Tag Archives: Uber

Uber Case Highlights Employment Liability Risk

By now you’ll have read the troubling tale of alleged workplace sexual harassment as told by a former Uber employee on her personal blog.

As the LA Times reports, Uber CEO Travis Kalanick has called in former U.S. Attorney General Eric Holder to conduct an independent investigation and claimed that the blog post was the first he knew of the incident.

The allegations are a warning to the tech industry and its so-called rockstar culture, the LA Times notes.

The New York Times goes into more detail here.

In a statement issued following a meeting with Kalanick and staff to discuss diversity and inclusion, Uber board member Arianna Huffington said:

“I view it as my responsibility to hold the leadership team’s feet to the fire on this issue.”

This is not the first time that the ridesharing company has been in the hot seat for behaving badly, as discussed in this earlier blog post.

Charges of sex discrimination, including sexual harassment and pregnancy discrimination accounted for 26,934, or 29.4 percent of all job bias charges reported to the U.S. Equal Employment Opportunity Commission (EEOC) in 2016.

As the Insurance Information Institute (I.I.I.) notes, the number of employee lawsuits has increased in recent years, and any size business is vulnerable to this type of risk.

Employment Practices Liability Insurance (EPLI) provides important financial protection to businesses against claims or lawsuits filed by employees, former employees, or potential employees.

EPLI covers legal costs, settlements and judgments that arise from claims of: discrimination (age, sex, race, disability, etc.); wrongful termination of employment; sexual harassment and other employment-related allegations and lawsuits.

In addition to insurance protection, I.I.I. says businesses should take key steps to reduce the risk of an employee lawsuit, such as creating clear workplace practices on employment practices and educating management and employees.

A recent Insurance Journal article took a look at what to expect in EPLI in 2017.

Modernizing Regulation Key To Insuring Sharing Economy

How free are insurers to provide the insurance products consumers want?

That’s a key question that the R Street Institute’s Insurance Regulation Report Card seeks to answer.

And it’s a very good question.

In the fourth and latest edition of the report R Street observes that regulation, in some cases, may hinder the speed with which new products are brought to market:

We believe innovative new products could be more widespread if more states were to free their insurance markets by embracing regulatory modernization.”

R Street says the most recent illustration of this challenge is seen in the different approaches individual states have taken to enable the timely introduction of commercial and personal insurance policies to cover ridesharing.

A compromise model bill to govern insurance requirements for ridesharing was announced by major representatives of the insurance industry and the burgeoning transportation network companies in March 2015.

The legislation alleviated what had been a major source of interindustry friction, R Street notes.

The model requires that:

– liability insurance with limits of $1 million be in-force any time a driver either is actively transporting a customer or en route to pick up a fare.

– any other time the driver is logged in to the TNC service, he or she must have coverage with minimum liability limits of $50,000 per passenger, $100,000 per incident and $25,000 for physical damage liability.

R Street writes:

The model would permit coverage to be procured either by the driver or the TNC,   expressly stipulates that it may be provided by the surplus lines market, preserves insurers’ right to exclude coverage and encourages states to approve new products to cover this emerging risk.”

Signatories to the compromise include Allstate, the American Insurance Association, Farmers Insurance, Lyft, the National Association of Mutual Insurance Companies, the Property Casualty Insurers Association of America, State Farm, Uber Technologies and USAA.

The report notes that in April 2015, Georgia became the first state to pass the compromise model ridesharing bill. The measure, H.B. 190, took effect January 1, 2016.

Have more questions? Check out the Insurance Information Institute’s (I.I.I.) Q&A on Ridesharing and Insurance.

An I.I.I. issues update on regulation modernization is available here.

One Ruling, But Uber Impact

A California Labor Commission ruling that an Uber driver is a company employee, not an independent contractor may dampen fears that the on-demand economy spells the end for workers compensation, liability and health insurance. At least for now.

As reported by numerous news outlets, here and here, the decision out of California — though it applies to a single driver — could significantly increase costs for the ride-sharing business if it is copied by other states and in other cases.

It could also have potential implications for other segments of the economy important to property/casualty insurers.

As the New York Times reports:

The classification of freelancers is in dispute across a number of industries, including at other transportation companies. And the debate is set to escalate as the number of online companies and apps like Uber and others rises.”

The ruling, which commentators say could hurt Uber’s $40 billion-plus valuation, orders Uber to pay Barbara Berwick, $4,152 in expenses for the time she worked as an Uber driver last year.

Here are a couple of key excerpts from the California Labor Commission decision:

Plaintiffs’ work was integral to Defendants’ business. Defendants are in business to provide transportation services to passengers. Plaintiff did the actual transporting of those passengers. Without drivers such as Plaintiff, Defendants’ business would not exist.”

And:

Defendants hold themselves as nothing more than a neutral technological platform, designed simply to enable drivers and passengers to transact the business of transportation. The reality, however, is that Defendants are involved in every aspect of the operation.”

In response to the ruling (which it has appealed) Uber stated:

The California Labor Commission’s ruling is non-binding and applies to a single driver. Indeed it is contrary to a previous ruling by the same commission, which concluded in 2012 that the driver ‘performed services as an independent contractor, and not as a bona fide employee.’ Five other states have also come to the same conclusion.”

Potential insurance issues arising out of the on-demand or sharing economy are a recurring topic of conversation these days.

In a recent presentation I.I.I. president Dr. Robert Hartwig noted that traditional insurance will often not cover a worker engaged in offering labor or resources through these on-demand platforms.

For example, private passenger auto insurance generally won’t cover you while driving for Uber and a homeowners insurance policy won’t cover a homeowner for anything other than occasional rents of their property.

Also, Dr. Hartwig said: “Unless self-procured, on-demand workers (independent contractors) will generally have no workers comp recourse if injured on the job.”

Uber-money, Uber-problems (or: “So a Loose Cannon Threatens To Blow up My Business. Now What…?”)

Reputational risk is among the most challenging to insure, says I.I.I.’s  VP of Communications Loretta Worters in this timely tale of Uber shenanigans:

There’s no such thing as bad publicity, the old saying goes. But the publicity ridesharing company Uber is getting lately may not just harm its image, but can hurt its bottom line. And for a business valued by some at north of $50 billion, that’s a world of hurt!

The latest trouble for the beleaguered rideshare titan started earlier this week when SVP of Business Emil Michael was reported by BuzzFeed to have said that the company should initiate a million-dollar “smear campaign” against journalists. Worse still was CEO Travis Kalanick’s response, a rambling 13-tweet condemnation of Michael’s on-the-record screed. (To date, however, Michael still has his job.) Jumping into the fray was Uber investor Ashton Kutcher, who defended the company for “digging up dirt” on journalists.

A company’s reputation is core to its profitability and long-term competitiveness. And the challenges from social media and other interactive online platforms often force businesses to respond immediately. This in part explains why damage from reputational risk events oftentimes does not result from the initial crisis, but from how well the company responds to it.

This isn’t exactly the first time Uber has “stepped in it.” However, leaving aside Uber’s occasional self-destructive missteps, how vulnerable is Uber or any other company with a capricious C-suite?

Reputational risk is among the most challenging categories of risk to manage, according to 92 percent of companies responding to a survey from ACE Group. Fully 81 percent of respondents view reputation as their most significant asset–and most of them admit that they struggle to protect it. The report also suggests that organizations need a clear framework for managing reputational risk that reduces the potential for crises, taking a multi-disciplinary approach that involves the CEO, PR specialists and other business leaders.

While Uber’s Kalanick acknowledged his company needs to repair its image, he clearly would benefit from reputational risk insurance and the expertise of a risk manager–even if that risk manager’s counsel amounts to: “dude, shut UP!”

Reputational risk is not covered under a typical business policy, but companies can purchase coverage as a stand-alone policy which typically pays fees for professional crisis management and communications services; media spending and production costs; some legal fees; other crisis response and campaign costs such as research, events, social media, and directly associated activities.

New reputation insurance products have started to emerge in the marketplace that cover financial losses caused by bad news that harms a company’s profits. For example, Aon with Zurich, Willis and Chartis among others have come out with policies that address the exposures of reputational risk and offer risk management services to help corporations keep their reputations intact.

One thing is clear: as the rideshare business grows more competitive, Kalanick will need to do better at projecting a positive image. And if he took a cue from his own product, and let somebody else do the driving for a change, Kalanick would be following the lead of many a troubled CEO before him.

For information on the insurance implications of ride-sharing, check out this handy Q&A.