallion cabs, green medallion cabs, black cars, and car services. As part of the licensing process the owner-operator must buy insurance approved by the TLC. There are only a few insurers who insure livery vehicles, such as American Transit Insurance Company and Hereford Insurance Company. It falls upon the driver-owner to purchase his own insurance.
Livery vehicles and black cars must carry $100/$300 liability insurance and $200 in No Fault. That means that the maximum coverage available for one injured person is $100,000, and the maximum pool available for three or more persons is $300,000. The No Fault medical and lost income coverage to an injured person is $200,000.
There is a question as to whether Uber provides coverage in addition to these amounts. Uber publicized that it has $1,000,000 in coverage for its drivers. However, there are many exceptions to coverage so that such coverage appears illusory. E.g., the $1,000,000 is not available if the Uber driver has not yet picked-up a fare. The coverage does not apply when the driver is “off the app”.
In view of the lack of clarity as to the insurance coverage, I strongly recommend that you review your own auto insurance coverage. You should carry the maximum insurance that you can afford for No Fault and Supplementary Uninsurance and Underinsurance Motorist coverage. These coverages will provide to you added protection in the event where there is lower insurance carried by the vehicles involved in the accident. See our related story in “From Our Case Files” on the back cover.
The app ride-shares business has shaken the taxi industry. The law involving Uber vehicles will have to adapt to the challenges presented by this new industry.