Ridesharing is one of this generation’s greatest innovative breakthroughs. The ability to hail a ride with a perfect stranger has evolved from a fringe concept in urban cities to a mainstay across America.
We can choose the size of vehicle we want, request the driver be a woman, or choose rides based on our budget. Splitting the cost of a ride home with friends is as easy as tapping your finger on an app.
The competition that ridesharing companies have spawned in the transportation business has delivered customers low fares, more options to travel between destinations, and the ability to hail a ride at any time of the day from virtually anywhere. Whether your flight landed late at night or you are in a sketchy part of town, finding a ride home has become significantly easier and safer.
Unfortunately, this industry has become the target of unnecessary lawsuits that are driving (pun intended) prices up.
Vicarious Liability
If something happens to a passenger on their ride, the company could be liable for the actions of the driver. It’s based upon the principle of vicarious liability. Also known as imputed liability, this is when a principal party is responsible for the actionable conduct of their agent based on the relationship between the two parties.
In the ridesharing context, the principal party is the ridesharing company, and the agent is the driver. Rideshare drivers are not employees of the company but are classified as independent contractors. Nonetheless, an Uber or Lyft driver’s actions could have consequences for the company.
Ridesharing companies provide $1 million or more in third-party liability insurance to cover accidents that occur during a ride. Partial insurance coverage for drivers who are active on the app but passengers are not present in the car is also provided.
A personal injury lawyer explained on his website:
When a rideshare driver is offline, their personal auto insurance typically applies, which may not cover commercial use. Once they log in to the app but have yet to accept a ride request, Uber and Lyft provide limited liability coverage. However, once a ride is accepted and the passenger is in the vehicle, the rideshare companies’ full liability coverage comes into play. This tiered structure means victims’ compensation potential varies dramatically based on the driver’s status at the time of an accident.
Auto accidents are unfortunate. When ridesharing vehicles are involved, there is greater scrutiny to understand how it happened and who was involved. Injured passengers understandably want answers and may need help. However, the prospect of million-dollar settlements has created a cottage industry that fuels the frivolous lawsuits.
Safe but a Target
Ridesharing is remarkably safe from many standpoints. As we’ve written over the years, ridesharing is safe, reducing drunk driving accidents. Over 99% of rides on Uber end without a safety incident. While there may be a handful of cases, ridesharing has lower fatality rates than the national average.
That speaks to the drivers’ prioritization of safety on the road, thanks to self-regulation by companies and some policy requirements.
Still, personal injury lawyers have found ridesharing a good target for litigation in hopes of a hefty settlement. This has become a big business. Legal advertising for these and other services is a $2.5 billion industry. If you look at the list of top players, you’ll see familiar names, including some you’ve probably seen on billboards along the side of the highway.
Frivolous Lawsuits Drive Prices Higher
You may dismiss the billboards asking if you’ve been in an accident with an Uber or Lyft, but we shouldn’t overlook how frivolous lawsuits cost customers.
According to a Medium post by Uber:
Between 2021 and 2024, Uber’s U.S. Mobility insurance costs per trip increased by more than 50%, driven in part by unnecessary and meritless vicarious liability suits.
Uber explained that it spends “hundreds of millions each year” fighting these cases. Whether or not lawsuits are dismissed, they are still on the hook for the legal fees incurred. This leads to increased insurance costs and increased costs for riders.
These costs may show up on your receipt afterward as higher fares and fewer options for rides. When service is reduced, and access to ridesharing is diminished, everyone loses valuable, flexible transportation options. Underserved communities are especially affected, from the disabled to poor communities that taxicabs avoid.
Bottom Line
Ridesharing is a safe, good deal, but grows more unaffordable as unnecessary lawsuits raise the cost of business. We want those injured in an accident to receive the help they need, but increasingly, we have a growing cottage industry purely looking to shake down businesses.
This is an area for policymakers to consider tort reform that would limit the liability of these companies in certain situations. States are moving in this direction. Washington should too.