The Strange Tale of an Uber Car Crash and What It Means for the Future of Auto Insurance
Shortly before midnight on a Tuesday night in March, a black Lincoln Town Car was heading south on Divisadero Street in San Francisco at the same time a Dodge Charger was approaching from the opposite direction. The accident that occurred next is a fairly common one: the Town Car was preparing for a left-hand turn as the Charger neared the intersection. The two cars collided along their front driver’s side bumpers (at varying speeds, depending on who’s doing the telling in the police report).
The next couple of moments are the weird ones. The Charger then careened through the intersection, sheared a fire hydrant off the ground, knocked over a tree and barreled into another one. A five-story tall geyser erupted from the corner as the hydrant flew up the sidewalk and struck a pedestrian. When police arrived, it was found lying 81 feet away.
As you might imagine, the front of the Dodge was badly damaged. The driver is now suing the driver of the Town Car, a vehicle with livery plates operated under the company SF Limo Car Service. The pedestrian, who broke her leg and injured her back, is suing both drivers. She is also suing – and this is what makes this crash particularly interesting – the transportation-tech company Uber.
From the State of California Traffic Collision Report
A reporter for the local blog SFist quickly turned up at the scene. “Although we cannot confirm at the moment whether the town car driver was working for Uber,” Andrew Dalton wrote, “a quick check of the Uber app revealed an available ride in the exact same spot. Its GPS icon slowly drove away as the car was towed.”
Several bystanders identified the Town Car on their Uber apps.
“That’s how we initially knew that Uber was involved,” says Sara Peters, an attorney representing Ziad Sleiman, the man who was driving the Charger (he broke his hand).
The whole chain of liability is a mess: A pedestrian was struck by a fire hydrant that was struck by a private vehicle that was struck by a Town Car whose driver had a contract with Uber – but no actual Uber passenger in the back seat. But the terribly fluky accident raises some more straight-forward questions, too: Just what does happen if you’re an Uber passenger in the middle of an accident, or the driver behind the wheel of someone else’s car on RelayRides, or the passenger who’s riding along during a collision on Lyft? Who will take care of you?
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This question of liability sits at the heart of how we define the new transportation alternatives that are often known as "ride-sharing" or "car-sharing." They are not quite cab companies, nor rental car services, two industries that have long since sorted out how to handle commercial auto insurance.
Broadly speaking, there are two kinds of car insurance: the personal policies we all (should) have for our private cars, and commercial policies that cover vehicles in the use of a business. Your personal policy probably has a line that says you can’t drive your car for commercial purposes. If you take your minivan out to ferry strangers around town for cash, and you get in an accident while doing that, your insurance company will likely refuse to pay out. For this reason, a pizza delivery guy who drives his personal vehicle is covered by the pizza company’s insurance policy while he’s working. And a cab driver, even if he owns his own vehicle, has to take out a commercial policy to cover it.
The genius of most of these newer ride-sharing companies is that they in fact own no vehicles at all. Some of them, like Uber, argue that they have created primarily technology platforms, modern-day phone books that connect people who already have cars (or car services) to people who want to ride in them. And you wouldn’t expect the phone book to shell out if you got in a taxi accident, would you? Why would a company that owns no cars buy car insurance?
Uber's smartphone app interface.
The phone-book analogy begins to fray in the fine print. Uber, for example, has contracts with all of the drivers who participate in the service under its name. The phone book does not. That Uber contract spells out that drivers are independent contractors, not employees of Uber. And it stresses that Uber “does not provide transportation services,” “is not a transportation carrier,” and that the independent businesses that are “transportation companies” are solely responsible for taking out insurance.
“But in reality,” Peters says, “for somebody who uses Uber – and I have in the past – when you log into that app, it doesn’t say ‘We’re going to help you find an independent transportation company.’ It’s saying ‘Here’s an Uber driver. Here’s the Uber driver ID. Here’s this person being tracked on your phone, and you’re going to pay them through us.'"
“Nothing about that relationship makes you think it’s a mere phone book.”
These “newfangled cab companies,” she argues, are creating risk – putting passengers into moving cars in busy urban traffic – in precisely the same way that taxi companies create risk. But they’re not taking any responsibility for it. Her client, the Charger driver Sleiman, has not yet sued Uber, but that option remains on the table.
Doug Atkinson, the lawyer representing the pedestrian in the San Francisco accident who is suing Uber, sees a larger inequality here: “In another case, someone could be killed.” Or someone’s brother could be killed. “And who’s going to say to that person that there’s no liability when this is a business making a huge profit?”
Since these lawsuits were filed this summer, Uber announced that it had closed a $258 million round of fundraising with the backing of Google Ventures, which also does not make it sound very much like the phone book (Uber also recently announced a partnership to ferry NFL players, passengers who surely care about injury liability, too). This sounds like a lot of money the company could spend being excessively careful about insurance. But from Uber’s point of view, all of its rides are already covered.
“In all cases, Uber is basically partnering with folks who are already running businesses, who already have commercial licenses,” says Uber CEO Travis Kalanick. “And in order to get a commercial license, you have to have commercial insurance.”
Uber’s role, the company argues, is to make sure that drivers who use their technology platform have appropriate insurance for their businesses, satisfying local regulation. In the San Francisco case, Djamol Gafurov, the Town Car driver, did. End of story.
Even Gafurov appears to agree with this. His lawyer doesn't see any reason why Uber should be part of any of these lawsuits. So the pedestrian hit by a fire hydrant hit by a car hit by an Uber car believes Uber bears some responsibility here. But the Uber driver does not.
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This whole insurance question is further complicated by the fact that every state and municipality has different regulations for taxi industries and minimum insurance levels. And every transportation start-up looks a little different. Uber started off by connecting passengers to town cars driven by existing high-end taxi and limo services. RelayRides, on the other hand, allows car owners to rent their personal vehicles to other people when they’re not using them. Lyft and Sidecar enable drivers to give rides in their own cars to strangers.
“These are 21st century businesses that are operating with 20th century laws,” says Shelby Clark, the founder of RelayRides (where he remains on the board). “That’s what the issue is.”
From the beginning, RelayRides offered a $1 million policy to protect vehicle owners while other people are driving their cars. It took Clark a year and a half just to find the insurance to cover that weird idea. But obviously, the question had to be resolved: Who would rent out their own car without insurance coverage? The drivers renting the car have several insurance levels to choose from for their own liability, just as you do at Avis or Enterprise. One policy covers the car’s owner, the other the driver renting the car.
Sidecar's smartphone app interface.
RelayRides now also benefits from laws in California, Oregon, and Washington that explicitly state that people legally can rent their private cars (no one had ever said anything about the matter before). Those laws require companies like RelayRides to take out commercial insurance for the personal vehicles of their customers when they’re in commercial use. They also say that auto insurers can’t drop you from your personal policy just because you start renting out your car. (Even these laws, though, cut both ways: RelayRides is thrilled to have them, but Clark also adds that if your state does not have such a law, that doesn’t mean that renting your car is illegal.)
The taxi-like services may be the messiest, whether in a licensed livery vehicle or a personal one. As James Surowiecki in The New Yorker recently pointed out, some sharing economy businesses have managed to “piggyback” off the trust consumers feel in markets that are typically heavily regulated. Cabs are regulated, so perhaps you assume Uber is, too. Personal auto insurance is heavily regulated, so perhaps you assume the guy driving your Lyft car is totally covered, too.
The California Public Utilities Commission was supposed to vote last week on a proposal that would formalize ride-sharing in the state under a new label called "transportation network companies." Each company like Lyft and SideCar would have to be licensed by the state, conduct criminal background checks on its drivers, and hold insurance policies that would be more stringent than what’s currently required of limo companies. But the vote – and the potential that it could influence how other states proceed as well – has been delayed.
Uber, in the meantime, has begun to expand from its luxury sedan service into something that looks more like ride-sharing under the label UberX. Some of the drivers of the cheaper mid-range cars are also licensed cabbies, with their own commercial insurance. But some of them are just regular people with their own cars. In those cases, Uber is providing a commercial policy to cover the rides. But that decision further muddies the core question of how we should define these companies: If Uber is just an app with no insurance liability when you ride in a Town Car, what does that make it when you order a ride in a Prius that the company has insured?