Yellow Cab Cooperative Inc. of San Francisco and Yellow Cab Chicago have filed for bankruptcy. The trigger was huge verdicts for personal injuries to passengers, the latest in San Francisco involved a driver that Yellow Cab asserted was not an employee. The judge saw it differently, holding Yellow Cab must pay $8 million to its passenger, even though Yellow Cab said it had no responsibility for the conduct of the driver.
The other reason for the cab company bankruptcies are the disruptive nature of the Uber and Lyft business models. (Besides their brilliant decision to self-insure.)
Of course, Uber is facing its own class action now for denying drivers employees benefits, full gratuities and expenses.* Wait until the personal injury claims start to pile up, and the limited coverage carried by drivers doesn’t satisfy the need for deep pockets. Uber & Lyft could find themselves suffering the same business realities that is choking cab companies.
Uber & Lyft may have dodged the employment and personal injury claims traditional companies have internalized, but reality has a way of catching up.
*April 2016, Federal District Court for Northern California Judge Edward M. Chen rejected Uber’s proposed settlement of up to $100 million as “not fair, adequate and reasonable” compensation to reimburse drivers mis-classified as independent contractors.