Thursday, July 10, 2014

Mobile Ride-Sharing Applications: Technology Changing Faster Than Law

Across the globe, in over 39 countries, people are trying a new form of locating transportation through mobile phone applications, commonly known as ride-sharing.  Companies such as Lyft and Uber, among others, have created an experience where a user can download an app to his or her mobile device to find area drivers who are willing to, for a fee, offer the user transportation to his or her desired location.

Several features differentiate this system from traditional taxicab services as we know them.  First, and arguably what makes these companies so popular over taxicabs, users can find transportation almost instantaneously in cities where companies like Lyft and Uber operate via the GPS function of a smart phone.  Gone are the days of calling a taxi and waiting an hour for an available driver to arrive.  Second, drivers use their own cars to offer transportation to users.  Companies like Uber and Lyft serve to bring the driver and ride-seeker together (and retain a fee for doing so), but they do not own or operate a physical fleet.  Third, the rate for such services can fluctuate based upon demand with users receiving a price quote for their entire trip prior to agreeing to accept a ride from the driver.  Further,contrasting these services from taxicab companies and each other, Lyft drivers are solely private individuals offering rides to other individuals, while Uber offers several types of services, including ride-shares offered by private individuals (through UberX) and rides offered from commercially licensed, professional chauffeurs (through UberBlack).   

While ride-sharing apps have been a huge success in many locations, such a system has not been without its share of critics.  Most notably, traditional taxi companies have challenged ride-sharing, arguing that the competitive playing field should be leveled with Lyft, Uber and similar companies forced to abide by the same stringent regulations imposed upon the taxicab industry.  Thus far, both ride-sharing app companies have skirted those regulations in many places because, as designed, they are technology companies matching riders with drivers rather than taxi companies who own, operate and manage fleets.  Interestingly, taxicab companies have not been seeking to end the use of ride-sharing technology but only to have those companies play by the same rules, suggesting that taxicab companies recognize the importance and usefulness of such an app and may be suffering from a case of sour grapes after not being able to capitalize on the same market opportunity themselves.  

In Maryland, a battle between taxis and Uber is blazing.  In April of this year, the Chief Public Utility Law Judge declared that ride-sharing application developer Uber is a common-carrier and thus subject to the same rules and regulations of a standard taxi company, including fixed prices rather than demand-based pricing, under the Maryland Public Utilities Article.  To reach the decision that Uber falls under these laws, the Judge essentially ruled that Uber “owns” the vehicles that are being used to offer rides: a conclusion that seems to contravene logic to some extent since Uber has no physical control or property interest in the vehicles.  Rather, they are basically a dispatch company.  While this specific Maryland challenge deals directly with Uber’s option that pairs ride-seekers with professional drivers for-hire rather than individual private drivers, the implication, legally, will probably be the same for both types of companies in Maryland. At this point, Uber’s appeal of the ruling is pending. 

With such complaints and lawsuits popping up around the world, different locales are dealing with the problem in different ways.  Recently Transport for London, the regulatory agency for that city's transportation industry, ruled that Uber's app is not the same as a taxi meter, thus allowing Uber to operate outside the rules and regulations that London's cabs must follow.  Here in the United States, some jurisdictions have decided to take matters into their own hands rather than waiting for regulatory and legal challenges, seeking to change the laws to accommodate the new technologies.  In June of this year, Colorado was the first state to pass legislation addressing specifically ride-sharing technologies in order to end the type of clash ensuing in Maryland.   The law in that state now allows ride-sharing apps but requires background checks for drivers, proof of insurance and vehicle inspections to assess safety. 

Though Colorado was the first to pass such laws, Maryland also had similar proposed legislation on the table before the Maryland General Assembly in the 2014 term.  Had the proposal been enacted into law, it would have codified safety standards, required driver background checks and rate reporting as well as set minimum insurance protocols such as requiring commercial liability insurance with minimum $1 million coverage for drivers offering ride-shares through the apps.  Unfortunately, the leading-edge proposal failed to pass. 

Until ride-sharing apps can garner enough support for legislative updates to meet changing technologies, Uber and Lyft are trying to continue to earn good will by stomping out detractors on other fronts.  While it is not a concern avidly raised by the traditional taxicab industry, one often cited worry about the continued growth of ride-sharing apps is rooted in public policy.  Many critics of Uber and Lyft question who will cover bodily injury claims in car accidents when drivers are acting as chauffeurs.  What about when drivers are en route to pick up clients?  Traditional taxicabs offer commercial insurance but Uber and Lyft, detractors argue, face insurance gaps.   

Not to be discouraged, both companies have followed up on such concerns with solutions.  Uber, specifically, made an announcement in May of this year, sharing information regarding their new insurance policies that govern the “gap” created between individual and professional coverage when a driver is actively on the Uber network but not transporting a passenger.  Uber CEO Travis Kalanick, in discussing the new policies in a conference call reported by Forbes Magazine said of the insurance, “it gives legislators and regulators the confidence in knowing the public interest is being protected while a lot of the rules are being figured out, and allows them to be thoughtful while they work through their legislative options…We are doing everything we possibly can to show how Uber in a city makes that city better.”

With Uber quickly winning favor with the general population and growing new types of and new markets for auto insurance coverage, it appears that, even with the latest hurdle in Maryland, ride-sharing technologies offering virtually on-demand services with free-market flexibility have lasting “curb” appeal.

Contributed by Lauren Seldomridge

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