Despite the loud protests of Teamsters-backed cab drivers, the D.C. Council voted 12-1 Tuesday to approve legislation legalizing the popular discount car services UberX (Uber’s ridesharing platform), Lyft, and Sidecar.
The vote took place as cabbies staged another horn-honking protest outside the Wilson Building. Taxis circled Freedom Plaza while a small group of union protesters chanted “justice now!”
Who is liable?
The two most important pieces of the legislation authored by Council members Mary Cheh (D-Ward 3) and David Grosso (I-At Large) deal with liability insurance coverage and background checks.
Uber, Lyft, Sidecar and any future entrants into the “private sedan” industry will be required to provide commercial liability insurance from the moment their drivers open their apps as they cruise for rides. The minimum level of coverage will vary depending on whether there is a passenger in the car.
When a driver is logged into the app but has yet to accept a ride, the tech companies must provide at least $100,000 in liability coverage. When a passenger who booked a ride through the smartphone app actually is in the car, the insurance coverage climbs to $1 million.
One gray area remains: Uber and the other “ridesharing” services are not required to provide the primary insurance when their drivers are on the road with their apps turned off.
Uber’s opponents in the regulated taxicab industry — whose drivers carry 24/7 commercial insurance — offer the following “what if” scenario: what if an UberX driver is on his way to a venue or neighborhood where he or she knows rides will be available but has yet to open the app, and then crashes? Even though the driver was not logged on, he or she could be considered working for Uber at that time, so who would be liable? Such cases may have to be worked out among insurance companies and lawyers, or wind up in court.
“Anybody who gets injured in that phase is going to have to deal first with the driver’s personal insurance, get denied, and then fight Uber’s lawyers,” said Dave Sutton, a spokesman for the Taxicab, Limousine, and Paratransit Association. His group has been attacking the “ridesharing” apps in a public campaign called “Who’s Driving You?”
“There is a dangerous insurance gap,” Sutton said.
Background checks
Uber, Lyft and Sidecar will not have to change their background check policies. They use third party screeners to verify drivers’ eligibility based on Social Security numbers and other identifiers. Council member Jim Graham (D-Ward 1) unsuccessfully proposed a change that would have required the tech companies to use FBI fingerprint background checks as taxicab companies must.
It would be unusual for a private sector firm to use the FBI database. Cab companies are required to conduct such background checks because their employees are licensed by a government entity.
The chairman of D.C. Taxicab Commission released a statement following the Council’s vote notable for the absence of the criticism he had previously leveled against the legislation.
“The City Council sets public policy and administrators have to work with it. There has been some strengthening of the enforceability of the requirements on private vehicles for hire that should improve on protecting public safety and preventing credit card fraud,” said the statement by Chairman Ron Linton.
What’s next?
Now that UberX, Lyft, and Sidecar have complete legal legitimacy in Washington, heavily regulated taxicab companies and individual drivers may have to surrender the notion that their competition will be regulated just as strictly.
Already there are efforts by the D.C. Taxicab Commission to establish a universal e-hail app so taxicabs can operate more like Uber. And the legislation approved by the Council allows taxis to charge flexible rates when partnering with a District-approved e-hail app, like myTaxi or Yellow Cab.
It is time for cab companies to begin imitating Uber and Lyft, according to Matthew Mitchell, a senior researcher and free market economist at George Mason University’s Mercatus Center.
“An underreported part of this story is a lot of Uber and Lyft drivers are former taxi drivers. Many of the cab companies aren't just fighting to keep their customers. They are fighting to keep their drivers,” Mitchell said. “A lot of the regulations are making taxi driving no longer a viable option.”
Mitchell suggested the District consider deregulating the taxi industry where possible so it can innovate and compete with Uber, Lyft, and Sidecar.
“In this environment, when you can push a button on your phone and see what the last 10,000 customers said about your driver, it may no longer make sense to subject taxis to all these regulations. Essentially regulators will have to adapt — or they will find they don’t have any industry to oversee anymore,” he said.
Mitchell said it is possible some cab companies and individual drivers will not survive, or may just drop out of the business and pursue other jobs.
“Creative destruction is a really important characteristic of a healthy dynamic economy. Those societies that lock in technologies and privilege companies and firms through regulations don’t grow as fast, and are not as dynamic,” Mitchell said.
“Just because companies go out of existence, that doesn't mean that the capital and the people that work for those companies are necessarily worse off. It is a good thing to have companies dissolve and have those people find better jobs that are going to be rewarding,” he added.
