Safety Worries Make Uber, Lyft Fair Game for Taxi Watchdogs

NEW YORK (TheStreet) -- Uber and Lyft are being accused of not only undermining the "sharing economy" with their vehicle insurance policies and driver background checks, but of shifting liability to drivers and riders while keeping the savings to themselves.

In September, the insurance division of Oregon's Department of Consumer affairs and business services joined state and district consumer oversight groups in 20 other states and Washington, D.C., in warning consumers about the potential dangers of driving or riding with services including Uber and Lyft.

The Oregon Insurance division cautions drivers that personal insurance policies will not provide you with coverage if you drive for companies like Uber and Lyft "because you would be collecting a fee for driving another person." Riders, meanwhile, were told that "neither your personal auto policy nor the personal auto policy of the driver will protect you when you are riding in another vehicle for a fee."

Meanwhile, late last month, the district attorneys for both San Francisco and Los Angeles issued a statement warning Uber, Lyft and Sidecar that they misled customers by claiming their background checks of drivers screen out anyone who has committed driving violations, including DUIs, as well as sexual assault and other criminal offenses.

San Francisco District Attorney George Gascon in June charged and Uber driver with striking a passenger, even though that driver had passed the company’s background check despite court records indicating he had previously been convicted of felony drug dealing and misdemeanor battery.

Unsurprisingly, this has drawn Uber, Lyft and Sidecar's critics from the taxi and limousine association into the fray.

"All of these components -- primary commercial auto liability insurance coverage, criminal background checks that involve the use of fingerprinting and are conducted by public entities, vehicle inspections that make certain that the vehicle is held to a certain standard, drug testing -- cost money, and they cost somewhere between 35% and 40% of all of a typical taxi company's operating costs," says Dave Sutton, spokesperson for Who’s Driving You?, a campaign funded by the Taxicab, Limousine and Paratransit Association. "These companies are skirting all of these costs, and it's how they're able to provide cheaper service. People love cheaper service, but it comes at an absolute cost and risk to the community."

Both Uber and Lyft stand behind their current methods of insuring their automobiles and drivers. An Uber spokesman asserts that Uber coverage meets and exceeds what is required by taxis in cities across the country, including $1 million of liability coverage per incident, $1 million of uninsured/underinsured motorist coverage per incident, collision cost coverage and liability coverage even between trips.

Lyft, meanwhile, points to its "$1 million commercial liability coverage that acts as primary to a driver's personal policy from the moment a driver is matched with a passenger to the time the ride ends in the app." However, that insurance is contingent upon a driver's own personal insurance and does not cover a driver's entire shift.

"Drivers on the Lyft platform are also covered by contingent comprehensive & collision coverage, uninsured/underinsured motorist coverage and contingent liability coverage," says Lyft spokewoman Chelsea Wilson. "After millions of rides, our insurance policies have worked as designed and provided excellent coverage for the Lyft community."

But 21 states and Washington, D.C., still find fault with those insurance programs, saying that they don't go far enough to protect either consumers or drivers. The Taxicab, Limousine & Paratransit Association offers a solution: Force Uber, Lyft and other similar services to adopt the same insurance as their taxi and limousine counterparts.

"Prior to 'ride-sharing' -- and we quote 'ride-sharing' because ride-sharing is actually carpooling -- there was no taxi company or limousine company in America that provided for-hire transportation without a single, specific insurance: Primary commercial auto liability insurance coverage," Sutton says. "What the ride-sharing companies are trying to do is get private individuals to play taxi driver and provide taxicab service with personal insurance, but the proper insurance to provide this commercial service is five to six times more expensive because of the risk involved."

That risk isn't limited to drivers. In one of the incidents that drove the Los Angeles and San Francisco district attorneys to threaten action against Uber, Lyft and Sidecar, an UberX driver allegedly attacked a San Francisco passenger with a hammer. Though the driver had no prior criminal record, it called the screening process for ride-share drivers into question.

Lyft's spokeswoman notes that its safety screening includes "criminal background checks, DMV record checks and 19-point vehicle inspections." Those background checks include a Social Security number trace, a county criminal record check, an enhanced nationwide criminal search, and a Department of Justice 50-state sex offender search, all conducted by a company called Sterling Backcheck.

Uber, meanwhile, uses a private three-step criminal background check -- with county, multi-state and federal checks going back seven years. Uber's process also includes a screening of the National Sex Offender Registry and ongoing reviews of motor vehicle records. Those companies' critics in the taxi and limousine industry say even that doesn't go far enough.

"These companies are avoiding proper, police-conducted criminal background checks using FBI fingerprinting," Sutton says. "They're doing so for financial reasons: It's cheaper and self-regulating."

The ride-share companies consider those criticisms an attempt to protect taxi monopolies and a flailing attempt at catching up to private competitors after failing to evolve and innovate. Taxi companies -- which have answered Uber and Lyft's disruption with increased non-cash payment options and mobile hailing apps like Hailo and Flywheel -- say they're just trying to level the playing field.

Thanks to state insurance agencies and district attorneys in ride-sharing's birthplace, Uber and Lyft's liability-shifting business plan has the government going the taxi industry's way.