Uber, Lyft and Sidecar are fast-growing “ridesharing” services that compete with each other and with conventional taxis.  The ridesharing services are summoned through an Internet app tied to an established personal account.  The app handles booking, payment, and a ride survey.

Ridesharing can be a compelling economic proposition to consumers.  In urban settings, it can be cheaper and certainly less stressful than driving a personal vehicle and finding parking.   In some cities vehicle-for-hire transport alleviates the need for thousands of parking spaces, because the shared car is in motion most of the day carrying perhaps a dozen customers who would otherwise need to park a private vehicle.

Uber offers two grades of service.  Its “black car” service is a high-end sedan similar to the car service limos that crowd Manhattan streets.  UberX is an economy service that uses regular cars owned by the drivers.  Some find the UberX service is a bargain at about half the cost of a regular taxi.  Many consumers like the real convenience of ordering and paying for a “vehicle for hire” through the app on their smartphone.  In rankings such as Yelp, UberX is well regarded, but with exceptions and there have been reports of some scary drivers.

In January 2014, an Uber driver ran over a 6-year old.  The driver’s insurance excluded driving for hire and thus it did not cover the incident.  Neither did Uber’s insurance.  Uber said that the driver was between customers and just driving around looking for a fare.  Since he was not carrying a customer or on his way to a booked customer, Uber said its insurance did not apply.  Uber says drivers are not employees, rather they are customers for Uber’s software, or contractors.

Uber’s attempt to distance itself from the child’s death was a failure and a public relations mistake. Legislators in some city councils were indignant over unacceptable gaps in ridesharing insurance coverage.  Taxi commission regulators and taxi companies would prefer that all competitors live under the same (taxicab) regulations.   In DC, that regulatory bias was evident in a taxi commission meeting convened to address the convenient issue of ridesharing insurance.

At the state level, Uber now faces regulatory legislation in 4 states, with 6 more considering legislation.   The states are primarily focused on firming up requirements for insurance to protect consumers of ridesharing services.

While Uber was being pilloried for insurance gaps, the issue of driver background checks surfaced failures that allowed violent felons to drive for Uber.  Uber claims it refuses drivers with convictions for violent offenses but some of its drivers have records of burglary, domestic assault, drug trafficking, reckless driving, DUI and criminal threats to cause injury.  Uber’s driver background policy is unevenly applied.  Lyft drivers can also be violent.

Uber’s insurance coverage has changed since the January 2014 death of the 6-year old child.  At that time drivers were required to have their own insurance to cover themselves and their car between fares, but it seems adherence to that policy was not monitored attentively by Uber.  Today, Uber tells its drivers: “you are covered by commercial auto liability insurance for rideshare drivers, which protects you against third-party liability both during an Uber trip and while you are waiting for a ride request through the Uber app.”  Of course, various situations of coverage could still lead be litigated, but the plain meaning is that insurance is in place while customers are in transit and while the driver has no customer but awaits one.

The amount of Uber insurance is capped at $1 million during the period starting when the driver accepts a customer trip and ending when the customer trip ends.  In the period the driver is logged on and available up to the time he accepts a customer trip, the driver’s own insurance is expected to cover liability, however if the driver’s own insurance does not cover the drivers liability in that period, Uber’s own insurance will cover $50,000 in injury ($100,000 in total injuries) and $25,000 in property damage.  The gap seems to have closed.  The coverage is not lavish, but it has improved.

Uber’s inept handling of the tragic death of a 6-year old has accelerated regulatory inclinations toward ridesharing and other sharing ideas such as Airbnb, and “taskrabbit.”  The current regulatory focus is on insurance and background checks.  However, we should be cautious about any further regulation, since once we get there, regulations will tend to expand in scope.

Alan Daley is a retired businessman who writes for The American Consumer Institute Center for Citizen Research