When Companies Ignore Law

On March 17, 2014, in Futures, Heather Bussing, HRExaminer, Technology and Law, by Heather Bussing

image of iOS screen with airbnb and uber app icons and text from HR Examiner story

If you read uber or airbnb’s terms of service you learn that neither company is responsible if something bad happens. Why?

Last week, I wrote about When Companies Stop Innovating, which sparked a great discussion with Scott Berkun, Phil Simon, and John Sumser on the life cycle of a company, and what happens when an innovator disrupts an existing model.

New companies have nothing to lose, so they take more risks.

Uber and Airbnb came up as companies that have ignored traditional business models in regulated industries: transportation and accommodations. The reason these industries have more rules and laws is because who drives us and where we sleep matters. It’s a public safety concern. That’s why the law holds innkeepers, bailees (people who hold your stuff), and common carriers (people who drive you and your stuff) to a higher standard of care. Riding with a stranger or sleeping someplace strange is a lot different than going or staying with someone you know and trust, particularly when it comes to injury-related issues.

Both Airbnb and Uber claim they are not driving you or offering you a place to stay. They are just apps that are simply matching services to connect people who want rides and rooms with people who have them. Uber doesn’t own the cars or employ the drivers. And Airbnb doesn’t own the houses or run them.

If you read their terms of service (links below), you learn that neither company is responsible if something bad happens. Why? Because when you sign up, you agree that they are not responsible. Not only that, you agree to indemnify them and pay their attorneys’ fees if they get sued over your use of the service.

Uber’s terms are even better, or worse, depending on your point of view. If you want to sue Uber, you will have to go to the Netherlands and sue them under Netherlands law. US courts have jurisdiction over accidents and events that happen between US citizens in the United States. But whether you can sue Uber in the US is probably at least a $50K question to get a court to decide. And that’s before you ever get to what happened, or who should pay for the injury or damage. I also expect different courts to come up with different answers. And it will take years.

So if something goes wrong when you use companies like Uber or Airbnb, your best, and probably only, recourse is to sue the people involved. Holding Uber and Airbnb responsible will be expensive and difficult, even though they are the reason you got yourself into a bad situation.

How can that be?

First, nobody knows where things happen on the internet to figure out what law applies. That is because laws are designed for people, places, and things. They don’t translate well to digital information that travels in packets  through many states and countries and gets cached in many places every time you do something online.

Regulation of taxis, limo tours, and even hotels is mostly state and local. And if regulations are violated (like insurance and safety requirements for drivers and innkeepers), the violations are generally enforced through fines and agencies. There simply aren’t enough public resources to inspect, stop, and cite every driver and homeowner is not complying. And the cost of doing that falls on taxpayers who are more concerned about murder and violence than whether the guy who drives on the weekends has insurance or a chauffeurs license.

Also, if the service is loved by voters, who is going to support the tax increase to enforce the laws? No one.

Technology, along with contractual limitations through terms of service, will continue to move faster than law. Even if legislatures pass laws, few governmental agencies have the resources to enforce them.

However, insurers can move quickly to limit or exclude coverage for hiring out a car or renting a home. The risk for private use is completely different from commercial use, and most policies either already or will soon limit the insurance coverage for people who participate in these businesses. This means that the only way to collect is to hope that the people participating have assets. Lets see, they are renting out rooms in their house and picking up strangers with their cars. Good luck.

Last, it’s difficult to sue companies like Uber and Airbnb because existing laws don’t specifically prohibit these kinds of services, so lawyers have to try to apply regulations and legal concepts that don’t quite fit. This is time consuming and expensive.

If you use the services, understand that you are only as safe as the driver or host you are dealing with.

Resources

Airbnb Terms of Service

Uber Terms of Service

Who’s Driving You?  A blog and website to explain the risks involved in ride sharing apps like Uber, Lyft, and Sidecar and provide resources if you have a problem.

And special thanks to Zack Agil, one of my Internet Law students, who provided helpful information on Uber, and great analysis of its Terms of Service and the legal issues involved.

Here is his post on Taxi Companies, Uber, Lyft and the Law



 
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