Uber and the legal status of ride-sharing in Toronto

December 9th, 2015 by

By Michelle Stephenson

Uber, a California-based application which offers ride-booking applications for smartphones has been in the courts and at the centre of legal debates recently in Toronto and around the world.

Using GPS, the Uber app matches a user to a nearby driver and charges the user’s credit card. Cash never changes hands, and users are not expected to tip; Uber takes 20% of the fare and the driver keeps the rest.

To become an Uber driver, individuals need a driver’s license, and a vehicle with proof of insurance.  They can then sign a contract with the company and receive an iPhone with the app.

The company also offers the UberX service, which is described as a ride-sharing service and connects users to drivers in their area, who may not have a taxi license, for a lower fare.

Uber has been criticized on the basis that there may be inadequate insurance coverage for drivers and passengers who use the service.  There are also concerns that Uber has managed to evade municipal licensing requirements for taxi drivers.  As a result, Uber has faced legal barriers in many countries around the world.

Insurance issues: is it safe?

A primary concern with Uber is that is somewhat unclear whether drivers and passengers are properly insured.

In City of Toronto v. Uber Canada Inc., Uber sought an order to seal its insurance policy from the public. This application was rejected. However, the exact terms of their policy are still unknown to the public.

This poses significant problems as most drivers’ insurance policies require the driver to notify the insurer (and pay a higher premium) if they are using their vehicle to carry paying passengers. Many policies will not provide coverage for commercial use of vehicles, and furthermore, failure to notify the insurer may void coverage.

The result may be that, where an Uber driver is at fault in an accident and their insurance does not cover carrying paid passengers, an injured passenger would need to seek recovery directly from the driver.

At the same time, if an Uber driver is injured in an accident caused by another driver, if they are not able to prove coverage, they may be barred by the Insurance Act from suing the other driver.

Uber, however, has stated that their ride-sharing partners are covered under Uber’s policy, in addition to their own coverage, and every ride using UberX in Canada is backed by US $5 million of contingent liability insurance. The details of the policy, however, remain unclear.

Is it legal?

Beyond concerns over insurance coverage for Uber and UberX drivers, the company has been accused of operating outside of the law by avoiding municipal regulatory regimes for cab companies. Uber has made the argument that UberX is a ride-sharing service, not a taxi service, and as such is not subject to the regulations.

This is a legal loophole which has been acknowledged by the Ontario courts. In July 2015, a request by the City of Toronto for an injunction halting Uber’s operations in the city was denied on the basis that the company was not operating as a taxi broker, and the ride-sharing service fell outside of the regulatory scheme.

Toronto’s city council voted on September 30, 2015 to create municipal legislation that would change this. However, the introduction of new by-laws was delayed until 2016.

While Toronto’s by-laws will be amended to include technology-based services like Uber, what is unclear is whether they will face similar regulations as taxi companies. Some have suggested new by-laws should require them to apply as a taxi brokerage, pay annual fees, and connect users only to drivers who are municipally licensed. On the other hand, it has been suggested by many, including the Toronto’s mayor John Tory, that ride-sharing and taxi companies are “different beasts” and should be subject to a different set of regulations. Over the next year, it will be interesting to see what the nature of the new by-laws will be and how Uber’s treatment compares to taxi companies.

In the meantime, after the council’s vote Uber was asked to suspend their operations in Toronto pending the new legislation. However, Uber Canada’s general manager promptly refused to do so, citing a “responsibility to the 400,000 riders who rely on [them]”. While they are not willing to stand down until new by-laws are in place, representatives of Uber have stated, both before and after the most recent vote, that the company is eager to find a political solution and to end the ongoing legal battles.

Creating a regulatory solution will be a tough job, however, with taxi companies and drivers pushing for Uber to be banned outright as well as strong opposition within city council to creating a separate regulatory framework for ride-sharing companies, all while Uber itself continues to refuse to suspend its services.

Additional pressure has been put on the city by taxi companies to order an injunction against UberX. The city has been criticized for acknowledging that the company is operating outside the law and asking it to stop, without being willing to take steps to enforce this.

The day after City Council’s vote to make Uber’s services illegal, the mayor stated that although he is unhappy with the company continuing to operate “outside the law”, he is willing to accept it for the time being, stating it would be impractical to devote a huge portion of Toronto’s police services to cracking down on the company to the extent where it might stop its illegal behaviour.

On the other side of the debate, of course, are the many thousands of Uber and UberX passengers in the city who support the company and benefit from the fares which are typically lower than  municipally licensed cabs.

Legal actions

In addition to the litigation over sealing Uber’s insurance policy and Toronto’s attempted injunction against the company earlier this summer, Uber has recently been the subject of other legal proceedings. Taxi and limousine drivers have filed a $400 million class action lawsuit against UberX and its drivers.

Additionally, in July 2015 police laid charges against 36 Uber drivers for various offences contrary to the Highway Traffic Act.

Globally

Uber’s legal status in Canada, and Toronto specifically, is in flux and it will likely not be operating fully legally until sometime in 2016. Similarly, there is ongoing conflict in many countries around the world over the introduction and regulation of Uber.

Uber has been banned altogether in several regions where its circumvention of taxi requirements have been found to be illegal, including Nevada, Thailand, and parts of India and Japan. Other places, including France and Germany, have banned only its ride-sharing services such as UberX.

In some places Uber has been asked to suspend service until legislation can be put in place regulating it directly; it has done so in some cities in response to pressure from law enforcement and communities, but has declined to do so in others, despite being told to stop operating pending legislation.

Locations where operations have been suspended include South Korea, Spain, and parts of the United States. In contrast, areas where the company has been asked to suspend its services but is still operating include Taiwan, parts of Australia, South Africa, and India, and now Toronto.


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