Last New Year’s Eve, an Uber driver named Syed Muzaffar was driving his car in San Francisco while logged into Uber’s app for drivers when he struck and killed a six-year-old girl who was in a crosswalk with her mother and brother. The next day, Uber distanced itself from the accident, posting a somewhat terse message on its Web site that offered condolences but also noted that “this tragedy did not involve a vehicle or provider doing a trip on the Uber system.” The statement was later updated to read, “The driver in question was not providing services on the Uber system during the time of the accident.” The subtext, though, was that the accident wasn’t strictly Uber’s responsibility. While the company could have provided up to a million dollars in liability coverage if an accident occurred, this applied only to drivers who had a passenger in the car or were on their way to pick one up; the company later argued that it wasn’t liable for the girl’s death.
At the time the accident took place, lawmakers were just starting to contend with the growth of Web sites that help people to use their own stuff—cars, condos, even WiFi signals—to provide services to others. The people who offer these services are rarely employed by the companies whose platforms they use; at most, they’re considered contractors. This ambiguous state of affairs was beginning to vex lawmakers, who saw a need to regulate some of the commercial activity enabled by the sites but kept being told by company executives that they weren’t responsible for the actions of their users. Just three months earlier, in New York, Attorney General Eric Schneiderman had subpoenaed Airbnb, which lets people rent out their homes, to obtain information about thousands of the company’s users in New York City, some of whom seemed to be violating a state prohibition against certain kinds of short-term rentals. In a blog post, David Hantman, Airbnb’s head of global public policy, replied, “This demand is unreasonably broad and we will fight it with everything we’ve got.”
After the Uber accident, scrutiny of car-sharing companies in particular intensified. The family of the six-year-old victim sued Uber, and California state lawmakers started pursuing a bill to strengthen insurance requirements for companies like Uber and its rivals Lyft and Sidecar. Amid all this, the companies began expanding their insurance coverage for drivers. In September, California Governor Jerry Brown signed into law new requirements requiring that ride-sharing companies provide at least secondary insurance (which would supplement drivers’ primary coverage) from the moment the app is turned on, rather than only when the drivers have accepted or are transporting passengers. It also mandates certain levels of insurance coverage.
This past Saturday, a Lyft driver transporting two young men swerved to avoid a stalled car on the freeway and hit a tree, killing one of the passengers, a twenty-four-year-old from West Sacramento. It was the company’s first fatality. From a liability standpoint, the situation was more straightforward than what Uber had faced with Muzaffar, because the victim was a passenger. Still, the incident reflected how much the industry has changed over the past several months.
Earlier this year, Lyft changed its own insurance policies in several ways, to provide secondary coverage for drivers who have their passenger-finding apps turned on but don’t have a passenger in the car, and to make its liability insurance the primary coverage in the event of an accident during a Lyft ride or while a driver is picking up a passenger, rather than covering an accident only on top of what the driver’s personal insurance provides. After Saturday’s accident, Lyft put out a statement that was markedly different from Uber’s: “We are deeply saddened to hear this news and will continue to support those involved as well as authorities in the ongoing investigation.” It is expected that Lyft’s insurance will kick in if it is established that the driver was at fault; Lyft hasn’t contested this view.
Lyft and Uber aren’t the only contractor-reliant Internet companies whose policies are evolving. Airbnb experienced one of the earliest liability disasters, in 2011, when a woman rented out her apartment in San Francisco through Airbnb and came back to find that it had been ransacked and trashed. After the incident, the company announced a guarantee of reimbursement, up to a certain level, if a host’s belongings are lost or damaged. Adrienne Raphel wrote in July about a reinvention of TaskRabbit, which lets people hire others over the Internet for odd jobs. Under its old model, a worker could bid to do a task at whatever price he felt was appropriate, but the new model requires that “Taskers” set hourly rates for themselves, which can be different from gig to gig but can never be lower than a pre-set minimum rate. TaskRabbit also started insuring tasks for up to a million dollars—for example, if a Tasker damages a client’s belongings.
It makes sense for companies in the so-called sharing economy to behave more conservatively as they grow and mature. Many of them operate in competitive, fast-changing markets, and in order to keep expanding, they need cash, whether from private investment, going public, or putting themselves up for sale. Potential investors might be put off if they perceive a company as prone to legal or regulatory issues.
Airbnb, Uber, and Lyft have sometimes protested when they have seen lawmakers as requiring too much of them. But so far, they’ve had more luck turning legislation in their favor when they’ve cooperated with the authorities than when they’ve gone rogue. When Uber tried to deflect blame for the New Year’s Eve accident, lawmakers responded by toughening legal requirements. Later, in the spring, a New York judge ruled that the attorney general had sought too much information but signalled that he would accept a subpoena for a more limited set of information; the attorney general promptly issued a narrower subpoena, and this time, rather than protesting, Airbnb reached an agreement with him to provide a set of anonymous data about New York Airbnb hosts. But ride-sharing companies took a different, more traditional, approach over the summer, when, for example, they didn’t like the proposed California legislation that would regulate car-sharing insurance requirements. Perhaps figuring that a bill would eventually be passed in some form, they lobbied legislators to change the bill under consideration so that the rules would be more palatable to them. It worked. The law signed by Brown was endorsed by Uber, Lyft, and others—because it incorporated some of their requests. Lyft’s measured response to Saturday’s accident, signalling that the company would be coöperative in the aftermath, came across as kinder and more generous than Uber’s statement in the wake of the New Year’s Eve accident. It was probably also a smarter business move.
Note: This post has been updated to clarify the roles of primary and secondary insurance coverage in Lyft's policies and under California law regarding ride-sharing companies.
