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Digital EditionHundreds of Scooter Riders Are Skittering Through the Streets. But Who Should Be Liable in the Case of a Crash?
Jillian Slyfield serves as Digital Economy Practice Leader at Aon. In this role, Slyfield addresses digital disruption of traditional industries and the on-demand economy. Her focus areas are Alternative Mobility, The Future of Work and New Economy Digital Risk. She can be reached at [email protected].
Scooters are an efficient, environmentally friendly, affordable transportation solution looking to replace cars for trips in the one to three mile range. That’s likely why Inc. Magazine’s “Company of the Year” for 2018 is a dockless electric scooter company valued at $2 billion and founded only 18 months ago.
Its fiercest competitor and rival, also less than two years old and valued at $2 billion, is going toe-to-toe for market share in more than 100 cities that span the United States, Latin America, Asia and Europe.
New technologies, particularly those that address Mobility as a Service, demand a second look at urban planning, state and local regulations, independent contractor relationships as well as the persistent question of “who is responsible when someone gets hurt?”
Lightning-speed adoption by electric scooter riders (approximately 100 million rides in the past 12 months) has left communities, riders and the scooter operators themselves urgently playing catch-up on large scale safety, risk and liability questions.
1) Scooter operators face risk issues associated with the vehicle, such as frequent break down, minimal battery life, vandalism and inconsistent maintenance.
To mitigate these risks, manufacturers are building more durable scooters with larger, wider wheels and a lower center of gravity.
These scooters also have electric brakes for smoother, safer braking, which also eliminates the ability for vandals to snip the exposed brakes — a problem with the first-generation models.
Although scooters are being built by contract manufacturers, scooters are designed and branded by the scooter operators and to their specifications, pressing responsibility to the operators.
2) Mechanics may be gig workers who learn to repair scooters by watching YouTube videos; they may be third-party vendors, and at times they are employees.
If the repair is faulty, the operator’s general liability policy will respond. However, the mechanic may also be held responsible for a claim resulting from faulty work.
Gig economy workers also work as Chargers who pick up scooters in need of a charge, charge them overnight in their homes and then return them to specific drop off points (like transit stations) for a per-unit payment.
The more challenging the scooter is to retrieve, the higher the per unit payment.
Lightning-speed adoption by electric scooter riders has left communities, riders and the scooter operators themselves urgently playing catch-up on large scale safety, risk and liability questions.
Scooter operators could be held liable in the event a Charger is injured while performing this role. Additionally, during pickup and drop off, where scooters are piled high inside the chargers’ van, pick up or trunk, a car accident or scooter that flies off the back of the car could cause significant injury to those around them.
This hired and non-owned auto exposure can be covered by insurance but is not always purchased by the operators.
Lastly, a faulty or vandalized battery could lead to a fire in the home of the Charger, leading to property damage or loss of life.
3) Challenges have also arisen from inexperienced riders who ride without a helmet and without an understanding of exactly where they should ride, such as the bike lane, sidewalk or street.
Riders report incidences due to faulty or poorly maintained scooters; poor street conditions like potholes, train tracks and deep cracks; and difficulty navigating around cars, bikes and pedestrians. Scooter operators are held harmless by their user agreements with riders, but claims of rider injury and third-party damage to property and/or pedestrian injury continue to trickle in.
One way operators are addressing this risk is by offering a free helmet to riders in exchange for taking a safety pledge.
Thousands of free helmets have been sent to riders under these programs; a sign that operators are investing heavily in rider safety. Operators also run tutorials on their web pages as well as YouTube, demonstrating safe rider behavior and best practices.
A hanging question remains: Who is responsible when a scooter rider injures a pedestrian or causes damage to another’s property or when a scooter rider injurers themselves falling off the scooter? Should the operator be to blame despite their best efforts to encourage safe behavior?
4) Scooters are powered by lithium ion batteries and have a useful life of approximately 30 days.
Weather, overuse and poor road conditions hasten their demise. Operators have GPS locations on scooters, making it easier for them to pick up unused scooters and sensors, which allow them to identify when a scooter may be tampered with.
Ultimately, there are also risk issues associated with the environmental consequences of an abandoned scooter — one that may be underwater or on fire or simply one that is ready to be recycled.
An environmental insurance policy is recommended to address these circumstances where batteries may be considered pollutants to bodies or water or air. Additionally, operators have recycling programs to refurbish a vehicle and/or recycle parts that are no longer operational.
Looking Deeper at Insurance
How is the insurance community responding? Well, in one word: cautiously.
A few insurers have jumped into the fray, offering general liability coverage that meets local regulations and hired and non-owned auto for the chargers and mechanics. As with all new forms of mobility, carriers will enter the market as data becomes available and predictable. The operator user agreement stipulating they be held harmless could also be challenged, and insurance companies are interested to see the outcome of related case law.
Complicating matters, scooter operators have been hit with differing insurance requirements per municipality, including Santa Monica and Los Angeles (which requires a $5 million un-aggregated general liability policy. )
The GL policy covers the scooter operator in the event a scooter malfunctions, resulting in a claim, or if a third-party has bodily injury or property damage as a result of a rider crash.
Few insurers have an appetite for this coverage, because the value of the exposure is yet unknown and case law is evolving.
Lastly, there is an opportunity to provide new applications of insurance across the business.
A form of passenger accident coverage for the riders, either purchased by the operators or by the riders themselves, is a realistic future expectation. Additionally, episodic professional liability offered to the independent contractor mechanics and/or chargers may be further considered as scooter maintenance is professionalized.
While the dockless electric scooter industry is in its infancy, insurance products are adapting quickly to meet the growing need.
Operators have an eye toward safety and can be expected to continue to collaborate with the insurance community for higher valued products, designed with platform-based micromobility in mind.
