understanding uber tli...network companies as uber and lyft is greater than the number of taxis in...

Understanding Uber

James A. Howard, IIHoward & Howard, PCVirginia Beach, Virginia

Understanding Uber

• It has been recently reported that Uber has raised another round of funding to value the company at $50 billion, making it the highest-valued venture-based company in the world

• It has also been reported that in certain areas of Virginia the number of registered drivers for such transportation network companies as Uber and Lyft is greater than the number of taxis in the area

Understanding Uber (cont.)

• Uber states it is a technology company whose product is not car rides, but the phone application used to arrange them

• Uber’s approach is to launch in local markets regardless of existing laws or regulations, build a large customer base as quickly as possible and , when challenged, rally its user to pressure government officials

• Uber’s mode of operation is to begin to operate and then send a notice to its smartphone-wielding customers containing the e-mail address and phone number of the official in charge of the decision and instructing them to demand that the DMV “stand up for you”

Temporary Authority

• Use of armada of contract lobbyists to influence lawmakers

• Uber lobbyists submit a draft of a proposed temporary operating permit

• Statutory temporary authority to Rasier, LLC, a subsidiary of Uber Technologies, Inc., to operate as a Transportation Network Company (“TNC”)

Temporary Authority (cont.)

• Such temporary authority authorized Rasier to contract with third parties (“TNC Partner”) who use their private vehicle to transport passengers for a fee

• Temporary authority gave Rasier authority to connect TNC partners with prospective passengers via Uber’s digital platform

Operation guidelines instituted under the temporary authority

• Extensive background checks of drivers, including criminal history

• A review of driving history• Zero tolerance for use of drugs or alcohol by any

drivers• Only employing drivers who are properly licensed and

over 21

Operation guidelines (cont.)

• Rigorous insurance requirements• Maintain documentation for each driver as to his

background check, driving record, proof of insurance, valid driver’s license, social security number, vehicle registration , and proof of vehicle safety inspection

Operation guidelines (cont.)

• Features to help customers identify their driver and vehicle, including from the outside of the vehicle

• Only accepting rides booked through the company’s mobile device apps, not street hails

• Companies maintaining a Virginia transportation broker’s license

DMV Study and Proposed Legislation

• DMV study completed in December 2014• Included as an appendix to the resulting report was

proposed legislation implementing the study recommendations

• In its study, DMV reviewed the regulations of transportation network companies by:

DMV Study & Proposed Legislation (cont.)

• the State of California• the State of Colorado• the City of Seattle• the City of Chicago

DMV Study & Proposed Legislation (cont.)

• Proposed legislation was considered by a large number of stakeholders, including Uber

• Uber found fault with and contested a number of proposed revisions

• Uber maintained its position that it is a technology company that does not provide transportation services

Legislation

• General Assembly of Virginia enacted in 2015 legislation in response to DMV’s proposed legislation, with some changes

• Important parts of the legislation include the following:

Driver Screening

• TNC shall confirm a TNC partner (driver) is at least 21 and possesses a valid driver’s license

• TNC shall obtain a national criminal history check of the TNC partner, and repeat same at least once every two years

• TNC shall verify before authorizing an individual to act as a TNC partner, and at least once every two years thereafter, that the person is not listed in sex offenders registry or U.S. Justice Department website on same

Driver Screening (cont.)

• TNC shall determine if partner has been convicted of has pleaded guilty or nolo contendre to a violent felony offense

• TNC shall employ a zero-tolerance policy with respect to use of drugs and alcohol by partners

• TNC shall disclose the liability insurance coverage and limits that the TNC provides while the TNC partner uses a vehicle in connection with the TNC’s digital platform

The New Legislation

• One set of statutes in effect until January 1, 2016, and another set effective on and after January 1, 2016

• Both sets of statutes provide the following:• A TNC or TNC partner shall keep in force TNC insurance as

required by the legislation• The requirements shall apply to TNC insurers from the

moment a TNC partner accepts a prearranged ride request on a TNC’s digital platform until the partner completes the transaction on the digital platform or until the prearranged ride is completed, whichever is later

The New Legislation (cont.)

• TNC insurance shall provide motor vehicle liability which coverage shall be primary and the minimum amount of liability coverage for death, bodily injury, and property damage shall be $1 million

• TNC insurance shall provide UM and UIM coverage in the minimum amount of $1 million, and such coverage shall apply from the moment a passenger enters a partner’s vehicle until the passenger exists the vehicle

• Coverage may be provided by the TNC or the partner, or any combination thereof, but if the insurance is to be obtained by a partner, the TNC must verify that the policy is maintained by the partner


• Insurers providing liability coverage shall have the exclusive duty to defend any liability claim

• Nothing in the statues shall be construed to require a personal automobile policy to provide primary or excess coverage


• From the moment a TNC partner logs on to a TNC’sassociated digital platform until the partner accepts a request to transport a passenger and from the moment the partner completes the transaction on the digital platform or the arranged ride is complete, whichever is later, until the partner either accepts another prearranged ride request or the digital platform logs off the digital platform, under the statute in effect until January 1, 2016, the TNC motor vehicle liability coverage is deemed to be secondary, providing liability coverage of at least $125,000 per person and $250,000 per incident for death or bodily injury and at least $50,000 for property damage


• Under the statute going into effect on and after January 1, 2016, such coverage is deemed to be primary and shall provide liability coverage of at least $50,000 per person and $100,000 for death or bodily injury and at least $25,000 for property damage

• Where a partner’s insurance has lapsed or ceased to exist, the TNC shall provide the coverage required beginning with the first dollar of the claim

• The pertinent sections shall not limit the liability of a TNC arising out of an accident involving a TNC partner

The Uber Contract

• The following are found in the Uber App:• Uber is committed to connecting the customer to the

safest side on the road• Uber represents that every driver is thoroughly

screened in a process including a three-step criminal background screening

• Uber app pinpoints the customer’s location to provide door-to-door service

Marketing

The Uber Contract (cont.)

• A customer/rider will see the driver’s name, license plate number, photo, and rating when the customer’s request is confirmed

• From the moment the rider gets into any Uber product to the moment the rider is dropped off, the rider is covered by commercial liability insurance

Marketing (cont.)


The Uber contract with the rider include the following salient terms:

• The Uber services constitute a technology platform that enables users of Uber’s mobile application or website to arrange and schedule transportation with third party providers of such services

• The customer/rider is asked to agree that Uber does not provide transportation services or function as a transportation carrier

Uber Contract


• The customer/rider is asked to agree that Uber has no liability to the customer related to any transportation provided to the customer by third party providers

• Uber states it does not guarantee the safety of third party providers

• The customer is asked to acknowledge that the customer may be exposed to situations involving third party providers that are potentially unsafe, and that the use of the third party provider is at the customer’s own risk

Uber Contract (cont.)


• Uber states it shall not have any liability arising from the customer’s transaction with third party providers

• The rider is asked to agree that the entire risk arising out of the use of the service remains solely with the rider, to the maximum extent permitted by law

• It is also provided that the rider agrees to indemnify and hold Uber harmless from any and all claims and expenses (including attorney’s fees) arising out of the rider’s use of the service



• The rider is asked to agree that any dispute will be settled by binding arbitration, and that the right to trial by jury is waived

• Uber states that the contract terms are governed by the laws of the State of California


Choice of Law

• Virginia law may be controlling• Application of another state’s substantive law not

required if contrary to public policy of Virginia• Virginia has public policy of police power to protect

general welfare of the people• Virginia has public policy against transportation

companies exempting themselves by contract from liability against injury or loss occasioned by their neglect as a common carrier

Subsidiary Corporation Issues

• Certificate of temporary authority issued to Rasier, LLC• Contract between Uber and its customer may not apply to

Rasier• Subsidiary corporations separate from any parent

corporation, and not a party to contract of which its parent is a party

• Virginia statute of frauds requires written contract signed by party to be charged in order to charge any person upon a promise to answer for misdoings of another

Uber Contract Vulnerability Issues

• Uber efforts to insulate itself from liability or claim indemnity may be void

• Proscription against statutes that impair private contracts does not prevent state from exercising police power

• Constitution to be given liberal construction to sustain enactment

Duty of Common Carrier

• Imposed by public policy of the state which adds to contract terms in carrying a passenger gratuitously or for hire

• Statute that no contract shall exempt any transportation company from liability of a common carrier which would exist in absence of such contract

• See prior discussion regarding statutes regarding unlawful to exempt a transportation network company from liability

Respondeat Superior

• Argument exists that Uber’s drivers are employees, not independent contractors

• Uber could be liable for their actions• California class action complaint seeks certification of Uber

drivers as employees, not independent contractors• Alleged that all drivers are required to follow detailed

uniform procedures and policies

Respondeat Superior (cont.)

• Labor Commissioner of the State of California recently held that Uber’s drivers are employees, not independent contractors

• It has been reported that in the U.S. Uber is facing legal challenges to their reliance on large work forces of “contractors” who don’t get the benefits provided to full-time employees, such as healthcare

• In India, Uber is offering its drivers some healthcare

Virginia Law

• Right of control determining factor under Virginia law as to whether worker is an employee

• The right to control the means and methods chosen to accomplish the results is the key

• Virginia Court of Appeals has held a cab driver was an employee when the driver had to follow a list of rules

• Key was that employer could suspend or fire a driver

Insurance Issues

• In Virginia, likely that driver’s personal insurance would not apply because of commercial use exception

• Highlights need for statute-required insurance

Prior Trouble with Uber Drivers

• Pedestrians killed and injured by Uber drivers in San Francisco

• Uber denied liability because driver did not have a passenger, nor was he on his way to pick up a fare

• Uber driver accused of rape in India• Uber sued in Oklahoma after rider got into a fight with

Uber driver

Prior Trouble with Uber Drivers (cont.)

• Uber driver taking passenger on a high speed wild ride/chase in Washington, DC

• Uber driver arrested in Los Angeles on suspicion of kidnapping for sexual assault

• Alleged rape in Seattle by Uber driver• Uber and one of its drivers were recently sued in Virginia

Beach, Virginia, after the alleged assault of a juvenile girl by a Uber driver

Negligent Hiring

• In Virginia, based upon an employer’s failure to exercise reasonable care in placing an individual with known propensities in an employment situation where it should have been foreseeable that the individual posed a threat of injury to others

• Also applies to propensities that should have been discovered by reasonable investigation

• Sufficient if ordinary, prudent person ought to have foreseen an injury might probably result from the act

Negligent Hiring (cont.)

• Tort of negligent hiring distinct from tort liability based on respondeat superior

• Negligent hiring enables a plaintiff to recover in circumstances when respondeat superior’s “scope of employment” limitation protects employers from liability

Negligent Retention

• Claim established if proved that:• (1) employer knows or should have known employee

poses an unreasonable risk of harm to others• (2) employer fails to attempt to prevent further harm by

the employee, and• (3) the employee subsequently injures another person

Joint Enterprise

• Even should Uber persuade a court a driver is not its employee,

• Uber may be liable if Uber and its drivers are involved in a joint enterprise

• Each is responsible for other’s negligent acts• There must be evidence that each had authority to

control the means to execute the common purpose

understanding uber tli...network companies as uber and lyft is greater than the number of taxis in...

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