Ride Share: CDOT expects rideshare usage to grow by 140% within a decade, potentially resulting in a 50% increase in carbon emissions if current road usage trends stay constant.

Denver resident Brian Fritts nearly died during his last Lyft ride, and a loophole in Colorado’s rules for rideshare companies could force him to pay $173,000 in medical expenses.

Fritts’ driver was involved in a hit-and-run accident on northbound I-25 south of the 6th Avenue exit. First responders found the back of the car — where Fritts was sitting — covered in blood. Doctors told Fritts he was lucky to be alive before outfitting him with a rod and six screws in his neck and fusing five vertebrae.

When Fritts presented both Lyft and the driver’s insurance companies with his claim and medical bills, neither insurer accepted liability. To make matters worse, state law doesn’t require rideshare companies like Lyft and Uber to carry the insurance coverage that would make them bear responsibility for patron injuries.

According to Fritts’ lawyer, Eric Faddis, this must change.

“No reasonable person believes that if they utilize rideshare services and sustain catastrophic injuries as a result thereof, the rideshare company will abandon them, make no efforts to rectify the grievous loss, wash its hands of the tragedy, and go on about their business while their patron’s life is changed forever, leaving the rider with no legal recourse at all,” Faddis told Glendale Cherry Creek Chronicle.

Regulatory Entrepreneurship

Legal scholars Elizabeth Pollman and Jordan Barry argue in the Southern California Law Review that companies like Uber and Lyft are intentionally designed to avoid these insurance hazards.

Known as regulatory entrepreneurship, Pollman and Barry describe the business practice as “a line of business in which changing the law is a significant part of the business plan.” The best known example is Uber.

Uber challenged the notoriously regulated taxicab industry to modernize, according to both Pollman and Barry. And while pundits debated the legality of the business altogether, Uber proved its value in markets like New York and Chicago. Soon thereafter, states scrambled to figure out appropriate regulations.

Different than regulatory arbitrageurs, who mold their behavior to effect favorable regulation, regulatory entrepreneurs try to make their business practices part of the law and “do not necessarily care whether they effect a legal change on a de facto or de jure basis,” according to Pollman and Barry.

Oftentimes this results in states crafting half-hearted regulations because neither side fully understands the business model.

Legal Scholars: Elizabeth Pollman, above, and Jordan Barry, far right, argue in the Southern California Law Review that companies like Uber and Lyft are intentionally designed to avoid insurance hazards.

Colorado became the first state to regulate rideshares in 2014 and placed the companies under the auspices of the Public Utilities Commission (PUC).

In 2015, the Division of Insurance (DOI) recommended rideshares should carry minimum insurance coverages of $50,000 per auto accident, $100,000 for bodily injury, and $30,000 for property damage — the same requirements as taxicab companies.

DOI made this determination by examining 128 claims involving taxicabs between 2010 and 2012. Of that total, only two claims rose above $100,000 in payments, according to the agency’s report.

However, these recommendations appear devoid of several important considerations, according to Faddis. Chief among them is the oversight to require rideshares to carry Uninsured/Underinsured Motorist’s insurance, which Faddis says could provide injured patrons a “way of putting their life back together.”

“In my opinion, that is a huge legislative gap that places thousands of Coloradans at risk,” Faddis added.

Buying Influence

Regulatory entrepreneurs are also heavily engaged in politics because it is a winning strategy to either effectuate profitable legal change or preserve a favorable regulatory environment, according to Pollman and Barry.

Campaign finance disclosures show both Uber and Lyft have developed strong ties to Colorado’s elected officials, primarily those wearing Blue. However, the companies take different approaches. Lyft seems to prefer campaign donations and lobbying the General Assembly while Uber is absorbed in state issues and PUC regulations.

Of the 208 recorded lobbying activities on behalf of Uber, 90 were directed at PUC, according to the Secretary of State’s office. Similarly, Lyft did not lobby any PUC regulations, but has logged 153 activities on behalf of state legislation.

As for campaign contributions, Lyft has spent $41,775 on state-level campaign and political action committee (PAC) donations since January 2020. Most of the donations went to politicians with ties to the state business, labor, and transportation committees.

Sens. James Coleman (D-Denver), Bob Woodward (R-Larimer), and Kevin Priola (R-Adams), all of whom sit on the Senate Business, Labor & Technology Committee, took money from Lyft. The company also donated to Reps. Dylan Roberts (D-Eagle) and Tom Sullivan (D-Centennial), who are the respective Chair and Vice Chair of the House Business Affairs & Labor Committee.

On the other side, Uber did not spend any money on Colorado campaigns last year. Instead, the company wrote a $15,000 check in support of Proposition CC, which allows the state to keep funds over its annual revenue limit to spend on education and transportation.

However, the Center for Responsive Politics found Uber hired a lobbying firm with strong ties to state lawmakers — Brownstein Hyatt Farber Schreck. In the last 15 years, Brownstein Hyatt has given over $373,000 to local causes, primarily to Democrat-controlled PACs, according to campaign finance data.

Further Measures

While state lawmakers once derided rideshares as a business model that clogs up the roads, they’re now looking to them as a way to reduce overall road usage.

In 2019, the Colorado Department of Transportation (CDOT) calculated road usage by rideshares only accounts for up to 8% of the state’s total. Even so, the agency expects rideshare usage to grow by 140% within a decade, potentially resulting in a 50% increase in carbon emissions if current road usage trends stay constant.

To combat this issue, CDOT recommended lawmakers craft legislation to create a uniform fee schedule and incentivizing the use of electric vehicles among rideshares. Lawmakers have also discussed adding additional fuel taxes and road usage taxes during the 2021 regular session.

However, no discussions have involved closing the insurance loophole that nearly ended Fritts’ life. To Faddis, Coloradans should be aware of the risks they’re hailing when they get in a rideshare.

“These rideshare services need to do the right thing and pay claims for patrons injured as a result of using their services; otherwise, all Coloradans need to know that they are not protected in this scenario and, as a result, using a rideshare service is extremely hazardous,” Faddis said.