A look into the regulation of e-scooters
Liability is one of the biggest deterrents governments face in adapting to shared micro-mobility, and for good reason. Here are just a few examples of instances that result in some form of liability from E-scooter use:
Losses and damages from these harms come in a variety of forms, including:
Finally, the list of parties who may either bring a claim, or be subject to liability themselves is extensive and includes:
Considering the extent and diversity of harms that may result from E-scooter use, as well as the number of actors who may be held liable, it stands to reason that insurance is a necessity. The bigger questions are: (1) what kind, and (2) how much? In order to answer these questions, one must evaluate the existing insurance framework and how it currently interacts with liability attributable to E-scooter use. In considering the current insurance options, keep in mind that even though certain types of insurance may not cover E-scooters as a general matter, coverage is ultimately determined by the policy itself, and this varies greatly.
Rider Third-Party Civil Liability Generally
Policy-makers often note that E-scooter riders are “naked” from a liability standpoint, and there is some truth to this. Currently, E-scooter riders are not clothed with the protections that a typical vehicle driver would have, namely: third-party liability insurance. That being said, the ecosystem of liability that spawns from E-scooter use is far more diverse than resulting damages to third-parties. In fact, even if a third-party civil liability policy were to cover a rider, this would constitute a relatively minute portion of potential harms.
It is difficult to objectively measure the amount of property damage being caused by this new technology. Excluding anecdotal reports from media outlets about individuals claiming property damages from the devices, there is a dearth of reliable data in this arena. What little research we do have concerns the health risks of riding E-scooters.[1] This research shows that some 91.6% of injuries are suffered by the rider. Though this statistic is of no consolation to innocent pedestrians harmed by E-scooters, it stands as a stark reminder that the rider is ultimately bearing the brunt of the risk.
There is currently no insurance product specifically designed to fill this void for riders. However, it is likely this need will be met as the shared micro-mobility industry continues to grow.
Auto Insurance
In addition to paying for damages to a vehicle, auto insurance provides drivers with coverage against civil suit. Unfortunately, it is highly unlikely to cover E-scooter use. Traditionally, auto policies are not flexible enough to provide coverage for E-scooters, which typically exclude vehicles with fewer than 4 wheels.[2] Motorcycle insurance is also unlikely to cover an E-scooter, as this tends to exclude vehicles that require users to stand.[3]
Health Insurance
The current health insurance regime consisting of private (purchased or employer provided) and public insurers (Medicare, Medicaid, etc.) is already equipped to address the medical costs of this new technology. This is because unlike other forms of insurance which are limited by the mechanism of the harm sustained, healthcare insurers are generally obligated to provide coverage regardless of how someone is injured. This is particularly helpful with E-scooters, as research suggests it is the rider who bears the brunt of the potential health risks.[4]
Homeowner’s Insurance
Several factors unique to shared micro-mobility weigh against the presumption of coverage from a homeowner’s insurance policy. Shared E-scooters do not service a residence, which is typically a requisite for coverage. Homeowner’s policies are also likely to exclude coverage for rented vehicles. Finally, it is possible that “vehicle” is not defined broadly enough in the policy to cover such a device.
Personal Liability Umbrella Insurance
Of all the traditional insurance products, this is the most likely to cover an individual’s E-scooter use. These policies are designed to supplement auto and homeowner’s insurance and therefore are less stringent on scope of coverage. For example, unlike homeowner’s and auto policies, umbrella liability insurance usually does not exclude vehicles according to the number of wheels it uses. Accordingly, some E-scooter liabilities may be covered by this form of insurance.[5]
User Agreement
Many would not consider assenting to a terms of use agreement as engaging in an insurance transaction. However, if insurance is defined as the practice of shifting liability from one entity to another in exchange for consideration, this is most certainly a form of insurance. Before a unit is unlocked, the rider must agree to a contract that shifts liability from the vendor and its affiliates to the user, in exchange for use of the unit. Presumably, by shifting any and all liability the vendor might have to the user, the user pays a lower rental price. Though there may be compelling public policy reasons to void these contracts, they often serve as an effective deterrent against potential lawsuits and effectively place any burdens the vendor might have on the rider.
One of the primary issues with this transfer of liability is the rider’s inability to pay for damages caused. Though vendors have not disclosed the average age of riders, it is safe to assume that their primary audience comes from young adults with lower earning capacity.
E-scooter Vendor Commercial General Liability Insurance
Many local governments with dockless mobility regulatory regimes in place have required E-scooter Providers to have a commercial liability policy. Even absent this mandate, vendors are likely to have policies that provide protection against civil liability. However, the vendor companies themselves are not the only beneficiaries of these policies, as they also ensure plaintiffs can be compensated for any wrongfully incurred harms.
Indemnity
Another common attribute of the E-scooter regulatory framework is the inclusion of an indemnity provision wherein vendors must indemnify the local government up to a certain amount. This effectively makes the E-scooter vendor legally liable for any potential legal liability incurred by the government hosting them.
Performance Bond
Local governments frequently impose upon E-scooter vendors the requirement that they post a certain sum of money as a security guaranteeing satisfaction of their obligations under the regulatory regime. Though these bond agreements vary from city to city, there are usually specific conditions by which the city can withdrawal funds from the bond to pay for costs borne by the city in remedying an obligation that the vendor has failed to meet.
[1] Trivedi TK, Liu C, Antonio ALM, et al. Injuries Associated With Standing Electric Scooter Use. JAMA Netw Open. 2019;2(1):e187381. doi:10.1001/jamanetworkopen.2018.7381
[2]Smith, H., E-scooter drivers beware of unplanned claims, Property Casualty 360, December 20, 2018. Accessed, April 5, 2019, https://www.propertycasualty360.com/2018/12/20/e-scooter-drivers-beware-of-unplanned-claims/
[3] Spotlight on: e-scooters and insurance, Insurance Information Institute, February 20, 2019. Accessed, April 2, 2019. https://www.iii.org/article/spotlight-on-e-scooters-and-insurance
[4] Trivedi TK, supra note 1
[5] supra note 3