DRIVE AT YOUR OWN RISK: UBER VIOLATES UNFAIR

1097

DRIVE AT YOUR OWN RISK: UBER

VIOLATES UNFAIR COMPETITION LAW S

BY MISLEADING UBERX DRIVERS ABOUT

THEIR INSURANCE COVERAGE

Abstract: Ride-sharing services such as Uber and Lyft have revolutionized the

private transportation market. Given the lack of clear regulations over these busi-

nesses, however, insurance industry experts disagree with Uber about the ade-

quacy of uberX drivers’ existing insurance coverage. This Note asserts that Uber

misleads uberX drivers about the type and amount of coverage available to them,

as uberX drivers have no first-party protections in place while they drive around

searching for fares. This Note further argues that based on these insurance mis-

representations, Uber may be liable to injured uberX drivers under California’s

unfair competition law for engaging in unfair business practices. Accordingly,

uberX drivers should be entitled to restitution for their injuries and injunctive re-

lief to prevent Uber from continuing to mislead uberX drivers about their insur-

ance coverage.

INTRODUCTION

On New Year’s Eve of 2013, around eight o’clock at night, six-year-old So-

fia Liu was walking in downtown San Francisco with her mother and four-year-

old brother.

As the family crossed a street in a crosswalk, a Honda sport utility

vehicle taking a right-hand turn failed to yield to the pedestrians and struck the

Liu family.

Sofia’s brother and mother survived the accident, but Sofia did not.

As it turned out, the driver of the Honda was an uberX driver.

Although the ub-

erX driver did not have a passenger at the time, he was logged into the Uber

Technologies, Inc. (“Uber”) mobile phone application (“app”) and searching for

fares.

Thus, when Sofia’s parents sued the driver for wrongful death, Uber de-

Family of Girl Killed in SF Crosswalk Suing Uber for Wrongful Death, CBS SF BAY AREA

(Jan. 27, 2014, 4:13 PM), http://sanfrancisco.cbslocal.com/2014/01/27/family-of-girl-killed-in-sf-

crosswalk-suing-uber-for-wrongful-death/, archived at http://perma.cc/G3XE-5TJK; Henry K. Lee,

Former Uber Driver Charged in Girl’s Crosswalk Death in S.F., SFG

ATE (Dec. 9, 2014, 5:37 PM),

http://www.sfgate.com/crime/article/Former-Uber-driver-charged-in-girl-s-crosswalk-5944049.php,

archived at http://perma.cc/9TML-UZ58.

Lee, supra note 1.

Id. (noting that in December of 2014, the uberX driver was charged with vehicular manslaughter

for Sofia’s death).

Family of Girl Killed in SF Crosswalk Suing Uber for Wrongful Death, supra note 1.

Id.; Doug Sovern, Parents of San Francisco Girl Fatally Struck by Uber Driver Seek Stricter

Ridesharing Rules, CBS

SF BAY AREA (June 25, 2014, 4:01 PM), http://sanfrancisco.cbslocal.com/

2014/06/25/uber-and-other-app-ride-services-urged-to-carry-commercial-insurance-before-state-senate/,

1098 Boston College Law Review [Vol. 56:1097

nied that its commercial auto insurance policy covered the driver’s liability in

between fares.

As ride-sharing becomes more and more common, so do ride-sharing ac-

cidents and subsequent insurance coverage disputes.

Despite Uber’s represen-

tations that uberX drivers are adequately insured, some insurance industry ex-

perts believe that uberX drivers still face coverage gaps while they drive

around searching for fares.

Indeed some uberX drivers involved in accidents

archived at http://perma.cc/4UY4-FLCB (reporting that Sofia’s mother alleges that she saw the uberX

driver using his phone). But see Lee, supra note 1 (reporting that Uber maintains that the uberX driver

was not responding to a ride request in the app at the time of the accident).

Carolyn Said, Hybrid Insurance for Uber, Lyft Drivers Is on the Way, SF GATE (Nov. 14, 2014,

5:17 PM), http://www.sfgate.com/business/article/Hybrid-insurance-for-Uber-Lyft-drivers-is-on-the-

5894075.php, archived at http://perma.cc/9UQB-WVGR; Sovern, supra note 5. Since Sofia’s death in

December 2013, Uber has begun providing a contingent liability policy to cover uberX drivers when

the driver has the app on but does not yet have a passenger. See Nairi Hourdajian, Eliminating Rides-

haring Ambiguity, U

BER (Mar. 14, 2014), http://blog.uber.com/uberXridesharinginsurance, archived

at http://perma.cc/LTS4-AWQR [hereinafter Hourdajian, Eliminating Ridesharing Ambiguity] (an-

nouncing Uber’s new contingent liability coverage in the wake of the San Francisco tragedy). Prob-

lems with this solution are explored below. See infra notes 46–68 and accompanying text (explaining

Uber’s insurance for ride-sharing drivers).

See Brad Aaron, TLC: Driver Who Killed Man on UES Works for Uber [Updated],

TREETSBLOG (Jan. 5, 2015), http://www.streetsblog.org/2015/01/05/tlc-unlicensed-driver-who-

killed-man-on-ues-works-for-uber/, archived at http://perma.cc/5H8S-7HHX (reporting on a state-

ment Uber issued after an Uber driver killed a man in New York City in January 2015, which pointed

out that the Uber driver had a commercial insurance policy associated with his taxicab license); Emily

Badger, The Strange Tale of an Uber Car Crash and What It Means for the Future of Auto Insurance,

ITYLAB (Sept. 10, 2013), http://www.citylab.com/commute/2013/09/real-future-ride-sharing-may-

all-come-down-insurance/6832/, archived at http://perma.cc/B7M6-7D3C [hereinafter Badger,

Strange Tale] (noting that Uber argued that its auto insurance did not cover an Uber driver who in-

jured two people in a March 2013 accident because the driver did not have a customer at the time);

Vauhini Vara, Uber, Lyft, and Liability, N

EW YORKER (Nov. 4, 2014), http://www.newyorker.com/

business/currency/uber-lyft-liability, archived at http://perma.cc/J5EE-62P8 (explaining that in the

wrongful death lawsuit over Sofia’s death, Uber denied that its liability policy covered the driver

because he did not have a passenger at the time); Randy Wallace, Accident Leaves Houston Uber

Driver with Regrets, M

Y FOX HOUSTON (Jan. 4, 2015, 10:30 PM), http://www.myfoxhouston.com/

story/27656550/accident-leaves-houston-uber-driver-with-regrets, archived at http://perma.cc/8KDM-

7XS6 (reporting that a Houston uberX driver who caused a collision was unable to get compensation

for his own injuries through Uber’s insurance); see also Said, supra note 6 (noting the vast potential

for insurance coverage disputes, given that ride-sharing drivers’ insurance coverage varies over time).

See Sharing a Ride, but Not Insurance: Ridesharing Drivers May Face Insurance Coverage

Gap, N

AT’L ASS’N OF INS. COMM’RS (Aug. 2014), http://www.naic.org/documents/consumer_

alert_ridesharing_drivers.htm, archived at http://perma.cc/65ZH-W325 [hereinafter NAIC Consumer

Alert for Ridesharing Drivers] (warning ride-sharing drivers about their potential gaps in insurance

and the various livery exclusions contained in many personal policies); Notice to Transportation Net-

work Company Drivers, C

AL. DEP’T OF INS., http://www.insurance.ca.gov/0250-insurers/0300-insurers/

0200-bulletins/bulletin-notices-commiss-opinion/TransNetwkDrvrs.cfm, archived at http://perma.

cc/25ZU-TSWQ (last visited May 17, 2015) (warning ride-sharing drivers that transportation network

companies (“TNCs”) do not provide medical payments, comprehensive, collision, or uninsured/

underinsured motorist (“UM/UIM”) insurance coverages). But see Hourdajian, Eliminating Rideshar-

ing Ambiguity, supra note 6 (stating that “drivers who use our app . .

. should have the confidence that

any potential ‘insurance gap’ is covered with a safety net”); Nairi Hourdajian, Insurance for uberX

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1099

have unexpectedly found themselves without the benefit of Uber’s auto insur-

ance.

Just as with the uberX driver who killed Sofia Liu, Uber denied that its

insurance policy covered a Houston uberX driver’s medical bills and vehicle

repairs after he got into an accident while transporting passengers in December

of 2014.

Based on the discrepancy between Uber’s claims about uberX drivers’ in-

surance coverage and the actual coverage drivers receive, injured uberX driv-

ers may be able to sue Uber in California for engaging in unfair business prac-

tices.

Violations of California’s unfair competition law (“UCL”) could ex-

with Ridesharing, UBER (Mar. 19, 2015), http://blog.uber.com/ridesharinginsurance, archived at

http://perma.cc/YL28-XH3M [hereinafter Hourdajian, Insurance for uberX] (stating that the limits of

Uber’s contingent liability policy, which covers uberX drivers between trips, “meets or exceeds the

requirements for [third] party liability insurance in every state”). See generally N

AT’L ASS’N OF INS.

COMM’RS, TRANSPORTATION NETWORK COMPANY INSURANCE PRINCIPLES FOR LEGISLATORS AND

REGULATORS (2015), available at http://www.naic.org/documents/committees_c_sharing_econ_wg_

exposure_adopted_tnc_white_paper_150331.pdf?1430061828513, archived at http://perma.cc/33Z3-

M9TB [hereinafter NAIC

WHITE PAPER ON TNC INSURANCE] (examining the insurance coverage

issues that plague ride-sharing drivers and proposing legislative solutions).

See Vara, supra note 7 (stating that Uber denied that its commercial liability policy covered the

driver responsible for killing the six-year-old girl in San Francisco); Wallace, supra note 7 (reporting

that Uber’s liability policy did not cover a Houston uberX driver’s personal medical bills or vehicle

damage).

See Catherine L. Rassman, Regulating Rideshare Without Stifling Innovation: Examining the

Drivers, the Insurance “Gap,” and Why Pennsylvania Should Get on Board, 15 P

ITT. J. TECH. L. &

POL’Y 81, 89 (2014) (explaining how Uber denied insurance coverage for the uberX driver when

Sofia’s parents sued Uber); Wallace, supra note 7 (reporting that Uber refused insurance coverage for

a Houston driver’s injuries). Note that liability and coverage are two separate legal issues in an insur-

ance dispute. See Jordan v. Consol. Mut. Ins. Co., 130 Cal. Rptr. 446, 448–49 (Cal. Ct. App. 1976)

(distinguishing between liability and coverage issues where judgment was entered against deceased

driver for causing car accident and injured plaintiff argued that vehicle owner’s insurance policy

should pay the judgment). Liability refers to the determination of fault in the accident. See id. at 448

(noting that the decedent, a Gulf Station employee, was liable for causing the plaintiff $55,000 in

damages while driving a customer’s Corvette). Coverage, on the other hand, refers to the amount and

type of insurance proceeds to which an injured party has access. See id. at 452, 456 (finding that the

Corvette owner’s insurance policy covered anyone with permission to drive the vehicle). This Note is

concerned with coverage (i.e., an uberX driver’s access to insurance proceeds) rather than who is

liable when an uberX driver gets into an accident. See infra notes 46–68 and accompanying text (ex-

plaining uberX drivers’ access to insurance policies).

See CAL. BUS. & PROF. CODE §§ 17200, 17203 (West 2012) (stating that “[a]ny person who

engages, has engaged, or proposed to engage in unfair competition may be enjoined,” and defining

unfair competition as “any unlawful, unfair or fraudulent business act or practice and unfair, decep-

tive, untrue or misleading advertising and any act prohibited by [California false advertising laws]”);

Dan Packel, Lyft, Uber Ridesharing Bids Fall Short, Pa. Insurers Say, L

AW360 (Sept. 16, 2014, 3:53

PM), http://www.law360.com/articles/577690/lyft-uber-ridesharing-bids-fall-short-pa-insurers-say,

archived at http://perma.cc/T8FJ-926M[hereinafter Packel, Lyft, Uber Ridesharing Bids] (noting the

Insurance Federation of Pennsylvania’s opinion that Uber lacks adequate insurance and insurance

education for uberX drivers). This Note examines California law because Uber’s and Lyft’s driver

agreements contain a choice of law provision stating that California law governs the agreements. See

O’Connor v. Uber Tech., Inc., No. C–13–3826, 2014 WL 4382880, at *1 (N.D. Cal. Sept. 4, 2014)

(providing the language of the California choice of law provision in Uber’s driver licensing agree-

1100 Boston College Law Review [Vol. 56:1097

pose Uber and other transportation network companies (“TNCs”) to ride-

sharing drivers’ claims for restitution and injunctive relief, as well as negative

publicity.

Accordingly, it is in the best interests of TNCs and ride-sharing

drivers to heed the numerous warnings from insurance industry insiders about

drivers’ insurance gaps.

This Note argues that Uber’s misrepresentations to uberX drivers should

be found to violate California’s UCL, as they constitute an unfair business

practice.

Part I discusses how ride-sharing apps function and Uber’s insur-

ment); Cotter v. Lyft, Inc., 13–cv–04065, 2014 WL 3884416, at *4 (N.D. Cal. Aug. 7, 2014) (stating

that Lyft’s driver contracts contain a California choice of law provision). This Note does not examine

the enforceability of these choice of law provisions, nor does it address whether California has per-

sonal jurisdiction over out-of-state plaintiffs. Cf. Ehret v. Uber Tech., Inc., No. C–14–0113, 2014 WL

4640170, at *1, *4–5 (N.D. Cal. Sept. 17, 2014) (allowing an out-of-state consumer’s UCL claims

against Uber to proceed); O’Connor, 2014 WL 4382880, at *11–12 (upholding Uber’s contractual

choice of law provision but refusing to apply California law extraterritorially and dismissing out-of

state Uber drivers’ UCL claims).

See CAL. BUS. & PROF. CODE §§ 17203–17204 (providing that “[a]ny person who engages . . .

in unfair competition may be enjoined,” and that actions for injunctions may be brought “by a person

who has suffered injury in fact and has lost money or property as a result”); Cel-Tech Commc’n, Inc.

v. L.A. Cellular Tel. Co., 973 P.2d 527, 539 (Cal. 1999) (stating that plaintiffs can obtain restitution as

well); see Serena Saitto, Inside Big Taxi’s Dirty War with Uber, B

LOOMBERG BUS. (Mar. 11, 2015,

8:00 AM), http://www.bloomberg.com/news/articles/2015-03-11/inside-big-taxi-s-dirty-war-with-

uber, archived at http://perma.cc/4TR4-63HU (reporting that taxi associations have hired people to

dig up dirt on Uber); Vara, supra note 7 (reporting that the statement Uber posted to its website fol-

lowing Sofia’s death seemed callous in comparison to Lyft Inc. (“Lyft”)’s handling of a similar inci-

dent). This Note examines California’s UCL case law because it may provide guidance to other states

in interpreting their similar unfair competition statutes. See Federal Trade Commission Act, 15 U.S.C.

§ 45(a)(1) (2012) (stating that “unfair methods of competition in or affecting commerce, and unfair or

deceptive acts or practices in or affecting commerce, are hereby declared unlawful”); Neil A. Helf-

man, Proof of Statutory Unfair Business Practices, 36 A

M. JUR. PROOF OF FACTS 3D 221, 229–30

(1996) (updated Apr. 2015) (describing how many states, including California, followed the Federal

Trade Commission Act (“FTCA”)’s lead and enacted similar statutes prohibiting unfair competition).

See, e.g., Eric Nordman, Ride-Sharing: New Technology Creates Insurance Challenges, CIPR

Newsletter (Nat’l Ass’n of Ins. Comm’rs & Ctr. for Ins. Pol’y & Research, Kansas City, Mo.), July,

2014, at 7–8, available at http://www.naic.org/documents/cipr_events_140819_rideshare_newsletter.

pdf, archived at http://perma.cc/26R4-A83U (pointing out gaps in ride-sharing drivers’ insurance that

arise from the fact that drivers’ personal auto policies will not cover commercial activity); Commer-

cial Ride-Sharing, N

AT’L ASS’N OF INS. COMM’RS, http://www.naic.org/cipr_topics/topic_commercial_

ride_sharing.htm, archived at http://perma.cc/3QGF-FPTY (last updated Oct. 24, 2014) (stating that

approximately twenty-five states have issued bulletins warning consumers about potential gaps and

limitations of ride-sharing insurance coverage); NAIC Consumer Alert for Ridesharing Drivers, supra

note 8 (warning ride-sharing drivers that they may face a gap in coverage between their personal poli-

cies and TNCs’ commercial policies); Notice to Transportation Network Company Drivers, supra

note 8 (advising ride-sharing drivers to purchase “a commercial policy with medical payments, com-

prehensive, collision and UM/UIM” to fill the gaps in their insurance coverage); Sharing a Ride, but

Not Insurance: Protect Yourself as a Ridesharing Passenger, N

AT’L ASS’N OF INS. COMM’RS (Aug.

2014), http://www.naic.org/documents/consumer_alert_ridesharing_passengers.htm, archived at http://

perma.cc/R9SZ-5WLW [hereinafter NAIC Consumer Alert for Ridesharing Passengers] (warning

ride-sharing customers that TNCs and ride-sharing vehicles are not subject to the same licensing and

insurance requirements as taxis and limos).

See infra notes 188–243 and accompanying text.

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1101

ance structure for uberX drivers.

Part II introduces California’s UCL and ex-

amines the different tests for unfairness that courts use to determine whether a

given business practice violates the UCL.

Finally, Part III argues that courts

should find Uber’s misrepresentations about the availability of insurance cov-

erage for uberX drivers to be unfair in violation of the UCL, thereby entitling

injured uberX drivers to restitution and injunctive relief.

THERE’S AN APP FOR THAT: UBER’S RISE AND EXISTING INSURANCE

COVERAGE FOR UBERX DRIVERS

With the rising popularity of ride-sharing, there is an increasing need to

regulate the insurance coverage of ride-sharing drivers.

This Part examines

Uber’s rapid expansion into the transportation market and existing insurance

coverage for uberX drivers.

Section A provides a brief background on Uber

and its dominance in the ride-sharing market.

Section B then explores how

Uber drivers, particularly uberX drivers, are insured.

Finally, Section C dis-

cusses recent attempts to regulate TNCs that could impact how Uber and other

ride-sharing companies structure their insurance.

A. Giving Them a Run for Their Money: The Emergence of Ride-Sharing

Shakes Up the Transportation Industry

As the sharing economy expands, ride-sharing has become a popular and

commercially viable peer-to-peer service.

Ride-sharing is a transportation

service whereby people without commercial licenses use their own personal

See infra notes 18–83 and accompanying text.

See infra notes 84–179 and accompanying text.

See infra notes 180–243 and accompanying text.

See Nordman, supra note 13, at 6–8 (discussing the emergence of ride-sharing facilitated

though TNCs and the California Insurance Commissioner’s recommendations for regulating ride-

sharing insurance to protect drivers and passengers); NAIC Consumer Alert for Ridesharing Passen-

gers, supra note 13 (assuring consumers that state insurance regulators and legislators are starting to

regulate TNCs). This Note uses the terms “regulation” and “law” interchangeably to refer to any legal

rule governing the public’s behavior. See infra notes 18–243 and accompanying text (employing these

terms).

See infra notes 18–83 and accompanying text.

See infra notes 23–45 and accompanying text.

See infra notes 46–68 and accompanying text.

See infra notes 69–83 and accompanying text.

See CHRISTOPHER KOOPMAN ET AL., MERCATUS CENTER, THE SHARING ECONOMY AND

CONSUMER PROTECTION REGULATION: THE CASE FOR POLICY CHANGE 3–5 (Dec. 2014), available

at http://mercatus.org/sites/default/files/Koopman-Sharing-Economy.pdf, archived at http://perma.cc/

V3KN-BAB9 (discussing the rapid growth and value of the sharing economy, loosely defined as an

internet marketplace where individuals come together to exchange underutilized goods or services).

Well-known sharing economy companies include Airbnb, Uber, Lyft, and TaskRabbit. Molly Cohen

& Corey Zehngebot, What’s Old Becomes New: Regulating the Sharing Economy, 58 B

OS. B.J., Spring

2014, at 6, 6.

1102 Boston College Law Review [Vol. 56:1097

vehicles to provide rides to strangers for a fee.

Ride-sharing drivers provide

customers with door-to-door service to their destinations, just like a taxicab,

but the transaction tends to be cheaper and more convenient for the customer.

As a result, ride-sharing has introduced competition into the taxicab market.

John G. Browning, Emerging Technology and Its Impact on Automotive Litigation, 81 DEF.

COUNS. J. 83, 84 (2014); Ken Yeung, Class-Action Lawsuit Filed Against Uber by San Francisco

Taxi Drivers for Unfair Competition, T

HE NEXT WEB (Nov. 14, 2012, 5:59 PM), http://thenextweb.

com/insider/2012/11/14/class-action-lawsuit-filed-against-uber-by-san-francisco-taxicab-drivers-citing-

unfair-business-competition/, archived at http://perma.cc/D2LU-L64C (describing California cab driv-

ers’ class action lawsuit alleging that uberX operates as an illegal taxicab and limousine service). Ride-

sharing providers are not subject to the same local licensing and insurance requirements that apply to

taxicabs and limousines. NAIC Consumer Alert for Ridesharing Passengers, supra note 13; see Bos-

ton Cab Dispatch, Inc. v. Uber Techs., Inc., No. 13-10769-NMG, 2014 WL 1338148, at *1–3 (D.

Mass. Mar. 27, 2014) (explaining how Boston taxicabs are regulated by Boston Police Department

Rule 403 and that Uber vehicles do not fall within the scope of Rule 403). See generally B

OS. POLICE

DEP’T, RULE 403, HACKNEY CARRIAGE RULES AND REGULATIONS (Aug. 29, 2008), available at

https://static1.squarespace.com/static/5086f19ce4b0ad16ff15598d/t/52af61e1e4b0871946c07a41/

1387225569980/Rule+403.pdf, archived at http://perma.cc/JTN7-6B3P (prescribing the Boston Police

Commissioner’s taxicab and radio association regulations); Thomson Reuters, Licensing of Taxi Driv-

ers, 0140 REGSURVEYS 2 (June 2014) (providing a fifty-state survey of state regulations for li-

censed taxicab drivers). Car-sharing is also distinguishable from ride-sharing in that car-sharing in-

volves a company or individual renting cars out to drivers, as rental car companies do. See Browning,

supra, at 84–85 (pointing out the similarity between car- and ride-sharing and rental car companies);

Side by Side Comparison of Car Sharing and Ridesharing, N

AT’L ASS’N OF INS. COMM’RS, http://

www.naic.org/documents/cipr_events_140819_sidebyside_rideshare_carshare.pdf, archived at http://

perma.cc/2U4X-M2VX (last visited May 17, 2015) (demonstrating how car-sharing and ride-sharing

differ); see also Z

IPCAR, http://www.zipcar.com, archived at http://perma.cc/8YPY-5KQ4 (last visited

May 17, 2015) (explaining that ZipCar is a car-sharing company that owns vehicles that members rent

to drive themselves around).

See NAIC Consumer Alert for Ridesharing Passengers, supra note 13 (comparing taxicabs to

uberX and noting that uberX is a cheaper but less safe alternative); Luke O’Neil, Hail, Boston: The

Uber vs Taxi Livery War Is Changing the Industry, B

OS. MAG. (Aug. 2014), http://www.boston

magazine.com/news/article/2014/07/30/uber-vs-taxis/, archived at http://perma.cc/XQ3J-UQBC (dis-

cussing Uber’s advantages over taxicabs, including the convenience of hailing a car from indoors).

But cf. Lori Aratani, Proposal Would Allow D.C. Cabs to Embrace ‘Surge Pricing,’ W

ASH. POST

(Apr. 7, 2014), http://www.washingtonpost.com/local/trafficandcommuting/proposal-would-allow-dc-

cabs-to-embrace-surge-pricing/2014/04/07/0bb48f28-be85-11e3-b195-dd0c1174052c_story.html,

archived at http://perma.cc/FD28-DBBT (explaining Uber’s practice of surge pricing, or raising prices

in response to increased demand).

See Josh Barro, Under Pressure from Uber, Taxi Medallion Prices Are Plummeting, N.Y.

TIMES (Nov. 27, 2014), http://www.nytimes.com/2014/11/28/upshot/under-pressure-from-uber-taxi-

medallion-prices-are-plummeting.html?_r=0&abt=0002&abg=1, archived at http://perma.cc/FD4J-

GUYR (describing how the prices of taxicab medallions are down in many cities due to competition

from Uber and Lyft); Commercial Ride-Sharing, supra note 13 (describing ride-shar

ing as a new

alternative to public transportation); London’s Anti-Uber Taxi Protest Brings Traffic to Standstill,

BBC

NEWS (June 11, 2014), http://www.bbc.com/news/uk-england-london-27799938, archived at

http://perma/cc/GW5M-8WDC (describing a London taxicab protest against Uber, which resulted in

an 850% increase in downloads of the Uber app); O’Neil, supra note 25 (pointing out that a few me-

dallion owners cornered the Boston taxicab market and drove up costs, until Uber began offering

customers other options).

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1103

Furthermore, ride-sharing has the potential to reduce traffic, relieve the burden

on public transportation systems, and improve community relations.

Transportation network companies (“TNCs”) enable ride-sharing transac-

tions between drivers and customers.

TNCs do not own any vehicles; rather,

TNCs connect customers with nearby drivers through a mobile phone applica-

tion (“app”), much like a taxi dispatcher does.

To hail a ride-sharing driver,

customers download the TNC’s app, store their credit card information in the

app, and then request a ride from a driver in the area.

Any of the TNC’s local

drivers logged into the app on their mobile phones can accept the ride re-

quest.

After the ride is complete, the TNC app charges the fare to the custom-

er’s credit card automatically.

TNCs profit by taking a percentage of the fares

and leaving the remainder to the drivers.

See Accelerating the Lyft Movement, LYFT BLOG (Mar. 11, 2015), http://blog.lyft.com/posts/

2015/3/11/accelerating-the-lyft-movement, archived at http://perma.cc/KD4P-2LGS (stating Lyft’s

goal of fostering community); Commercial Ride-Sharing, supra note 13 (stating that TNCs can “less-

en traffic congestion, improve the environment, and enhance social connection”); Gregory Ferenstein,

Two New Studies Show Why Uber Makes Cities More Productive and Less Congested, V

ENTURE-

BEAT (Sept. 3, 2014, 2:12 PM), http://venturebeat.com/2014/09/03/two-new-studies-show-why-uber-

makes-cities-more-productive-and-less-congested/, archived at http://perma.cc/H3G7-B2RE (explain-

ing studies in San Francisco and New York City that found that ride-sharing reduced rider waiting

times and city congestion and could reduce traffic pollution). But see Melkorka Licea et al., More

Uber Cars Than Yellow Taxis on the Road in NYC, N.Y.

POST (Mar. 17, 2015, 11:43 PM), http://

nypost.com/2015/03/17/more-uber-cars-than-yellow-taxis-on-the-road-in-nyc/, archived at http://

perma.cc/7XQ5-2A3A (noting that with more Uber limousines in New York City than medallion-

bearing cabs, traffic congestion has increased along with competition).

See Nordman, supra note 13, at 6 (explaining how TNCs’ online platforms facilitate ride-

sharing by connecting riders with drivers through a mobile phone application). Other ride-sharing

TNCs include Lyft and Sidecar. See Browning, supra note 24, at 84.

See Boston Cab, 2014 WL 1338148, at *2 (explaining how the Uber app generates assignments

for Uber drivers, similar to the way in which taxicab radio associations provide dispatch services to

taxicab drivers); Browning, supra note 24, at 84 (comparing TNCs, which do not own any vehicles, to

taxi dispatchers because they connect drivers with nearby riders). Uber, Lyft and Sidecar all function

in the same way. Compare U

BER, https://www.uber.com, archived at http://perma.cc/4ETG-FZZY

(last visited May 17, 2015) (explaining that customers use the Uber app to hail a ride with an Uber

vehicle), with L

YFT, https://www.lyft.com, archived at http://perma.cc/J6G3-T6S5 (last visited May

17, 2015) (explaining that the Lyft app connects customers with ride-sharing drivers), and S

IDECAR,

https://www.side.cr, archived at http://perma.cc/UX8J-XDFD (last visited May 17, 2015) (explaining

how the Sidecar app similarly connects customers with ride-sharing drivers, except customers learn in

advance how much the fare will cost).

See Boston Cab, 2014 WL 1338148, at *2 (describing how Uber customers use the Uber app to

request a ride).

See id. (stating that taxicab drivers choose to make themselves available for hire through the

Uber app while also remaining available for dispatch by their radio associations); Browning, supra

note 24, at 84 (discussing how the Uber app uses cell phone GPS technology to connect customers

with nearby drivers).

See Boston Cab, 2014 WL 1338148, at *2 (stating that the Uber fare is charged to the custom-

er’s preauthorized credit card); Nordman, supra note 6, at 6 (stating that no tipping is involved in an

Uber transaction). The driver’s cell phone tracks the distance and duration of the ride, which are then

used to calculate the fare. See Mike DeBonis, Uber Runs Afoul of Massachusetts Regulators, W

ASH.

1104 Boston College Law Review [Vol. 56:1097

The world’s largest TNC is Uber.

Founded in San Francisco in 2009,

Uber currently operates in fifty-five countries and in over 260 cities world-

wide.

Hundreds of thousands of drivers use Uber’s platform to provide rides

to customers, and Uber continues to grow its fleet of drivers and expand its

services.

Among the various transportation options Uber offers, its most pop-

POST (Aug. 16, 2012), http://www.washingtonpost.com/blogs/mike-debonis/post/uber-runs-afoul-of-

massachusetts-regulators/2012/08/10/e8044bc6-e317-11e1-98e7-89d659f9c106_blog.html, archived

at http://perma.cc/9B4Z-NPFB (noting that Massachusetts regulators challenged but ultimately ap-

proved of Uber’s GPS metering system, and providing a link to the Massachusetts Division of Stand-

ards’ order).

See Ehret, 2014 WL 4640170, at *1 (challenging Uber’s practice of charging customers a

twenty percent fee on top of its metered fare, calling the fee a driver gratuity, and then keeping a “sub-

stantial” portion for itself); Boston Cab, 2014 WL 1338148, at *2 (alleging that Uber adds a twenty

percent “gratuity” for drivers to its fares but only remits half of the gratuity to drivers); Nordman,

supra note 13, at 6 (stating that TNCs take a percentage of drivers’ sales).

See Scott Austin et al., The Billion-Dollar Startup Club, WALL ST. J. (Feb. 28, 2015), http://

graphics.wsj.com/billion-dollar-club/, archived at http://perma.cc/PH3W-92RU (noting that Uber was

valued at over $41 billion in December of 2014, making it the second largest venture-backed private

company in the world); Michael Wolff, The Tech Company of the Year Is Uber, USA

TODAY (Dec.

22, 2013, 10:54 PM), http://www.usatoday.com/story/money/columnist/wolff/2013/12/22/the-success-

of-app-based-car-service-uber/4141669/, archived at http://perma.cc/44VG-D3B5 (stating that if Uber

meets its goal of earning $50 billion in revenue, it would become the world’s largest transportation

company). But see Scott Cendrowski, China Has a New Taxi App Monopolist—and It Isn’t Uber,

ORTUNE (Feb. 16, 2015, 6:30 AM), http://fortune.com/2015/02/16/china-has-a-new-taxi-app-

monopolist-and-it-isnt-uber/, archived at http://perma.cc/3EKD-XGS7 (describing the battle among

taxi-hailing apps in China, where Uber is relatively new to the market). Uber’s closest competitor in

the United States, Lyft, was valued at $2.5 billion in March of 2015. See Austin, supra; Adam

Lashinsky, Uber Banks on World Domination, F

ORTUNE (Sept. 18, 2014, 7:25 AM), http://fortune.

com/2014/09/18/uber-banks-on-world-domination/, archived at http://perma.cc/5FP4-NR6D (refer-

ring to Lyft as Uber’s “pip-squeak rival”).

See Lashinsky, supra note 34 (describing Uber’s origins); Where Is Uber Currently Available?,

BER, https://www.uber.com/cities, archived at http://perma.cc/3HWP-BCF4 (last visited May 17,

2015) (listing cities where Uber operates). By comparison, Lyft operates in only sixty U.S. cities. See

Cities We’re In, L

YFT, https://www.lyft.com/cities, archived at http://perma.cc/TR56-XADM (last

visited May 17, 2015) (listing the cities in which Lyft operates).

See Emily Badger, Now We Know How Many Drivers Uber Has—And Have a Better Idea of

What They’re Making, W

ASH. POST (Jan. 22, 2015), http://www.washingtonpost.com/blogs/wonk

blog/wp/2015/01/22/now-we-know-many-drivers-uber-has-and-how-much-money-theyre-making%

E2%80%8B/, archived at http://perma.cc/E66R-V84A [hereinafter Badger, Now We Know] (reporting

that Uber had over 162,000 active drivers in December 2014 and that its cadre of drivers has doubled

every six months over the past two years); Lashinsky supra note 34 (reporting that Uber claims to

have hundreds of thousands of drivers and describing Uber’s growth strategy). In addition to provid-

ing ground transportation, Uber has experimented with water transportation, food delivery, and heli-

copter rides. See Kate, Elevate Your Ride to Coachella Valley with UberCHOPPER, U

BER (Apr. 1,

2015), http://blog.uber.com/festivalchopperSD, archived at http://perma.cc/FD5S-KT75 (describing

Uber’s helicopter service); Maya Kosoff, Uber’s Seamless Killer Is Launching a Dinner Option in Los

Angeles, B

US. INSIDER (Dec. 8, 2014), http://www.businessinsider.com/ubers-seamless-killer-uberfresh-

is-launching-a-dinner-option-in-los-angeles-2014-12, archived at http://perma.cc/4RHC-4G4E (de-

scribing Uber’s food delivery service); Conor Myhrvold, Uber Boat Meets #Uberdata, U

BER (July 15,

2014), http://blog.uber.com/uberboatrecap, archived at http://perma.cc/7YND-RHXJ (describing

Uber’s boat service).

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1105

ular service is uberX, the low cost ride-sharing option.

Uber continues to ac-

tively recruit uberX drivers to meet the demand for ride-sharing services.

Because Uber does not have to comply with local taxicab and limousine

regulations, it has pursued innovative but controversial business methods.

Regulators have challenged its practice of surge pricing—increasing fares dur-

ing high-demand periods—as price gouging.

Critics have argued that Uber

provides insufficient training for drivers and improperly classifies them as in-

dependent contractors rather than employees.

Passengers and taxicab compa-

See Ferenstein, supra note 27 (demonstrating that uberX ride-sharing is Uber’s most popular

service, as researchers found fifty-three percent of survey respondents were riding with uberX, as

opposed to an Uber limo, Lyft, Sidecar, or taxi); U

BER, supra note 29 (stating that Uber customers can

request a ride from an Uber-affiliated limo, taxi, or a lower-cost uberX vehicle). Lyft and Sidecar, on

the other hand, only offer ride-sharing vehicles. See L

YFT, supra note 29; SIDECAR, supra note 29.

See Ken Bensinger & Johana Bhuiyan, Uber Advises Drivers to Buy Insurance That Leaves

Them Uncovered, B

UZZFEED NEWS (Dec. 22, 2014), http://www.buzzfeed.com/kenbensinger/ubers-

yawning-insurance-gap?utm_term=.edjMADgPZ#.ubq9WDJbQz, archived at http://perma.cc/X6W4-

Q8A2 (reporting on an uberX driver recruiting event held at a car dealership); Lashinsky, supra note

34 (describing Uber’s strategy of partnering with dealerships and lenders to help uberX drivers with

poor credit finance new cars, getting them on the road faster); Douglas MacMillan, Uber Cuts Deals

to Lower Car Costs, W

ALL ST. J. (Nov. 25, 2013), http://blogs.wsj.com/digits/2013/11/25/uber-cuts-

deals-to-lower-car-costs/, archived at http://perma.cc/FF7G-8QZT (explaining that Uber partners with

Toyota, GM, and lenders to obtain discounts and financing for its drivers). It is possible that Uber

misleads uberX drivers about the insurance coverage they need so that it can recruit drivers more

quickly. See Bensinger & Bhuiyan, supra (reporting that an Uber representative told potential uberX

drivers that they do not need commercial auto insurance, which most drivers cannot afford).

See Boston Cab, 2014 WL 1338148, at *6–7 (alleging that Uber engages in unfair competition

by avoiding the costs of complying with taxi regulations); Saitto, supra note 12 (stating that Uber’s

strategy is to launch services without regard to regulations and then force local regulators to adapt).

Under Boston’s local regulations, for example, taxis must carry a hackney license, belong to a radio

association, and pass regular vehicle inspections and criminal background checks. See Boston Cab,

2014 WL 1338148, at *1–2 (stating that Boston’s Police Commissioner regulates taxis). See generally

OS. POLICE DEP’T, RULE 403, supra note 24 (prescribing regulations for Boston taxis).

See Aratani, supra note 25 (stating that legislators are considering allowing taxis to engage in

surge pricing as well so that they can compete with Uber); Ben Walsh, Here’s Why Uber Is Tripling

Prices During a State of Emergency, H

UFFINGTON POST BUS. (Jan. 27, 2015, 12:59 PM), http://www.

huffingtonpost.com/2015/01/26/uber-price-surge-blizzard_n_6548626.html, archived at http://perma.

cc/93HR-ZQ55 (discussing criticism Uber faced after it raised prices during the terror attacks in Syd-

ney, Australia and Hurricane Sandy in the United States). Lyft also engages in surge pricing. Walsh,

supra.

See Richard Epstein, Uber and Lyft in California: How to Use Employment Law to Wreck an

Industry, F

ORBES (Mar. 16, 2015, 10:57 AM), http://www.forbes.com/sites/richardepstein/2015/03/

16/uber-and-lyft-in-california-how-to-use-employment-law-to-wreck-an-industry/, archived at http://

perma.cc/FGV9-XQJT (discussing two class action lawsuits against Uber pending in California that

challenge Uber’s practice of classifying drivers as independent contractors); Ellen Huet, Uber Skimps

on Driver Training, Then Charges Drivers $65 for Basic Driver Skills Course, F

ORBES (Oct. 28,

2014, 9:00 AM), http://www.forbes.com/sites/ellenhuet/2014/10/08/uber-skimps-on-driver-training-

then-charges-drivers-65-for-basic-driver-skills-course/, archived at http://perma.cc/9U2G-5S8W

[hereinafter Huet, Uber Skimps on Driver Training] (criticizing Uber for requiring drivers to pay for

their own training); Ellen Huet, What Happens to Uber Drivers and Other Sharing Economy Workers

Injured on the Job?, Forbes (Jan. 6, 2015, 1:15 PM), http://www.forbes.com/sites/ellenhuet/2015/01/

06/workers-compensation-uber-drivers-sharing-economy/, archived at http://perma.cc/9JUJ-ZS2Y

1106 Boston College Law Review [Vol. 56:1097

nies have sued Uber over its practice of charging mandatory driver gratuities

and taking its fees out of those gratuities.

Uber is also facing lawsuits over its

allegedly inadequate driver screening processes.

Finally, and most important-

ly for the purposes of this Note, the insurance industry has warned that Uber

does not provide drivers with adequate auto insurance.

But given that ride-

sharing appears to be the future of transportation, regulators are wary of over-

regulating TNCs and stifling innovation.

[hereinafter Huet, Sharing Economy Workers Injured on the Job] (questioning whether Uber properly

classifies drivers as independent contractors, as it allows Uber to avoid providing them with overtime

pay, worker’s compensation, sick days, and health insurance); London’s Anti-Uber Taxi Protest

Brings Traffic to Standstill, supra note 26 (reporting that the London taxi drivers intended their Uber

protest to highlight the intense training that taxi drivers undergo).

See Ehret, 2014 WL 4640170, at *1 (recounting a customer’s allegations that Uber misrepre-

sents its fees as a driver “gratuity”); Boston Cab, 2014 WL 1338148, at *2 (recounting the taxicab

dispatch companies’ allegations that Uber’s practice of charging customers a twenty percent gratuity,

and keeping half, exceeds the maximum fare taxicabs are allowed to charge).

See Andrew Lopez, Prices Slashed for UberX as Opposition Raise Questions Over Safety,

NBC

LOS ANGELES (June 23, 2014, 12:04 PM), http://www.nbclosangeles.com/news/local/UberX-

Cuts-Prices-as-Opposition-Raises-Questions-Over-Safety-264278051.html, archived at http://perma.

cc/W2ZY-VHB3 (pointing out that uberX drivers are not subject to the same background checks as

taxicab drivers); Kurt Orzeck, Calif. DAs Hit Uber with Consumer-Safety Suit as Lyft Settles, L

AW360

(Dec. 9, 2014), http://www.law360.com/articles/603221/calif-das-hit-uber-with-consumer-safety-suit-

as-lyft-settles, archived at http://perma.cc/J4BQ-PBJ5 (reporting that California authorities sued Uber

and Lyft for misleading consumers about the quality of their background checks).

See Commercial Ride-Sharing, supra note 13 (describing potential gaps in insurance coverage for

uberX and other ride-sharing drivers); Stephanie Friedhoff, Insurance Could Make Road Bumpy for Uber

and Lyft, B

OS. GLOBE (Jan. 7, 2015), available at http://www.bostonglobe.com/business/2015/01/

07/insurance-questions-latest-bump-road-for-ride-share-companies/wegXpHUBpZHwtUXNHJSf6H/

story.html, archived at http://perma.cc/MRF4-YK5T (stating that insurers opine that ride-sharing drivers

have sufficient auto insurance coverage).

See Steve Chapman, The Flimsy Case for Regulating Uber, CHI. TRIBUNE (Jan. 2, 2015, 4:00

PM), http://www.chicagotribune.com/news/opinion/chapman/ct-uber-regulation-background-pricing-

sexual-assault-perspec-0104-20150102-column.html, archived at http://perma.cc/RB4L-TF4N (argu-

ing against regulating Uber and contending that heavy regulation made the taxicab industry ineffi-

cient); Farhad Manjoo, Uber, a Rising Business Model That Could Change How You Work, N.Y.

TIMES (Jan. 28, 2015), http://www.nytimes.com/2015/01/29/technology/personaltech/uber-a-rising-

business-model.html, archived at http://perma.cc/GJ8L-7V5V (reporting on the “uberization” of dif-

ferent types of jobs and noting that the number of new drivers on Uber’s platform doubles every six

months); Saitto, supra note 12 (reporting that app systems for hailing rides is here to stay and that

regulators should level the playing field for competitors); Harrison Weber, As Uber Battles 13 Law-

suits, Cabbies & State Agencies Are Out for Blood (Update), V

ENTUREBEAT (May 8, 2014), http://

venturebeat.com/2014/05/08/as-uber-battles-13-lawsuits-cabbies-state-agencies-are-out-for-blood/,

archived at http://perma.cc/A2ZR-8BXB (warning that the numerous lawsuits against Uber could hurt

innovation and potentially put all ride-sharing companies out of business); see also supra notes 69–83

and accompanying text (discussing recent attempts to regulate ride-sharing).

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1107

B. Mind the Gap: Potential Problems with UberX Drivers’

Insurance Coverage

Since uberX accidents have become more common, Uber has opened up

about its insurance coverage for ride-sharing drivers in an effort to ensure the

public that ride-sharing is safe.

Uber’s customers appear fully covered for

their injuries; however, uberX drivers’ access to compensation is less certain.

The uncertainty surrounding uberX drivers’ coverage while they are driving

around searching for fares is particularly problematic, as operating a mobile

phone app while driving is risky behavior.

Uber structures its insurance for

uberX drivers in the following way.

An uberX driver’s insurance coverage varies depending on the driver’s

activity, which can be divided into three distinct time periods.

During period

See Hourdajian, Eliminating Ridesharing Ambiguity, supra note 6 (announcing contingent

liability coverage for drivers during the trolling period in hopes of eliminating any confusion about

coverage that arose after an uberX driver accidentally killed a young girl in San Francisco); Zara

Rahim, Certificate of Insurance—U.S. Ridesharing, U

BER (Jan. 11, 2015), http://blog.uber.com/

certificatesofinsurance, archived at http://perma.cc/5ZBD-RMT2 (providing hyperlinks to Uber’s

insurance certificates for every state).

See Tim Fernholz, A Coverage Dispute Between Uber, Lyft, and Insurers Leaves Drivers Exposed,

UARTZ (Mar. 23 2015), http://qz.com/365854/a-coverage-dispute-between-uber-lyft-and-insurers-

leaves-drivers-exposed/, archived at http://perma.cc/39Y7-KH8U (discussing the uncertainty that

remains over whether uberX drivers are covered by insurance while they drive around searching for

fares); Hourdajian, Insurance for uberX, supra note 8 (indicating that Uber has a commercial liability

policy that kicks in when the uberX driver accepts a fare request and continues through the duration of

the ride). But see Stephanie Francis Ward, Internet Car Companies Offer Convenience, but Lawyers

See Caution Signs, ABA

J. (Jan. 1, 2014 10:00AM), http://www.abajournal.com/magazine/article/

internet_car_companies_offer_convenience_but_lawyers_see_caution_signs, archived at http://perma.

cc/YM6B-C4WD (noting that some lawyers believe $1,000,000 will not go very far in a serious acci-

dent with multiple injured parties). Uber’s commercial liability policy will pay for up to $1,000,000 in

third party damages caused by the uberX driver and up to an additional $1,000,000 for injuries caused

by an underinsured third party driver. Hourdajian, Insurance for uberX, supra note 8.

See NAIC WHITE PAPER ON TNC INSURANCE, supra note 8, at 5–6 (explaining that most in-

surers and consumer protection groups believe that ride-sharing drivers post a greater risk during the

trolling period because they are required to use their cell phones); Badger, Strange Tale, supra note 7

(describing how an Uber driver, with the app on but without a passenger, struck another vehicle that

dislodged a fire hydrant and struck a pedestrian); Matt Richtel, Distracted Driving and the Risks of

Ride-Hailing Services Like Uber, N.Y. T

IMES (Dec. 21, 2014, 7:00 AM), http://bits.blogs.nytimes.

com/2014/12/21/distracted-driving-and-the-risks-of-ride-hailing-services-like-uber/, archived at http://

perma.cc/P8BN-7KAR (explaining how Uber drivers trolling for fares have fifteen seconds to manu-

ally respond to a ride request on the app or they risk losing the fare and access to Uber’s driver plat-

form); Sovern, supra note 5 (reporting that mother of young girl killed by uberX driver claimed to

have seen driver looking at his phone when he hit her daughter).

See infra notes 50–68 and accompanying text (explaining uberX drivers’ insurance coverage).

See Hourdajian, Eliminating Ridesharing Ambiguity, supra note 6 (showing that uberX ride-

sharing insurance coverage varies based on whether the driver has the app off or on and whether the

driver has a passenger). Lyft has a nearly identical insurance structure. Compare id. (stating that an

uberX driver is covered by his or her personal insurance and Uber’s contingent liability policy while

the app is on but no ride is in progress, and then Uber’s full commercial liability coverage kicks in

once the driver accepts a ride request), with We Go the Extra Mile for Safety, L

YFT, https://www.lyft.

1108 Boston College Law Review [Vol. 56:1097

one, the driver is neither using the Uber app nor seeking fares.

Uber asserts

on its website that all drivers have auto insurance policies that cover them dur-

ing this time.

During period two, the uberX driver is logged into the Uber

app and seeking fares, but has not yet accepted a ride request.

Uber’s website

states that the driver’s personal policy is in effect during this period.

Uber

also carries a contingent liability policy that covers the driver in the event that

the driver’s insurer denies coverage for an accident during period two.

Final-

ly, period three commences when the uberX driver accepts a ride request and

com/safety, archived at http://perma.cc/3CM9-FANC (last visited May 17, 2015) (stating that Lyft’s

contingent liability policy covers the driver while the app is on but no ride is in progress, and then

Lyft’s commercial liability coverage begins once the driver accepts a ride request).

See Hourdajian, Eliminating Ridesharing Ambiguity, supra note 6 (providing a visual of an

uberX driver’s insurance coverage over the course of a ride, indicating that Uber’s insurance is una-

vailable to drivers when the app is off). The uberX driver is essentially off-duty during this time. See

id.

See id. (indicating that uberX drivers have “personal auto insurance” coverage when the “Uber

app [is] off”). This Note is concerned with Uber’s assertions about ride-sharing drivers’ insurance

because many uberX drivers rely on Uber to tell them what insurance they need. See Bensinger &

Bhuiyan, supra note 38 (reporting that many uberX drivers rely on Uber’s representations about in-

surance because they are inexperienced with transportation). Most uberX drivers only carry personal

auto insurance, although some insurance officials believe that they should have commercial policies. See

id. (explaining that many uberX drivers do not have commercial insurance because it costs three to ten

times more than personal insurance); NAIC Consumer Alert for Ridesharing Drivers, supra note 8

(warning ride-sharing drivers that personal policies likely will not cover commercial activity, so they

should consider purchasing a commercial policy).

See Hourdajian, Eliminating Ridesharing Ambiguity, supra note 6 (indicating that a second

time period commences when the uberX driver logs into the app and is waiting for a trip request).

See id. (stating that when ride-sharing drivers have the Uber app on, “the vast majority of per-

sonal insurance policies cover this period either by the plain terms of the insurance policy, or due to

the insurance requirements set by state”); Hourdajian, Insurance for uberX, supra note 8 (stating that

“[d]uring the time that a ridesharing partner is available but between trips, most personal auto insur-

ance will provide coverage”).

See Hourdajian, Insurance for uberX, supra note 8 (indicating that Uber’s “contingent liability

coverage” also covers uberX drivers while they search for fares for up to $50,000 in damages per

person, up to $100,000 in damages per incident, and up to $25,000 in property damage). Liability

polices pay for injuries to third parties that the driver causes but not for the driver’s own injuries.

OBERT H. JERRY, II & DOUGLAS R. RICHMOND, UNDERSTANDING INSURANCE LAW 918 (5th ed.

2007) (explaining liability coverage). Drivers must purchase first-party coverage if they intend to

insure their own medical expenses and property. See id. (explaining personal injury protection and

underinsured motorist, collision, and comprehensive coverages, all of which are first-party coverages).

Personal injury protection pays for the insured driver’s own medical expenses. Id. Underinsured mo-

torist coverage (“UI/UIM”) pays for the insured’s own medical expenses if another driver that lacks

sufficient liability policy injures the insured. Id. Finally, collision and comprehensive coverages com-

pensate the insured for damages to his or her property. Id. at 918, 968–69 (explaining that collision

coverage pays for vehicular damage caused by impact with another object, whereas comprehensive

coverage pays for vehicular damage caused by other perils, such as a bridge collapse). Uber’s liability

policy for uberX drivers during the trolling period, which will only pay for third parties’ injuries, is

also “contingent” because it only pays if the driver’s personal auto insurer completely denies the claim

or pays nothing. See Hourdajian, Insurance for uberX, supra note 8.

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1109

spans the duration of the ride.

During period three, Uber’s website indicates

that its primary commercial liability policy covers uberX drivers.

Although Uber asserts that uberX drivers’ personal insurance covers them

while they drive around searching for fares (during period two), a coverage

gap may persist during this time.

Drivers’ personal policies usually do not

cover commercial activities.

In addition, most personal auto polices contain

express livery exclusions stating that the policy will not cover the insured if the

insured uses the vehicle to carry persons for a fee.

Trolling for fares alone

can trigger livery exclusions.

Therefore, insurers can refuse to provide uberX

drivers with coverage under their personal policies, or rescind their personal

policies entirely, if insurers discover that the drivers engaged in ride-sharing.

See id. (indicating that Uber’s commercial insurance coverage applies during a period begin-

ning from the moment the uberX driver accepts the trip until the trip is completed).

See id. (indicating that as soon as the uberX driver accepts a ride request, the driver is covered

by Uber’s commercial liability policy, as well as an additional $1,000,000 in UI/UIM motorist cover-

age, personal injury protection in select states, and contingent comprehensive and collision coverage

up to the value of the car). Uber’s commercial liability policy is “primary” because it takes precedence

over the uberX driver’s personal policy, but it will not take precedence over any commercial policy on

the vehicle. See id.

Compare id. (indicating that most uberX drivers’ personal policies will cover them when they

have the app on and are searching for fares), with Bensinger & Bhuiyan, supra note 38 (noting that

because personal policies issued by Allstate, State Farm, Progressive, and Geico do not cover any sort

of ride-sharing, some insurers have cancelled policies of drivers who engaged in ride-sharing), and

Ellen Huet, Rideshare Drivers Still Cornered into Insurance Secrecy, F

ORBES (Dec. 18, 2014, 2:45

PM) http://www.forbes.com/sites/ellenhuet/2014/12/18/uber-lyft-driver-insurance/, archived at http://

perma.cc/DC6F-3SSL [hereinafter Huet, Rideshare Drivers Cornered into Secrecy] (interviewing

ridesharing drivers, some of whose insurers dropped them because of their ride-share driving), and

Notice to Transportation Network Company Drivers, supra note 8 (advising drivers to get their own

commercial auto policies with first party coverages, particularly medical payments, comprehensive,

collision, and UI/UIM coverages, as TNCs’ insurance policies may leave coverage gaps).

See Mooney v. Nationwide Mut. Ins. Co., 822 A.2d 567, 569, 571 (N.H. 2003) (holding that

insurer was authorized to rescind insured’s personal policy because he put his car to commercial use

by delivering mail for his employer); J

ERRY & RICHMOND, supra note 55, at 917 (distinguishing be-

tween personal auto insurance and commercial auto insurance); NAIC Consumer Alert for Rideshar-

ing Drivers, supra note 8 (warning ride-sharing drivers that most personal policies contain livery

exclusions that do not cover commercial activities, so insurers may refuse to insure them if they con-

duct business with their personal vehicles).

See NAIC Consumer Alert for Ridesharing Drivers, supra note 8 (warning drivers that most

personal auto policies have livery exclusions, which may exclude the time period when the driver is

available for hire); Notice to Transportation Network Company Drivers, supra note 8 (providing the

language of the typical livery exclusion found in personal auto policies).

See Friedhoff, supra note 44 (noting that the insurance industry overwhelming opines that

trolling for rides is not covered by personal auto policies that contain a livery exclusion); Rassman,

supra note 10, at 88, 90 (discussing how commercial activity can trigger livery exclusions, despite

Uber’s claims that personal auto policies are effective, which leads to confusion over whether person-

al policies will cover uberX drivers while they drive around searching for fares).

See JERRY & RICHMOND, supra note 55, at 391–97, 717–23 (discussing insurers’ main justifi-

cations for terminating coverage—misrepresentation, breach of warranty, or concealment—and dis-

tinguishing representations from warranties). This risk of total loss of personal insurance leads some

ride-sharing drivers to lie to their insurers about their ride-sharing. See Friedhoff, supra note 44 (re-

1110 Boston College Law Review [Vol. 56:1097

Moreover, Uber’s contingent liability policy does not compensate uberX

drivers for their own physical and property damages in the event of an acci-

dent.

The policy will not compensate uberX drivers for their bodily injury or

vehicle damage, because liability coverage only covers third party injuries that

the uberX drivers cause.

Further, Uber does not carry personal injury protec-

tion for drivers during this period, which would compensate uberX drivers for

their own bodily injuries regardless of fault.

Nor does Uber provide uberX

drivers with collision or comprehensive coverages, which would pay for dam-

age to the drivers’ vehicles.

Finally, Uber also lacks uninsured/underinsured

motorist (“UI/UIM”) coverage for uberX drivers during this period.

UI/UIM

coverage would pay for uberX drivers’ injuries if a motorist without third-party

liability coverage caused the accident.

porting that some uberX drivers avoid telling their insurers that they drive for Uber to keep their per-

sonal coverage); Huet, Rideshare Drivers Cornered into Secrecy, supra note 58 (interviewing drivers

who lied to their personal auto insurers about engaging ride-sharing to avoid losing coverage).

See Fernholz, supra note 47 (reporting that insurers are pessimistic about Uber’s contingent

liability coverage for uberX drivers during the trolling period, which Uber claims fills any coverage

gap); Wallace, supra note 7 (reporting an Uber spokesperson’s statement that liability policies only

compensate injured third parties, not the injured uberX driver).

See JERRY & RICHMOND, supra note 55, at 918 (explaining that liability coverage is third-party

protection that compensates only injured third parties, whereas first-party protection compensates the

driver for his or her own injuries).

See id. at 918, 923–24 (explaining personal injury protection and no-fault laws); Hourdajian,

Insurance for uberX, supra note 8 (displaying an uberX driver’s insurance coverage over the course of

a ride-sharing transaction, which lacks personal injury protection while the driver is searching for

fares). Many states mandate personal injury protection to ensure that drivers’ own injuries are com-

pensated. See J

ERRY & RICHMOND, supra note 55, at 97 (citing Tomai-Minogue v. State Farm Mut.

Auto. Ins. Co., 770 F.2d 1228, 1235 (4th Cir. 1985)) (explaining that states regulate the amount and

type of auto insurance coverage people must buy to ensure that injured persons have access to ade-

quate compensation); Summary of State Laws Related to Auto Insurance, N

AT’L ASS’N OF INS.

COMM’RS, http://www.naic.org/documents/committees_c_d_auto_insurance_study_group_related_

auto_law_summary.pdf, archived at http://perma.cc/7RJN-FKNM (last visited May 17, 2015) (indi-

cating that seventeen states mandate drivers carry personal injury protection).

See JERRY & RICHMOND, supra note 55, at 918 (stating that comprehensive and collision are first-

party coverages that cover damage to the insured’s own vehicle); Hourdajian, Insurance for uberX, supra

note 8 (displaying an uberX driver’s insurance coverage over the course of a ride-sharing transaction,

which lacks comprehensive and collision coverages while the driver is searching for fares).

See Hourdajian, Insurance for uberX, supra note 8 (displaying absence of UI/UIM coverage for

uberX drivers while they are driving with the app on and searching for fares).

See JERRY & RICHMOND, supra note 55, at 918 (explaining that underinsured motorist cover-

age is a first-party coverage). UI/UIM coverage is required in most states. See Summary of State Laws

Related to Auto Insurance, supra note 65 (indicating that thirty-five states require drivers to carry

uninsured motorist coverage, although drivers in some states can reject the coverage in writing).

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1111

C. Back to the Drawing Board: Recent Attempts to Regulate TNCs and

Ride-sharing Insurance

As Uber’s insurance practices have become more public, so too has the

discourse surrounding them.

Uber asserts that its insurance complies with the

law in all states, but because TNCs do not fit neatly into existing regulatory

frameworks for transportation, it is unclear which laws even apply.

Realizing

that Uber manages to deny insurance coverage for its drivers regularly, state

insurance commissioners and lawmakers have begun pursuing legislation that

will directly govern TNCs’ activities.

Although many of the proposed laws create specific insurance require-

ments for ride-sharing, some insurance officials believe that they may not go

far enough to protect uberX drivers.

California, for example, emerged as a

See, e.g., Don Jergler, Uber Announces New Policy to Cover Gap, INS. J. (Mar. 14, 2014),

http://www.insurancejournal.com/news/national/2014/03/14/323329.htm, archived at http://perma.cc/

97RY-XHU8 (reporting that the Property Casualty Insurers Association of America has been publicly

advocating for TNCs to fill the gaps in ride-sharing drivers’ insurance); Vara, supra note 7 (criticizing

Uber’s handling an insurance dispute arising from an accident involving an uberX driver that resulted

in death of young girl in San Francisco); Ward, supra note 47 (providing an overview of the various

legal issues, including lack of insurance coverage, that ride-sharing raises).

See Commercial Ride-Sharing, supra note 13 (stating that ride-sharing does not fit into insurers

risk-pooling models for personal auto insurance because the risks are not yet well understood; addi-

tionally, TNCs may not be subject to taxi and limo regulations that mandate proper insurance); Hour-

dajian, Insurance for uberX, supra note 8 (stating that Uber’s contingent liability policy in effect be-

tween trips “meets or exceeds the requirements for [third] party liability insurance in every state in the

U.S.,” and that personal injury protection “is provided in certain states at similar levels as limos or

taxis in those cities”). It is questionable whether Uber’s insurance for ride-sharing drivers does in fact

comply with local laws. Compare T

EX. INS. CODE ANN. § 1952.152 (West 2009) (mandating that all

insured carry personal injury protection coverage), with Certificate of Liability Insurance, U

BER (Dec.

19, 2014), https://uber-regulatory-documents.s3.amazonaws.com/insurance/COIs/TX.pdf, archived at

http://perma.cc/8AUD-AVMB (providing proof of Uber’s insurance coverage in Texas, which lacks

personal injury protection).

See Commercial Ride-Sharing, supra note 13 (noting that state insurance regulators are work-

ing with TNCs to ensure that drivers are adequately covered, even though insurance regulators usually

oversee insurance companies and agents); Jergler, supra note 69 (stating that Uber is working with

insurers and lawmakers to ensure that ride-sharing drivers have proper coverage). See generally

ROPERTY CAS. INSURERS ASS’N OF AM., TRANSPORTATION NETWORK COMPANY (RIDE SHARING)

ISSUE STATUS (Aug. 8, 2014), available at http://www.naic.org/documents/cipr_events_140819_

tnc_issue_status.pdf, archived at http://perma.cc/E9WM-BFZ7 (listing states’ regulatory actions per-

taining to ride-sharing safety and insurance).

See, e.g., CAL. PUB. UTIL. CODE § 5433 (West Supp. 2015) (requiring TNC drivers to carry

certain minimum amounts of insurance starting (a) when the driver logs into the app, and (b) when the

driver accepts a ride request, but not stating who should maintain the policies and not mandating first-

party coverages for the driver); A.B. 6090, 2015 Assemb., 238th Legis. Sess. (N.Y. 2015) (proposing

to require TNCs in New York to: (a) provide first party coverage for drivers while they are transport-

ing passengers, without mentioning the trolling period; and (b) disclose to drivers that their personal

liability policies may not cover them while the TNC app is on, but not mentioning that their personal

first party benefits may be entirely unavailable as well); H.B. 931, 189th Gen. Court, Reg. Sess. (Ma.

2015) (proposing to require TNCs to (a) provide liability coverage to drivers that complies with Mas-

sachusetts’ mandatory minimums from the moment they turn the app on, but without mention first-

1112 Boston College Law Review [Vol. 56:1097

leader in the regulatory race following Sofia Liu’s death in San Francisco on

New Year’s Eve in 2013.

Starting on July 1, 2015, California will require

TNCs drivers to be covered by insurance starting the moment they log into the

app, even if they do not yet have a passenger.

The law also requires TNCs to

make certain disclosures to drivers in their driver agreements.

TNCs must

disclose the limits of their liability policies, and that drivers’ personal policies

will not cover them while they are using the TNCs’ platforms.

TNCs also

will no longer be able to provide coverage that is contingent upon drivers sub-

mitting claims to their personal insurers first.

California’s attempts to fill the

coverage gap during period two, when the uberX drivers are trolling for fares,

and educate ride-sharing drivers about their insurance are steps in the right di-

rection.

party coverages, and (b) disclose to drivers that their personal policies may not be in effect, but with-

out requiring the TNCs to provide any detail);

NAIC WHITE PAPER ON TNC INSURANCE, supra note

8, at 6 (noting that some states have enacted legislation to fill ride-sharing insurance coverage gaps,

but holes still remain).

See Nordman, supra note 6, at 6–7 (describing California’s Insurance Commissioner as the

leader in the insurance community with regard to regulating TNCs and discussing his recommenda-

tions); Dan Packel, Calif. Bill on Uber, Lyft Insurance Offers Road Map for Pa., L

AW360 (Aug. 29,

2014, 5:47 PM), http://www.law360.com/articles/572365/calif-bill-on-uber-lyft-insurance-offers-

road-map-for-pa, archived at http://perma.cc/PAF9-5MBT [hereinafter Packel, Calif. Bill] (reporting

that Pennsylvania legislators will look to California as they attempt to regulate ride-sharing insur-

ance); Vara, supra note 7 (reporting that California lawmakers were spurred into action by Sofia’s

death in San Francisco).

CAL. PUB. UTIL. CODE § 5433(b)–(c) (imposing new insurance requirements on TNCs effective

July 1, 2015). “[F]rom the moment a participating driver logs on to the . . . platform until the driver

accepts a request . . . and from the moment . . . the ride is complete . . . until the driver . . . accepts

another ride request . . . [TNC] insurance shall be primary” and provide up to $50,000 for personal

injury per person, up to $100,000 for personal injury per accident, and up to $30,000 for property

damage Id. § 5433(c). Then, “from the moment a participating driver accepts a ride request . . . until

the driver completes the transaction . . . [TNC] insurance shall be primary and in the amount of one

million dollars ($1,000,000) for death, personal injury, and property damage.” Id. § 5433(b).

See id. § 5432 (imposing disclosure requirements effective July 1, 2015).

Id. § 5432(a)–(b) (requiring that TNCs disclose in their driver agreements “the insurance cov-

erage and limits of liability that the [TNC] provides while the driver uses . . . [the TNC’s] platform,”

and that “the driver’s personal automobile policy will not provide collision or comprehensive cover-

age for damage to the [driver’s] vehicle . . . from the moment the driver logs on to the [TNC’s] . . .

platform to the member the driver logs off”). TNCs also must provide drivers written notice that their

“personal automobile insurance policy will not provide coverage because the driver uses a vehicle in

connection with a [TNC’s] . . . platform.” Id. § 5432(a).

Id. § 5433(d) (“Coverage under a [TNC] insurance policy shall not be dependent on a personal

automobile insurance policy first denying a claim nor shall a personal automobile insurance policy be

required to first deny a claim.”).

See Packel, Calif. Bill, supra note 73 (noting that Pennsylvania lawmakers, trial lawyers, and

insurers agreed that California’s new TNC insurance regulations would serve as a useful guide for

their state).

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1113

Some insurance officials believe, however, that California’s law does not

fully protect uberX drivers’ interests.

The law does not dictate whether the

TNC or the driver must maintain the drivers’ insurance coverage required for

period two, while drivers are searching for fares.

Nor does the law require

drivers to be covered by first-party insurance during period two, which would

pay for the drivers’ own injuries.

Further, California’s required disclosures

about drivers’ insurance coverage may end up buried in fine print in the driver

agreements, making them of little use in educating drivers.

These potential

loopholes concern some insurance officials, as they want greater assurances

that these new laws will adequately inform and protect drivers.

See CAL. PUB. UTIL. CODE §§ 5432–5433 (discussing insurance coverage for TNC drivers but

not directly addressing first-party protection for drivers, adequate disclosures, and who must provide

drivers with coverage during the trolling period); cf. A.B. 3765, 216th Leg., 2014 Sess. (N.J. 2014)

(stating that the “[TNC] shall provide” drivers with commercial liability coverage, “property damage

and uninsured and underinsured motorist coverage, medical payments coverage . . . and optional col-

lusion and comprehensive coverage,” which “shall be in force and effect from the time the . . . provid-

er makes itself available for hire by logging into the [TNC]’s application . . . and continuing during

any transportation network trip . . . until the . . . provider logs out”).

CAL. PUB. UTIL. CODE § 5433(c)(1)(A)–(C) (stating that requirements for insurance during the

trolling period “may be satisfied by . . . [TNC] insurance maintained by a participating driver” or

“insurance maintained by a [TNC] that provides coverage in the event a participating driver’s insur-

ance policy” fails to provide coverage). By contrast, New Jersey’s proposed law clearly states that

TNCs must provide coverage to ride-sharing drivers from the moment they log into the app through

the duration of every trip. See N.J. A.B. 3765 (stating that the “[TNC] shall provide coverage . . . to

the provider contracting with the [TNC]”).

See CAL. PUB. UTIL. CODE § 5433 (not discussing first party coverages for the driver, other

than requiring UI/UIM coverage to be in effect during a ride); J

ERRY & RICHMOND, supra note 55, at

918 (explaining first-party coverages). New Jersey, on the other hand, proposes to require TNCs to

provide drivers with “property damage and uninsured and underinsured motorist coverage, medical

payments coverage . . . and optional collusion and comprehensive coverage,” which must be in effect-

ing whenever the driver’s TNC app is on. See A.B. 3765.

See CAL. PUB. UTIL. CODE § 5432 (mandating only that disclosures must be in writing, and

some must be given in the driver agreements). New Jersey’s proposed disclosures will more effective-

ly warn ride-sharing drivers about the potential for insurance gaps. See A.B. 3765 (requiring explicit

disclosures to drivers about the insurance implications of ride-sharing, which must be “on a separate

sheet of paper,” “in 14-point bold type,” and “signed by the [driver]”).

See NAIC Consumer Alert for Ridesharing Drivers, supra note 8 (providing ride-sharing driv-

ers with questions to ask TNCs about their insurance coverage and advising them to talk to their per-

sonal insurers); Packel, Lyft, Uber Ridesharing Bids, supra note 11 (noting that Pennsylvania insur-

ance officials have criticized TNCs for not providing ride-sharing drivers with “adequate insurance

education”). But see Fernholz, supra note 47 (quoting an Uber representative as stating “it’s up to

[drivers] to be able to read their own personal insurance policy to see if it works”).

1114 Boston College Law Review [Vol. 56:1097

II. KEEPING THEM HONEST: FIGHTING UNFAIR BUSINESS PRACTICES WITH

UNFAIR COMPETITION LAWS

When companies act unethically, unfair competition laws play an important

role in righting the wrongs of the company.

To determine whether Uber Tech-

nologies, Inc. (“Uber”) engages in an unfair business practice when it makes

assertions about uberX insurance, it is important to examine the standards courts

use to determine whether a business practice is unfair.

As such, Section A of

this Part discusses California’s unfair competition law (“UCL”) and explains

why California law is appropriate for evaluating Uber’s insurance practices.

Section B then explains how California courts distinguish between UCL lawsuits

brought by business competitors versus consumers.

Finally, Section C exam-

ines the different tests for unfairness that courts use to assess competitor and

consumer UCL claims.

A. Giving the Public a Voice: California’s Unfair Competition Law

California’s UCL is the proper law under which to analyze possible uberX

driver claims against Uber for unfair competition for two reasons.

First, alt-

hough the Federal Trade Commission Act (“FTCA”) also prohibits unfair

competition by businesses, it does not provide a private right of action.

such, most states, including California, have adopted similar unfair competi-

See Federal Trade Commission Act, 15 U.S.C. § 45(a)(1) (2012) (“Unfair methods of competi-

tion in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are

hereby declared unlawful.”); H.R.

REP. NO. 103-138, at 2–4 (1993) (discussing the purpose underly-

ing the Federal Trade Commission Act (“FTCA”) of protecting consumers from unfair business prac-

tices on both a case-by-case and industry-wide basis); Helfman, supra note 12, at 228–29 (explaining

that unfair business practices could not be controlled through common law, so Congress enacted sec-

tion five of the FTCA, and many states followed suit). State unfair competition laws serve as powerful

tools for consumers, who cannot enforce the FTCA. Helfman, supra note 12, at 229.

Compare Hourdajian, Eliminating Ridesharing Ambiguity, supra note 6 (stating that uberX

drivers should feel confident that they do not have any insurance gaps), with NAIC Consumer Alert for

Ridesharing Drivers, supra note 8 (warning ride-sharing drivers about the potential gaps in their in-

surance).

See infra notes 89–104 and accompanying text.

See infra notes 105–115 and accompanying text.

See infra notes 116–179 and accompanying text.

See CAL. BUS. & PROF. CODE §§ 17200–17203 (West 2012) (providing that “[a]ny person who

engages . . . in unfair competition may be enjoined,” and “unfair competition shall mean and include

any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading

advertising and any act prohibited by Chapter 1 . . . of Part 3 of Division 7 of the Business and Profes-

sions Code”).

15 U.S.C. § 45(a)(2) (stating that “[t]he [FTC] is hereby empowered and directed to prevent

persons . . . from using unfair methods of competition in or affecting commerce and unfair or decep-

tive acts or practices in or affecting commerce”); see Helfman, supra note 12, at 229 (noting that the

FTCA does not provide a private right of action).

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1115

tion statutes to give consumers a way to sue businesses acting unfairly.

Sec-

ond, California law is likely to apply to uberX drivers’ claims against Uber

because Uber’s driver agreements contain a California choice of law provi-

sion.

Therefore, this Note focuses on Uber’s potential liability to uberX driv-

ers under California’s UCL.

Like many other unfair competition laws, California’s UCL prohibits “un-

fair . . . business act[s] or practice[s],” among other types of unethical behav-

ior.

The UCL purports to ameliorate the societal harm caused by businesses

acting unethically in a variety of contexts.

Almost any conduct in commer-

cial markets for goods and services constitutes a business practice under the

UCL.

Both public prosecutors and private individuals can sue under the

See, e.g., CAL. BUS. & PROF. CODE §§ 17203–17204 (providing that “[a]ny person who engag-

es . . . in unfair competition may be enjoined,” “by [any] person who has suffered injury in fact and

has lost money or property as a result of the unfair competition”); 815 I

LL. COMP. STAT. ANN. 505/2,

505/10a (2012) (stating that “[u]nfair methods of competition and unfair or deceptive acts or practices

. . . in the conduct of any trade or commerce are hereby declared unlawful,” and that “[a]ny person

who suffers actual damage as a result of a violation of this Act committed by any other person may

bring an action against such person”); M

ASS. GEN. LAWS ch. 93A, §§ 2(a), 9(1) (2012) (stating that

“unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or

commerce are hereby declared unlawful,” and “[a]ny person . . . who has been injured . . . may bring

an action in the superior court”); see also Helfman, supra note 12, at 229–30 (describing how many

states have adopted unfair competition statutes modeled after the FTCA or one of the three model

statutes promulgated by the FTC).

See O’Connor v. Uber Tech., Inc., No. C–13–3826, 2014 WL 4382880, at *1, *11 (N.D. Cal.

Sept. 4, 2014) (upholding Uber’s contractual choice of law provision, but ultimately refusing to apply

California law extraterritorially); Ehret v. Uber Tech., Inc., No. C–14–0113, 2014 WL 4640170, at *1,

*4–5 (N.D. Cal. Sept. 17, 2014) (allowing an out-of-state consumer’s UCL claims against Uber to

proceed).

See infra notes 94– 243 and accompanying text (analyzing Uber’s potential liability to uberX

drivers under California’s UCL).

CAL. BUS. & PROF. CODE §§ 17200, 17203; see 815 ILL. COMP. STAT. ANN. 505/2; MASS.

GEN. LAWS ch. 93A, § 2(a). California’s UCL proscribes many types of unfair competition, including

unfair business practices, unlawful business practices, fraudulent business practices and misleading

advertising. See C

AL. BUS. & PROF. CODE § 17200. Although these prongs of liability are not mutual-

ly exclusive, this Note is only concerned with the “unfair” business practices prong of liability. See

infra notes 95–243 and accompanying text; see also Sharon J. Arkin, The Unfair Competition Law

After Proposition 64: Changing the Consumer Protection Landscape, 32 W.

ST. U. L. REV. 155, 157

(2005) (explaining that although the California UCL has multiple prongs of liability, the vast majority

of lawsuits are predicated on unlawful, unfair, and/or fraudulent business practices).

See Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 973 P.2d 527, 539–40 (Cal. 1999)

(stating that the “sweeping” language of the UCL gives courts latitude to enjoin new, creative unfair

business schemes as they arise); Arkin, supra note 94 (discussing the UCL’s broad intent to protect all

of society, including business competitors and the consuming public).

See Celebrity Chefs Tour, LLC, v. Macy’s, Inc., 16 F. Supp. 3d 1159, 1169–70 (S.D. Cal. 2014)

(holding that distributing a television show for broadcast constituted a business practice); Drum v. San

Fernando Valley Bar Ass’n, 106 Cal. Rptr. 3d 46, 48, 51–52 (Cal. Ct. App. 2010) (treating the bar associ-

ation’s refusal to sell its membership list as a business practice and applying several tests for unfairness

under the UCL). But see Tecza v. Univ. of S.F., 532 Fed. App’x 667, 668–69 (9th Cir. 2013) (holding that

disclosure of a student’s private medical information was not a business practice).

1116 Boston College Law Review [Vol. 56:1097

UCL.

To establish standing, plaintiffs must demonstrate that the business

practice that caused them economic injury that is at the core of the claim.

The

bar for demonstrating a cognizable injury under California’s UCL is very

low.

Restitution and injunctive relief are the only remedies available to indi-

vidual plaintiffs, however, because courts assume that plaintiffs will seek dam-

ages through other legal avenues.

100

The standard California courts use to evaluate whether conduct is unfair

depends on whether the plaintiff is a competitor or a consumer.

101

A competitor

alleging unfair business practices must prove that the conduct violated antitrust

CAL. BUS. & PROF. CODE § 17204 (stating that “[a]ctions for relief pursuant to this chapter shall

be prosecuted . . . by the Attorney General or a district attorney . . . or by a person who has suffered injury

in fact and has lost money or property as a result of the unfair competition”).

See id.; Kwikset Corp. v. Superior Court, 246 P.3d 877, 884–85 (Cal. 2011) (explaining the

UCL’s standing requirements). Plaintiffs whose claims are based on a business’s misrepresentations

must also demonstrate actual reliance to have standing. See In re iPhone Application Litig., 6 F.

Supp. 3d 1004, 1015 (N.D. Cal. 2013) (dismissing plaintiffs’ UCL claims for failure to establish actu-

al reliance on the defendant’s misrepresentations about its data collection and privacy practices). Cali-

fornia’s UCL did not require plaintiffs to demonstrate any injury until voters passed Proposition 64 in

2004, which tightened the UCL standing provisions to require plaintiffs to demonstrate an injury in

fact. See 2004 Cal. Legis. Serv. Prop. 64 (West) (codified as amended at C

AL. BUS. & PROF. CODE

§§ 17203, 17204, 17206, 17535, 17536 (West 2012)); Arkin, supra note 94, at 156, 167–69 (explaining

that Proposition 64 requires plaintiffs to demonstrate an actual economic injury, not merely a prospec-

tive or possible injury, because plaintiffs’ attorneys abused the UCL).

See Kwikset, 246 P.3d at 885–86 (stating that the economic injury requirement is not difficult

to satisfy; it can even consist of overpaying in a transaction). Most states with unfair competition laws

require plaintiffs to demonstrate an actual economic injury in order to have standing. See Camasta v.

Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 740 (7th Cir. 2014) (interpreting “actual damage” require-

ment of Illinois’s unfair competition statute to require the plaintiff to demonstrate actual pecuniary

loss, such as paying more for an item than it is worth); Helfman, supra note 12, at 233 (indicating that

most states predicate standing for unfair competition lawsuits on actual injury). But see Ruiz v. Bally

Total Fitness Holding Corp., 496 F.3d 1, 5 (1st Cir. 2007) (holding that an injury sufficient to estab-

lish standing under Massachusetts’s unfair competition statute can consist of an economic or non-

economic loss).

100

See CAL. BUS. & PROF. CODE §§ 17203, 17205 (stating that anyone who “engage[s] in unfair

competition may be enjoined”; that “[a]ny person may pursue representative claims for relief on be-

half of others only if the claimant meets the standing requirements”; and “the remedies or penalties

provided by this chapter are cumulative to each other and to the remedies or penalties available under

all other laws of this state”); Cel-Tech, 973 P.2d at 539 (noting that private plaintiffs’ UCL remedies

are limited to injunctive relief and restitution); Helfman, supra note 12, at 232–33 (stating that states

enacted unfair competition laws to enjoin bad business behavior because common law remedies were

not always effective). Public prosecutors can also seek civil penalties under the UCL. C

AL. BUS. &

PROF. CODE § 17206 (providing that “[a]ny person who engages . . . in unfair competition shall be

liable for a civil penalty . . . which shall be assessed and recovered in a civil action brought in the

name of the people of the State of California by the Attorney General” or other public prosecutors).

101

See Drum, 106 Cal. Rptr. 3d at 51 (noting that the test for unfair business practices differs based

on whether the plaintiff is a competitor or a consumer of the defendant). Whether a business practice is

unfair under the UCL is a factual issue. Countrywide Fin. Corp. v. Bundy, 113 Cal. Rptr. 3d 705, 723

(Cal. Ct. App. 2010).

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1117

law or policy or otherwise harmed competition.

102

A consumer, however, can

establish unfairness under three different standards used by the appellate

courts.

103

Regardless of which standard applies, the legislature intended courts

to construe the UCL’s unfairness prong broadly to allow them to strike down

new, harmful business schemes as they arise.

104

B. Friend or Foe?: Distinguishing Between Consumer and Business

Competitor UCL Claims

Courts evaluating claims under the UCL’s unfairness prong must first de-

cide whether the plaintiffs are competitors or consumers of the defendants,

because competitors must satisfy a stricter standard of unfairness.

105

If plain-

tiffs allege that the defendants’ actions harmed their particular businesses or

competition generally, courts will treat them as competitors of the defend-

ant.

106

For example, in 1999, in Cel-Tech Communications, Inc. v. Los Angeles

102

See Cel-Tech, 973 P.2d at 544 (adopting a standard for unfair business practices that applies

when a plaintiff brings a UCL claim against a direct competitor, which is grounded in antitrust princi-

ples). Anticompetitive practices tend to reduce competition and are the target of antitrust legislation.

See id. at 543–54 (looking to the FTCA and federal antitrust law to determine what constitutes anti-

competitive conduct); Neil W. Averitt, The Meaning of “Unfair Methods of Competition” in Section 5

of the Federal Trade Commission Act, 21 B.C.

L. REV. 227, 238–41 (1980) (explaining that violations

of the Sherman Act, such as price fixing, and Clayton Act, such as forming an agreement that will

create a monopoly, can serve as the basis for unfair competition lawsuits under the FTCA).

103

See Drum, 106 Cal. Rptr. 3d at 53–54 (describing three lines of consumer UCL cases that

emerged after the Supreme Court of California decided Cel-Tech Communications, Inc. v. Los Angeles

Cellular Telephone Co. in 1999, all applying different standards for unfairness). The Supreme Court of

California has not decided which test is proper in consumer lawsuits. Id. at 53.

104

See Cel-Tech, 973 P.2d at 540 (stating that the legislature intended the standard for unfairness

to be broad enough to allow courts to enjoin “innumerable new schemes which the fertility of man’s

invention would contrive”) (internal quotation marks omitted); People ex rel. Mosk v. Nat’l Research

Co. of Cal., 20 Cal. Rptr. 516, 520–21 (Cal. Ct. App. 1962) (stating that because unfair business

schemes “may run the gamut of human ingenuity and chicanery,” the legislature must have intended

the UCL to be inclusive); Helfman, supra note 12, at 231–33 (explaining that the purpose of state

unfair competitions laws is to provide a broader cause of action with broader remedies than the

FTCA).

105

See, e.g., Rankin v. Global Tel*Link Corp., No. 13–cv–01117–JCS, 2013 WL 3456949, at *16

(deciding to treat plaintiff as a competitor rather than consumer before applying the competitor test for

unfairness); Cel-Tech, 973 P.2d at 544 & n.12 (Cal. 1999) (adopting a narrow, antitrust policy-based

standard for unfairness for competitor lawsuits and stating that nothing in the opinion relates to con-

sumer actions); Progressive W. Ins. Co. v. Yolo Cnty. Superior Court, 37 Cal. Rptr. 3d 434, 453 (Cal.

Ct. App. 2005) (opining that the narrower standard of unfairness used in competitor cases is inappro-

priate for consumer cases because consumers are more vulnerable than businesses). Some courts will

avoid deciding whether a plaintiff is a consumer or competitor if they find that the plaintiff failed to

meet either standard of unfairness. See Drum, 106 Cal. Rptr. 3d at 51 (holding that the court need not

determine whether the plaintiff was a competitor or consumer because the plaintiff failed to satisfy

either standard of unfairness).

106

See, e.g., Levitt v. Yelp! Inc., 765 F.3d 1123, 1136–37 (9th Cir. 2014) (applying the competi-

tor standard of unfairness because the plaintiffs were business owners who claimed the defendant’s

actions hurt their business prospects); Rankin, 2013 WL 3456949, at *16 (utilizing the competitor test

1118 Boston College Law Review [Vol. 56:1097

Cellular Telephone Co., the Supreme Court of California treated the plaintiff

and defendant as competitors under the UCL.

107

The plaintiff, a cell phone re-

tailer, accused another cell phone retailer of below-market pricing, an anti-

competitive practice.

108

Similarly, in 2014, in Levitt v. Yelp! Inc., the Ninth

Circuit for the U.S. Court of Appeals held that the plaintiff and defendant were

competitors.

109

Although the small business owners who sued Yelp! Inc. did

not compete with the defendant directly, they alleged harm to competition as a

result of Yelp!’s conduct.

110

If the plaintiffs suing under the unfair business practices prong of the

UCL do not claim that the defendants caused them business injuries or en-

gaged in anti-competitive activities, however, the court will treat them as con-

sumers.

111

As such, California courts have treated defendants’ employees and

customers both as consumers for the purposes of their UCL claims.

112

For in-

stance, in 2012 in Aleksick v. 7-Eleven, Inc., California’s Fourth District Court

of Appeal treated a franchise employee as a consumer in her suit against the

franchisor based on its payroll practices.

113

Likewise, in 2014 in Ehret v. Uber

Technologies, Inc., the U.S. District Court for the Northern District of Califor-

of unfairness because the plaintiff alleged that the defendant monopolized the market); Cel-Tech, 973

P.2d at 544–46 (holding that the competitor standard of unfairness applied to the cell phone seller’s

claims that its direct competitor sold cell phones at a loss to drive the plaintiff out of business).

107

See Cel-Tech, 973 P.2d at 545 (applying the competitor standard of unfairness).

108

Id. at 532–33.

109

See Levitt, 765 F.3d. at 1136 (applying the competitor standard of unfairness after the small

business owners conceded its applicability to their claims).

110

See id. (noting that although the small business owners did not compete with Yelp!, they al-

leged a loss of competitiveness); see also Rankin, 2013 WL 3456949, at *16 (treating the plaintiff bail

bond company as a business competitor because the first amended complaint alleged harm to competi-

tion); First Amended Complaint at 10, Rankin, 2013 WL 3456949 (3:13-cv-01117-JCS) (alleging that

the disruption in defendant’s telephone services damaged the plaintiff’s business and hurt competition

within the bail bonds industry).

111

See, e.g., Ehret, 2014 WL 4640170, at *10 (treating the plaintiff as a consumer because she

argued that the fees she paid to Uber were unfair); McKell v. Wash. Mut., Inc., 49 Cal. Rptr. 3d 227,

240–41 (Cal. Ct. App. 2006) (treating the plaintiffs as consumers because they alleged that their mort-

gage lender overcharged borrowers for underwriting); Wilner v. Sunset Life Ins. Co., 93 Cal. Rptr. 2d

413, 422–23 (Cal. Ct. App. 2000) (treating the plaintiff policyholder as a consumer because she

claimed her insurer’s deceptive sales tactics were unfair).

112

See, e.g., Donohue v. Apple, Inc., 871 F. Supp. 2d 913, 916, 928 (N.D. Cal. 2012) (applying a

consumer standard for unfairness to an Apple customer’s claims); Aleksick v. 7-Eleven, Inc., 140 Cal.

Rptr. 3d 796, 807–08 (Cal. Ct. App. 2012) (applying a consumer standard for unfairness to the fran-

chise employee’s claims against a franchisor); Wilner, 93 Cal. Rptr. at 422–23 (applying the consumer

standard of unfairness in to the policyholder’s claims against the insurer from whom she purchased

insurance). To be considered a consumer under the UCL, a plaintiff need not transact business with

the defendant, but he or she must be able to establish standing. See Camacho v. Auto. Club of S. Cal.,

48 Cal. Rptr. 3d 770, 773, 779 (Cal. Ct. App. 2006) (treating a debtor as a consumer in his lawsuit

against a debt collector for its collection practices, but dismissing his case because he lacked an inju-

ry).

113

Aleksick, 140 Cal. Rptr. at 807–08 (applying the consumer standard of unfairness to the em-

ployee’s claims that the franchisor’s payroll practices deprived her of income).

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1119

nia treated a rider suing Uber over its fees as a consumer.

114

Because courts

subject consumers to different standards of unfairness, determining whether

plaintiffs are competitors or consumers is a threshold issue for courts.

115

C. All Plaintiffs Are Not Created Equal: Different Standards of Unfairness

for Business Competitors and Consumers Suing Under the UCL

California courts apply different standards to determine whether business

activities are unfair under the UCL depending on whether the plaintiff is a busi-

ness competitor or a consumer.

116

For claims brought by competitors, courts ap-

ply a narrow antitrust standard of unfairness referred to as the Cel-Tech test.

117

Most competitor claims are dismissed under this test, however, because it is dif-

ficult to plausibly plead harm to competition.

118

California courts apply three different tests to determine unfairness in

UCL claims brought by consumers, however, because the Supreme Court of

California has not yet adopted a uniform standard.

119

Accordingly, this Section

114

Ehret, 2014 WL 4640170, at *10 (applying the consumer standard of unfairness to the cus-

tomer’s claims that she paid more for the transaction than she would have if Uber had not misrepre-

sented its fees).

115

See Rankin, 2013 WL 3456949, at *16 (deciding that the plaintiff was a competitor before

analyzing whether the defendant’s conduct was unfair under the competitor standard). But see Drum,

106 Cal. Rptr. at 51, 54 (refusing to decide whether the plaintiff was a competitor or consumer yet

affirming the dismissal for failure to state a UCL claim).

116

See Zhang v. Superior Court, 304 P.3d 163, 174 n.9 (Cal. 2013) (pointing out the various

standards for unfairness that appellate courts apply to consumer UCL actions); Cel-Tech, 973 P.2d at

544 & n.12 (adopting a new test for unfairness to be used in competitor UCL lawsuits but stating that

its opinion does not apply to consumer lawsuits).

117

Cel-Tech, 973 P.2d at 544 (holding that a business practice is unfair to competitors if it

“threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws

. . . or otherwise significantly threatens or harms competition”). Since Cel-Tech, courts have applied

this anticompetitive standard for unfairness to all UCL claims brought by competitors. See, e.g., Levitt,

765 F.3d at 1136 (applying the Cel-Tech test for unfairness to business competitors’ UCL claims);

Rankin, 2013 WL 3456949, at *16 (same); Drum, 106 Cal. Rptr. 3d at 51 (same).

118

See, e.g., Levitt, 765 F.3d at 1136–37 (dismissing small business owners’ allegations that

Yelp! harmed competition by manipulating ratings of certain business because plaintiffs failed to

demonstrate how it violated antitrust principles); Rankin, 2013 WL 3456949, at *16 (dismissing bail

bond company’s claims against prison telephone service provider because plaintiff failed to demon-

strate that defendant created a monopoly or otherwise violated antitrust law); Drum, 106 Cal. Rptr. 3d

at 51–52 (dismissing plaintiff’s claim based on defendant’s refusal to sell him its mailing list because

an independent actor refusing to deal does not implicate antitrust law, even if it affects prices). But see

Cel-Tech, 973 P.2d at 546 (remanding the case for trial, noting that the unusual circumstances might

satisfy the new standard for unfairness). Pleading harm to one’s business prospects is insufficient to

satisfy the Cel-Tech standard of unfairness. See id. at 544 (noting that “injury to a competitor” does

not establish harm to competition or implicate antitrust law).

119

See Lozano v. AT&T Wireless Servs., Inc., 504 F.3d 718, 736 (9th Cir. 2007) (observing that

the California courts have not yet decided what is the standard for unfair business practices when

consumers sue under the UCL, and explaining three different standards that have emerged); Zhang,

304 P.3d at 174 n.9 (noting that Cel-Tech did not resolve the issue of which standard for unfairness

applies in consumer actions); see also Camacho, 48 Cal. Rptr. 3d at 776–77 (applying the “section 5

1120 Boston College Law Review [Vol. 56:1097

examines the different consumer tests for unfairness available to plaintiffs.

120

Subsection 1 describes the balancing test for unfairness, which predated Cel-

Tech.

121

Subsection 2 discusses a policy-based standard of unfairness that some

courts adopted after Cel-Tech, which this Note refers to as the “revised Cel-

Tech test.”

122

Lastly, Subsection 3 explains the “section 5 test” for unfairness,

which some courts developed by looking to the FTCA, just as Cel-Tech did.

123

1. The Balancing Test for Unfair Business Practices

Many California courts apply a balancing test to determine if a business

practice is unfair to consumers under the UCL.

124

Under the balancing test,

courts weigh the utility of the conduct against the gravity of the harm to the

consumer.

125

Conduct is unfair if it “violates established public policy or if it is

immoral, unethical, oppressive or unscrupulous and causes injury to consumers

which outweighs its benefits.”

126

This balancing test previously applied to all

plaintiffs’ allegations of unfair business practices, until Cel-Tech held in 1999

that competitors must use a narrower test.

127

Thus, not surprisingly, some low-

test” for unfairness to a consumer’s UCL claim, based on the FTCA’s definition of unfair business

practices); Gregory v. Albertson’s, Inc., 128 Cal. Rptr. 2d 389, 395 (Cal. Ct. App. 2002) (applying a

test (that this Note refers to as the revised Cel-Tech test) which defines unfair business practices as

violative of a public policy that is tied to specific legislation); Wilner, 93 Cal. Rptr. 2d at 422–23 (ap-

plying the balancing test for unfair business practices).

120

See infra notes 124–179 and accompanying text.

121

See infra notes 124–154 and accompanying text.

122

See infra notes 155–169 and accompanying text.

123

See infra notes 170–179 and accompanying text.

124

See, e.g., McKell, 49 Cal. Rptr. 3d at 240 (holding that test for unfairness involves weighing

utility of defendant’s conduct against harm to plaintiff); Progressive, 37 Cal. Rptr. 3d at 453 (conclud-

ing that balancing test should apply in consumer actions, and allowing case to proceed so that defend-

ant could present evidence justifying its seemingly unethical practice); Wilner, 93 Cal. Rptr. 2d at 422

(holding that the test for whether a practice is unfair to consumers involves balancing the impact on

the plaintiff against the defendant’s justifications for the conduct).

125

See Wilner, 93 Cal. Rptr. 2d at 422.

126

McKell, 49 Cal. Rptr. 3d at 240. In 2000, in Wilner v. Sunset Life Insurance Co., California’s

Second District Court of Appeal framed the test slightly differently, stating that conduct is unfair if it

“offends an established public policy” or “is immoral, unethical, oppressive, unscrupulous or substan-

tially injurious to consumers” (emphasis added) (internal quotation marks omitted). Wilner, 93 Cal.

Rptr. 2d at 422.

127

See Cel-Tech, 973 P.2d at 543 (holding that the balancing test for unfairness no longer applies

in competitor claims because it is “too amorphous” to provide meaningful guidance to businesses).

Cel-Tech also described the balancing test that lower courts use to define unfairness. Id.; see State

Farm Fire & Cas. Co. v. Superior Court, 53 Cal. Rptr. 2d 229, 234–35 (Cal. Ct. App. 1996) (stating

that courts “must weigh the utility of the defendant’s conduct against the gravity of harm to the al-

leged victim”) (internal quotation marks omitted); People v. Casa Blanca Convalescent Homes, Inc.,

206 Cal. Rptr. 164, 177 (Cal. Ct. App. 1994) (stating that a business practice is unfair if it “offends an

established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or

substantially injurious to consumers”); Motors, Inc. v. Times Mirror Co., 162 Cal. Rptr. 543, 546

(Cal. Ct. App. 1980) (stating that determining “whether a particular business practice is unfair neces-

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1121

er courts still hold that the balancing test is proper for evaluating unfairness in

consumer claims, as Cel-Tech did not deal with consumers.

128

Although the

balancing test is imprecise,

its flexibility allows courts greater discretion to

protect consumers, who are more vulnerable to abuse than business competi-

tors.

129

This flexible balancing test allows courts to intervene when a business

engages in a pattern of misleading the public.

130

For example, in 2000, in Wil-

ner v. Sunset Life Insurance Co., California’s Second District Court of Appeal

held that an insurer’s sales practices were unfair under the UCL.

131

Sunset Life

Insurance Co. (“Sunset”) convinced customers to replace their existing whole or

term life insurance, bought from other companies, with Sunset’s universal life

insurance by deceiving them about their benefits and premiums.

132

Further, Sun-

set failed to determine whether universal life insurance was suitable for the

new customers and concealed the inferiority of the product, despite knowing

that the product was inappropriate for most people.

133

Weighing the harm to

the deceived policyholders against Sunset’s lack of justification for its “im-

moral, unethical and unscrupulous” sales practices, the court found the practice

was unfair under the UCL.

134

sarily involves an examination of its impact on its alleged victim, balanced against the reasons, justifi-

cations and motives of the alleged wrongdoer”).

128

See, e.g., Progressive, 37 Cal. Rptr. 3d at 453 (Cal. Ct. App. 2006) (applying the balancing

test because (1) Cel-Tech did not disapprove of its use in consumer claims, (2) the state Supreme

Court has not yet overruled it, and (3) the statutory term “unfair” should be construed broadly to fulfill

the legislative intent); McKell, 49 Cal. Rptr. 3d at 240 (applying the balancing test); Wilner, 93 Cal.

Rptr. 2d at 422 (applying the balancing test).

129

See Cel-Tech, 973 P.2d at 543 (calling the balancing test “vague”); Progressive, 37 Cal. Rptr.

3d at 453 (stating that the balancing test should apply in consumer actions because its broad reach

enables courts to better protect consumers, who lack resources to protect themselves from unscrupu-

lous businesses); see also Leslie E. Schuster, For the “Deals” No Shopper Could Pass Up: The Ninth

Circuit’s Interpretation of California’s False Advertising Law in Hinjos v. Kohl’s Corporation, 47

OY. L.A. L. REV. 1049, 1056–1058 (2014) (discussing the psychological factors that influence con-

sumer behavior and decision-making).

130

See, e.g., Ehret, 2014 WL 4640170, at *1 (noting the plaintiff’s allegation that the transporta-

tion network company had a pattern of disguising its fees as driver gratuities); McKell, 49 Cal. Rptr.

3d at 234 (noting that the mortgage lender had a pattern of overcharging mortgagors for underwrit-

ing); Progressive, 37 Cal. Rptr. 3d at 438–39 (describing the plaintiff’s allegations that the insurer had

a pattern of demanding reimbursement without regard to whether it was legally entitled to the money);

Wilner, 93 Cal. Rptr. 2d at 416, 422 (finding that the insurer had a pattern of selling unsuitable re-

placement insurance policies to new customers).

131

Wilner, 93 Cal. Rptr. 2d at 422.

132

Id. at 422–24. Sunset tricked customers into believing that their replacement policies provided

greater death benefits for the same (or lower) premiums than their existing policies, when in fact the

premiums for the replacement policies would certainly rise. Id. at 423.

133

Id. at 422. The court noted that Sunset’s deceptive methods for selling the policies to new

customers differed from the procedures it followed when selling the policies to preexisting customers.

Id. at 423. For its preexisting customers, Sunset conducted suitability determinations and cost-benefit

analyses for the policyholders before selling them universal life insurance. Id.

134

Id. at 423–24 (citing State Farm, 53 Cal. Rptr. 2d at 235).

1122 Boston College Law Review [Vol. 56:1097

Similarly, in 2006, in Progressive West Insurance Co. v. Yolo County Su-

perior Court, California’s Third District Court of Appeal applied the balancing

test and allowed an insured’s UCL claim against his insurer to proceed.

135

Pro-

gressive West Insurance Co. (“Progressive”) misrepresented its rights with re-

spect to policyholders and demanded reimbursements to which it was not nec-

essarily entitled.

136

Just as in Wilner, the court deemed the insurer’s practice

“immoral, unethical, oppressive, unscrupulous or substantially injurious” to

claimants.

137

It also noted that Progressive had not yet provided a reason or

motive to justify its practices.

138

Thus, the court held that the plaintiff properly

stated a claim under the unfairness prong of the UCL.

139

Courts also use the balancing test to protect consumers from businesses

that disguise their costs and fees.

140

For instance, in 2006, in McKell v. Wash-

ington Mutual, Inc., California’s Second District Court of Appeal allowed a

homeowners’ UCL suit to proceed against their mortgage lender for its misrep-

resenting underwriting costs.

141

The lender misled borrowers about the cost of

the federal government’s automated underwriting program, charging them sub-

stantially more for the service than it cost.

142

The lender’s defense, that the

court should not get involved with its fee practices because lending is already

heavily regulated, did not justify the harm it caused homeowners from failing

to pass on savings accrued from automatic underwriting

143

Further, the lender’s

overcharging homeowners undermined established federal public policy aimed

at increasing home ownership by making underwriting cheaper and faster.

144

Therefore, the court held that the lender’s fees were potentially unfair under

the UCL.

145

135

Progressive, 37 Cal. Rptr. 3d at 438–39, 453.

136

Id. at 453. The plaintiff alleged that the insurer acted in bad faith by seeking full reimburse-

ment of medical payments from payees, even though multiple common law doctrines limit an insur-

er’s right to reimbursement. Id. at 438–39.

137

Id. at 453 (internal quotation marks omitted).

138

Id.

139

Id. at 450.

140

See Ehret, 2014 WL 4640170, at *9–10 (holding that the Uber customer stated a UCL claim

against the transportation network company for disguising its fees as driver gratuities); McKell, 49

Cal. Rptr. 3d at 235, 237 (holding that the mortgage holder stated a UCL claim against the lender for

disguising the true cost of underwriting from customers).

141

McKell, 49 Cal. Rptr. 3d at 235, 237.

142

Id. at 235. The lender charged borrowers hundreds of dollars for automated underwriting and did

not disclose that it actually only cost the bank twenty dollars to perform. Id. The bank also charged some

borrowers for underwriting services that it did not provide. Id.

143

Id. at 241

144

See id. at 235, 240–41 (explaining the federal policy underlying the automatic underwriting

program as increasing homeownership by lowering borrowing costs, reducing underwriting risks, and

speeding up the process).

145

See id. at 241 (holding that the plaintiffs sufficiently alleged unfair business practices under

the UCL); see also State Farm, 53 Cal. Rptr. 2d at 235 (stating that a business practice is unfair if it

“offends established public policy”).

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1123

Likewise, in Ehret, the court used the balancing test to allow the Uber

passenger’s UCL claim against Uber to proceed.

146

Uber represented to riders

that the twenty percent fee tacked on to all fares was a driver gratuity, when in

fact Uber kept a substantial portion of that fee.

147

Applying the balancing test

for unfairness, the court noted that Uber provided no justification for the prac-

tice that could outweigh the plaintiff’s injury, i.e., that she paid more than she

would have for the transaction but for Uber’s misrepresentations.

148

Therefore,

Uber’s practice of disguising fees as driver gratuities was at least arguably un-

fair, and the customer’s UCL claim was allowed to proceed.

149

On the other hand, a company’s poor product design alone is unlikely to

satisfy the balancing test for unfair business practices.

150

For example, in 2012,

in Donohue v. Apple, Inc., the U.S. District Court for the Northern District of

California dismissed a customer’s UCL claim against his cell phone’s manu-

facturer.

151

The customer alleged that the manufacturer, Apple, Inc. (“Apple”)

designed a new signal meter that artificially inflated the phone’s apparent sig-

nal strength.

152

The court applied the balancing test and determined that Ap-

ple’s use of a faulty signal meter in its phones was not “immoral, unethical,

oppressive or unscrupulous” absent evidence that Apple intended to mislead or

146

Ehret, 2014 WL 4640170, at *10.

147

Id. Uber keeps half of the driver “gratuity,” or ten percent of the overall fare. Boston Cab

Dispatch, Inc. v. Uber Techs., Inc., No. 13-10769-NMG, 2014 WL 1338148, at *2 (D. Mass. Mar. 27,

2014).

148

Boston Cab, 2014 WL 1338148, at *6, *10 (describing the plaintiff’s alleged injury as surren-

dering more in the transaction than she otherwise would have due to Uber’s misrepresenting its fees as

driver gratuities). The fact that the twenty percent fee was mandatory did not factor in determining

whether the plaintiff’s injury was sufficient to establish standing. Id. at *7.

149

See id. at *7. (allowing the plaintiff’s UCL claim to proceed because no evidence existed at

the motion to dismiss stage of Uber’s justification for calling its fees driver gratuities); see also State

Farm, 53 Cal. Rptr. 2d at 234 (stating that to test whether a business practice is unfair, courts must

weigh the wrongdoer’s justifications against the victim’s injury).

150

See Donohue, 871 F. Supp. 2d at 928 (dismissing the plaintiff’s UCL claim based on the new

design of the phone’s signal meter because there existed no evidence that the manufacturer purpose-

fully designed the signal meter to artificially inflate signal strength). There was no precedent showing

that a poor product design, without related misrepresentations or knowledge of the product design’s

danger, can constitute an unfair business practice. Id.; cf. Peterson v. Mazda Motor of Am., Inc., 44 F.

Supp. 3d 965, 973 (C.D. Cal. 2014) (holding that the consumer adequately stated claim under the

unfairness prong of the UCL because the vehicle manufacturer knew that the cars had an assembly

defect that would likely result in dangerous and costly engine problems for buyers, and the manufac-

turer had not argued the utility of its conduct).

151

Donohue, 871 F. Supp. 2d at 928.

152

Id. at 927 (describing the plaintiff’s UCL claim based on the flawed signal meter design).

Instead of incorporating formulas recommended by wireless network providers to determine signal

strength of the phones, Apple developed its own secret formula based on a series of tests that, in retro-

spect, were flawed. Id. at 917. Apple publicly acknowledged and fixed its signal meter design flaw

soon after the product launched. Id.

1124 Boston College Law Review [Vol. 56:1097

deceive customers about connectivity.

153

Therefore, the court found the design

was not unfair under the UCL.

154

2. The Revised Cel-Tech Test for Unfair Business Practices

As an alternative to the balancing test, a series of consumer UCL cases

use a policy-based test for unfairness adapted from the competitor test laid out

in Cel-Tech.

155

Under this revised Cel-Tech test, a business practice is unfair to

consumers if it violates a public policy that is “‘tethered’ to specific constitu-

tional, statutory or regulatory provisions.”

156

Lower courts justified adopting

this new test by pointing to language in Cel-Tech, which criticized the balanc-

ing test as “too amorphous,” and reading such criticisms as overruling the bal-

ancing test entirely.

157

By requiring a public policy violation to be tethered to a

specific law, the revised Cel-Tech test addresses the Supreme Court of Califor-

nia’s concerns about vagueness, making for a stricter alternative to the balanc-

ing test.

158

153

Id. at 928 (noting that without facts showing that Apple knowingly installed a flawed signal

meter or made misrepresentations about it, the court will not get involved); see McKell, 49 Cal. Rptr.

3d at 240 (stating that a business practice is unfair if it is “immoral, unethical, oppressive or unscrupu-

lous”) (internal quotation marks omitted); cf. Peterson, 44 F. Supp. 3d at 973 (noting the plaintiff’s

allegations that the manufacturer knew that its engine design put the public safety at risk).

154

Donohue, 871 F. Supp. 2d at 927–28.

155

Compare Graham v. Bank of Am., N.A., 172 Cal. Rptr. 3d 218, 233–34 (Cal. Ct. App. 2014)

(adopting what this Note refers to as the revised Cel-Tech test and stating that an unfair business prac-

tice must be “tethered” to a specific law or public policy), and Aleksick, 140 Cal. Rptr. 3d at 807 (stat-

ing that an unfair competition claim must be predicated on a public policy that is tied to a specific

law), with Cel-Tech, 973 P.2d at 544 (defining unfair business practices as violating or threatening to

violate antitrust law or policy).

156

See Gregory, 128 Cal. Rptr. 2d at 395 (establishing the revised Cel-Tech test for unfairness)

(quoting Cel-Tech, 973 P.2d at 543).

157

Cel-Tech, 973 P.2d at 543 (referring to the definitions of unfairness under the balancing test as

“too amorphous and provid[ing] too little guidance to courts and businesses”); see Gregory, 128 Cal.

Rptr. 2d at 394–95, 395 n.3 (disapproving of other California courts that continue to apply the balanc-

ing test and reading Cel-Tech as signaling that the balancing test for unfairness is too vague in any

context); see also Graham, 172 Cal. Rptr. 3d at 233–34 (following the Gregory rationale and rejecting

the balancing test); Aleksick, 140 Cal. Rptr. 3d at 807 (same). Critics of the revised Cel-Tech test disa-

gree, and point out that the Supreme Court of California explicitly stated that it did not want Cel-

Tech’s narrow test to apply to consumers. See Cel-Tech, 973 P.2d at 544 n.12 (“This case involves an

action by a competitor alleging anticompetitive practices. Our discussion and this test are limited to

that context. Nothing we say relates to actions by consumers . . . .”); Progressive, 37 Cal. Rptr. 3d at

543 (refusing to apply the Cel-Tech language to consumer actions because the Supreme Court explic-

itly declined to extend its holding to consumers).

158

Compare Cel-Tech, 973 P.2d at 543 (stating that “vague references to ‘public policy,’ for

example, provide little real guidance”), and Scripps v. Superior Court, 134 Cal. Rptr. 2d 101, 116–18

(Cal. Ct. App. 2003) (applying the revised Cel-Tech test to the consumer’s action because, as the Cel-

Tech court pointed out, it is the role of the legislature, not the courts, to decide which business practic-

es are unfair), and Gregory, 128 Cal. Rptr. 2d at 395 (holding that under the revised Cel-Tech test,

unfair business practices must violate a public policy that is “tethered” to a specific law because Cel-

Tech cautions against using the broader balancing test), with McKell, 49 Cal. Rptr. 3d at 240 (applying

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1125

Although the revised Cel-Tech test is arguably broader than the test for

unfairness applied to competitors, it may undermine the broad purpose of the

UCL, because it is difficult for consumers to overcome.

159

For example, in

2002, in Gregory v. Albertson’s, Inc., California’s Second District Court of Ap-

peal applied the revised Cel-Tech test and dismissed a citizen’s UCL claim

against a grocery chain.

160

There, the plaintiff alleged that the decision of Albert-

son’s, Inc. (“Albertson’s”) to keep its leasehold space unoccupied to prevent a

competitor from moving in was unfair under the UCL.

161

She alleged that this

decision caused the entire surrounding shopping center to deteriorate, in viola-

tion of public policy against urban blight found in California’s Health and Safety

Code’s Community Redevelopment Law.

162

The court rejected these arguments

as a matter of law, because to enforce the policy against urban blight would in-

fringe on a separate state policy favoring freedom of contract.

163

Noting that the

plaintiff’s remaining allegations failed to sufficiently invoke antitrust policy or

law, the court found that Albertson’s conduct was not unfair.

164

the balancing test, which states that a business practice is unfair if it “violates established public poli-

cy” and does not require tethering the policy to a law).

159

See Cel-Tech, 973 P.2d at 540 (stating that the legislature used “sweeping language” in the

UCL to give courts broad latitude to enjoin a wide range of unethical conduct); Camacho, 48 Cal.

Rptr. 3d at 776 (refusing to require consumer claims under the UCL’s unfairness prong to be tethered

to a legislative provision because it would undermine the broad purpose of UCL); see also Aleksick,

140 Cal. Rptr. 3d at 807–08 (holding that a franchisor’s method of calculating employees’ wages was

not unfair because the Labor Code provisions invoked did not apply to the franchisor); Gregory, 128

Cal. Rptr. 2d at 395 (finding that a grocery chain’s decision to keep its store unoccupied to prevent

competitors from moving in was not unfair because the law that the plaintiff invoked did not provide a

private right of action). Still, the revised Cel-Tech test is arguably more flexible than the Cel-Tech

competitor test because almost any policy violation tied to a law can serve as the basis for claim, not

just antitrust policy or law. Compare Cel-Tech, 973 P.2d at 544 (holding that unfair business practices

must implicate antitrust policy or law) (emphasis added), with Gregory, 128 Cal. Rptr. 2d at 395

(holding that unfair business practices can implicate any public policy, as long as the policy is

grounded in a specific law).

160

Gregory, 128 Cal. Rptr. 2d at 397.

161

Id. at 395–96.

162

Id. at 395. The Community Redevelopment Law provides a means for the public to redevelop

empty private property. See C

AL. HEALTH & SAFETY CODE § 33035 (West 2010); Gregory, 128 Cal.

Rptr. 2d at 395.

163

Gregory, 128 Cal. Rptr. 2d at 395–96. The court noted that awarding an injunction against the

grocery chain, Albertson’s, would force them to enter into a commercial transaction. Id.

164

Id. The plaintiff did not allege violation of any specific antitrust law, and her allegation that

Albertson’s acted with the motive of thwarting competition was insufficient; rather, she needed to

allege that its conduct adversely affected competition. See id. Her allegation that the conduct reduced

market choices also did not demonstrate diminished competition. See id. If the court had applied the

balancing test to the allegations in Gregory, however, the case may have come out differently. See

McKell, 49 Cal. Rptr. 3d at 240 (explaining the balancing test); Gregory, 128 Cal. Rptr. 2d at 390–91

(stating the plaintiff’s allegations against the grocery store chain). Albertson’s decision to leave its

storefront empty for potentially the forty years remaining on its lease seems to violate the state’s pub-

lic policy against urban decay, which was established by laws favoring efficient use of land. See

McKell, 49 Cal. Rptr. 3d at 240 (stating that under the balancing test, “[a] business practice is unfair

1126 Boston College Law Review [Vol. 56:1097

Similarly, in Aleksick, the court used the revised Cel-Tech test to dismiss a

franchise employee’s UCL claim against franchisor 7-Eleven, Inc. (“7-

Eleven”).

165

The employee alleged that 7-Eleven’s payroll calculation methods

violated the public policy favoring full payment of wages for all hours worked

found in California’s Labor Code.

166

The court held that the Labor Code provi-

sions did not apply to 7-Eleven, however, because 7-Eleven was a franchisor,

not an employer; thus, the plaintiff’s allegations failed as a matter of law.

167

The payroll methods were therefore not unfair under the UCL.

168

Considering

the outcomes in Gregory and Aleksick, the revised Cel-Tech test may bar con-

sumer actions that the legislature would want to proceed.

169

. . . if it violates established public policy”); Gregory, 128 Cal. Rptr. 2d at 395 (explaining how the

Community Redevelopment Law allows the government to acquire vacant property through eminent

domain and spend public funds to redevelop it). Albertson’s actions also harm the consuming public

without good reason; it forced people to travel farther to get groceries because Albertson’s refused to

operate in the space or let another grocery store move in. See McKell, 49 Cal. Rptr. 3d at 240 (stating

that “the court must weigh the utility of the defendant’s conduct against the gravity of the harm to the

alleged victim”) (internal quotation marks omitted); Gregory, 128 Cal. Rptr. 2d at 390–91 (noting the

plaintiff’s allegation that Albertson’s only justification for it conduct was to secure an advantage over

competitors, which Albertson’s did not rebut).

165

See Aleksick, 140 Cal. Rptr. 3d at 798–99, 807–08.

166

Id. at 798, 807–08. 7-Eleven required all of its franchise stores to use a truncation method of

calculating payroll for their employees. Id. at 798. The plaintiff alleged that this practice violated several

provisions of the Labor Code that pertain to overtime pay, unpaid wages, and minimum wages. Id. at

801.

167

Id. at 802, 808. The plaintiff conceded that 7-Eleven, as a franchisor, was not her employer. Id.

at 806.

168

Id. at 808. If the court had applied the balancing test for unfairness to the employee’s UCL

claim in Aleksick, the case may have survived summary judgment. See id. at 798–99 (alleging that 7-

Eleven’s payroll practices unfairly denied the franchise employees part of their wages, in violation of

Labor Code provisions that purport to ensure fair wage practices); McKell, 49 Cal. Rptr. 3d at 240

(stating that under the balancing test, “[a] business practice is unfair . . . if it violates established pub-

lic policy”). On the other hand, however, 7-Eleven asserted that truncating wages was easier to do on

the computers, and its expert opined that truncating did not reduce employee wages in the majority of

pay periods. See Aleksick, 140 Cal. Rptr. 3d at 798–800 (describing the evidence and noting that the

plaintiff sought to represent a class of injured 7-Eleven franchise employees); McKell, 49 Cal. Rptr.

3d at 240 (stating that the court must “examin[e] . . . [the] impact on its alleged victim, balanced

against the reasons, justifications and motives of the alleged wrongdoer”) (internal quotation marks

omitted).

169

See Aleksick, 140 Cal. Rptr. 3d at 808 (affirming summary judgment for the defendant); Greg-

ory, 128 Cal. Rptr. 2d at 397 (affirming judgment on the pleadings in favor of defendant); Arkin,

supra note 94, at 157 (noting that the purpose of the UCL and its predecessor, California Civil Code

section 3369, is to protect the entire consuming public, so the law should not be applied narrowly); see

also Camacho, 48 Cal. Rptr. 3d at 776 (stating that requiring unfair business practices to be tethered

to a legislative provision undermines the broad purpose of the UCL, as well as the principle that a

practice can be “unfair” without being “unlawful”); Progressive, 37 Cal. Rptr. 3d at 543 (refusing to

require unfair business practices to be tethered to a specific law because the unfairness prong of the

UCL is supposed to be interpreted broadly to provide adequate protection to vulnerable consumers).

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1127

3. The Section 5 Test for Unfair Business Practices

Instead of employing the balancing test or revised Cel-Tech test, a few

California courts evaluate consumer UCL claims using the definition of unfair

competition found in section five of the FTCA.

170

Under this “section 5 test,” a

business practice is unfair if: (1) the consumer suffered a substantial injury, (2)

that he or she could not reasonably avoid, and (3) the benefits of the business

practice do not outweigh the injury.

171

Courts that have adopted the section 5

test also read Cel-Tech as overturning the balancing test.

172

Taking a cue from

Cel-Tech dicta, these courts look to the FTCA and import its definition of un-

fairness into consumer claims under the unfair business practices prong of the

UCL.

173

These courts assert that the section 5 test is narrower than the flexible

balancing test, thereby assuaging the Supreme Court of California’s concerns

about ambiguity.

174

Further, the section 5 test avoids the pitfalls of importing

Cel-Tech’s narrow competitor standard of unfairness into consumer cases.

175

170

See, e.g., Zuniga v. Bank of Am. N.A., No. CV 14–06471, 2014 WL 7156403, at *6 (C.D.

Cal. 2014) (citing Camacho, 48 Cal. Rptr. 3d at 776–77) (adopting the three-pronged test for unfair-

ness delineated in section 5 of the FTCA); Davis v. Ford Motor Credit Co., 101 Cal. Rptr. 3d 697, 700

(Cal. Ct. App. 2009) (stating that the test for unfairness, laid out in 2006 by California’s Second Dis-

trict Court of Appeal in Camacho v. Automobile Club of Southern California, guides its inquiry);

Camacho, 48 Cal. Rptr. 3d at 776–77 (rejecting the revised Cel-Tech test and coining the section 5 test,

based on the factors that define unfair competition under the FTCA); see also Federal Trade Commis-

sion Act § 5(n), 15 U.S.C. § 45(n) (2012)) (defining an act as unfair if it “causes or is likely to cause

substantial injury to consumers which is not reasonably avoidable by consumers themselves and not

outweighed by countervailing benefits to consumers or to competition”).

171

15 U.S.C. § 45(n); Camacho, 48 Cal. Rptr. 3d at 776–77 (looking to the FTCA for guidance

and adopting the “section 5 test”).

172

See, e.g., Zuniga, 2014 WL 7156403, at *6 (finding Camacho’s rationale for adopting the

section 5 test convincing and finding unpersuasive the reasoning of courts that apply the revised Cel-

Tech test and courts that refuse to admit that Cel-Tech overruled the balancing test); Ford, 101 Cal.

Rptr. 3d at 700 (following Camacho’s reasoning for adopting the section 5 test); Camacho, 48 Cal.

Rptr. 3d at 776–77 (stating that the balancing test cannot be satisfactory for consumer cases if the

Supreme Court of California deemed it too vague for competitor cases, and then adopting the section

5 test); see Cel-Tech, 973 P.2d at 543 (stating that the preexisting definitions of unfair business prac-

tices “are too amorphous and provide too little guidance to courts and businesses . . . we must devise a

more precise test for determining what is unfair”).

173

See Camacho, 48 Cal. Rptr. 3d at 776–77 (explaining that Cel-Tech instructed the court to

look to the FTCA for guidance in interpreting the UCL’s unfairness prong, and noting that the FTCA

definition of unfairness is geared toward consumers); see also Cel-Tech, 973 P.2d at 564 (stating that

in order to devise a new test for unfairness, the court “may turn for guidance to the jurisprudence

arising under the parallel section 5 of the [FTCA]”) (internal quotation marks omitted).

174

See Zuniga, 2014 WL 7156403, at *6 (adopting the section 5 test, reasoning that the Supreme

Court of California’s concerns about the ambiguity of the balancing test spill over into consumer ac-

tions); Camacho, 48 Cal. Rptr. 3d at 777–78 (describing the section 5 test as “suitably broad” but

“more focused” than the older definitions of unfairness, thereby making it easier to apply); see also

Ford, 101 Cal. Rptr. 3d at 708–09 (agreeing with Camacho’s analysis and adopting the section 5 test).

For example, Camacho held that a collection agency’s attempts to collect a valid debt from the plaintiff

were not unfair under the section 5 test, as the plaintiff could have avoided incurring the debt by obeying

the law in the first place. Camacho, 48 Cal. Rptr. 3d at 779. Similarly, in 2009 in Davis v. Ford Motor

1128 Boston College Law Review [Vol. 56:1097

Some courts caution against adopting the section 5 test for unfair business

practices in consumer UCL actions, however, because the Supreme Court of

California has not endorsed the test.

176

Although the Cel-Tech court looked to

the FTCA for guidance in developing its competitor standard of unfairness, it

only referenced the FTCA case law dealing with direct competitor lawsuits.

177

Additionally, the Supreme Court of California has twice declined to rule on the

applicability of the section 5 test to consumers.

178

As such, the section 5 test

for unfairness under the UCL may be inappropriate for consumer actions.

179

III.

TIME TO COME CLEAN: UBERX DRIVERS CAN HOLD UBER

ACCOUNTABLE FOR ITS INSURANCE MISREPRESENTATIONS

SING CALIFORNIA’S UNFAIR COMPETITION LAW

Uber Technologies, Inc. (“Uber”)’s misrepresentations to uberX drivers

about their insufficient insurance coverage for ride-sharing violates the prohi-

bition against unfair business practices in California’s unfair competition law

Credit Co., California’s Second District Court of Appeal applied the section 5 test and held that the lend-

er’s billing practices were not unfair because the consumer could have avoided the successive late fees by

making his monthly payments on time. Ford, 101 Cal. Rptr. 3d at 700.

175

See Cel-Tech, 973 P.2d at 544 & n.12 (stating that its newly devised test for unfairness under

the UCL, i.e., that the conduct must violate an antitrust law or the “spirit” of one of those laws, is

limited to competitor lawsuits); Camacho, 48 Cal. Rptr. 3d at 776–77 (refusing to apply Cel-Tech’s

“tethering” requirement to consumer cases because it would not serve the broad purpose of the UCL,

and describing the section 5 test as “suitably broad”); Progressive, 37 Cal. Rptr. 3d at 453 (stating that

requiring consumers to tether an alleged public policy violation to a specific law, as in Cel-Tech, un-

dermines the goals of the UCL). For instance, in 2014, in Zuniga v. Bank of America N.A., the U.S.

District Court for the Central District of California applied the section 5 test and found that the lender’s

dual-tracking foreclosure practice was unfair. Zuniga, 2014 WL 7156403, at *8–10. Although the plain-

tiff homeowner was responsible for defaulting on the loan, she could not avoid dual-tracking, which

caused her injury. Id. at *9. Furthermore, dual-tracking did not produce a benefit that outweighed the

plaintiff’s injury; in fact, the legislature tried to ban dual-tracking to keep people in their homes. Id.

176

See Lozano, 504 F.3d at 736 (refusing to adopt the section 5 test for unfairness in the absence

of a clear holding from the Supreme Court of California); Donohue, 871 F. Supp. 2d at 928 (same).

177

See Cel-Tech, 973 P.2d at 543–44, 544 n.11 (stating that the court was only referencing FTCA

law that interpreted unfair competition in the consumer context). The court then stated that nothing in

its discussion pertained to consumer lawsuits and that it had no opinion on FTCA cases involving

consumers. Id. at 544 n.12. In 2007, in Lozano v. AT & T Wireless Services, Inc., the U.S. Court of

Appeals for the Ninth Circuit stated that the FTCA definition of unfairness does not provide appropri-

ate guidance for consumer actions because it involves anticompetitive conduct. Lozano, 504 F.3d at

736.

178

See Rose v. Bank of Am., 304 P.3d 181, 187 n.9 (Cal. 2013), cert. denied, 134 S. Ct. 2870

(2014) (noting that the lower court applied three different tests for unfairness, but refusing to address

the issue because it was not fully briefed); Zhang, 304 P.3d at 174 n.9 (noting that the appellate courts

use different tests for unfair business practices in consumer UCL lawsuits, including the section 5 test,

but declining to decide which test is proper).

179

See Lozano, 504 F.3d at 736 (stating that it is not appropriate to apply the FTCA test to con-

sumers without guidance from the Supreme Court of California). But see Camacho, 48 Cal. Rptr. 3d

at 777 (opining that because the FTCA definition of unfairness is “on its face geared to consumers,” it

is appropriate for consumer UCL actions).

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1129

(“UCL”).

180

Uber misrepresents to uberX drivers that the combination of their

personal policies plus Uber’s contingent liability policy covers them complete-

ly while they drive around searching for fares.

181

In reality, Uber knows that

uberX drivers’ personal policies will not cover such commercial activity.

182

Moreover, even if an uberX driver obtains coverage through Uber’s contingent

liability policy, it will not cover the driver’s own bodily injuries or property

damage under any circumstance.

183

As a result, if uberX drivers cause acci-

180

See CAL. BUS. & PROF. CODE §§ 17200, 17203 (West 2012) (stating that “unfair competition

shall mean and include any unlawful, unfair or fraudulent business act or practice,” and “[a]ny person

who engages . . . in unfair competition may be enjoined”); Packel, Lyft, Uber Ridesharing Bids, supra

note 11 (reporting that Pennsylvania insurers opine that transportation network companies (“TNCs”)

still do not provide their drivers with adequate insurance or education about insurance); Hourdajian,

Insurance for uberX, supra note 8 (displaying the insurance coverage that uberX drivers have when

they are searching for fares, specifically their personal auto insurance plus Uber’s contingent liability

coverage).

181

Compare NAIC Consumer Alert for Ridesharing Drivers, supra note 8 (warning ride-sharing

drivers about remaining gaps in their insurance coverage, as most personal policies contain livery

exclusions), and Rassman, supra note 10, at 90 (quoting the Insurance Federation of Pennsylvania’s

opinion that Uber’s policy of offering only contingent liability coverage during the trolling period will

create confusion and leaves ride-sharing drivers exposed), with Hourdajian, Eliminating Ridesharing

Ambiguity, supra note 6 (stating that the “vast majority” of uberX drivers’ personal insurance policies

cover the trolling period, but if an insurer denies coverage, Uber’s contingent policy will provide

coverage). Lyft could be held liable under the unfair business practices prong of the UCL as well

because it provides drivers with the same insurance structure as uberX drivers. See We Go the Extra

Mile for Safety, supra note 50 (explaining Lyft’s insurance policies for ride-sharing drivers). Lyft also

has only contingent liability coverage in place for drivers during the time period while they are driving

around with the app on searching for fares. Id.

182

See NAIC Consumer Alert for Ridesharing Drivers, supra note 8 (warning drivers that making

themselves available for hire may trigger the livery exclusion in their personal policies); Friedhoff,

supra note 44 (reporting that insurance industry insiders disagree with Uber’s statements on its web-

site and instead believe uberX drivers are not covered by personal insurance while they drive around

looking for passengers); Packel, Lyft, Uber Ridesharing Bids, supra note 11 (reporting that Uber

knows about the problems with personal insurance policies that uberX drivers face). Despite this

knowledge, Uber requires uberX drivers to submit claims to their personal insurers before they can

access Uber’s contingent liability coverage. See Hourdajian, Insurance for uberX, supra note 8 (stating

that Uber’s contingent liability policy will only cover uberX drivers if their personal auto insurers

decline coverage or pay nothing). This contingency forces uberX drivers to choose between disclosing

their ride-sharing to their personal auto insurers to get the added coverage from Uber’s contingent liabil-

ity policy, which risks losing their personal policies entirely), or submitting claims to their personal insur-

ers without disclosing their commercial activities. See Huet, Rideshare Drivers Cornered into Secrecy,

supra note 54 (discussing the dilemma that ride-sharing drivers face after getting into an accident

between lying to their insurer or risk losing their personal auto coverage). Lying on an insurance

claim, which some drivers do, constitutes insurance fraud. See id. (reporting how an uberX driver lied

to her personal insurer about ride-sharing when submitting her claim); Michael S. Quinn, Closing

Arguments in Insurance Fraud Cases, 23 T

ORT & INS. L.J. 744, 745 (1988) (noting that insureds

commit insurance fraud if they knowingly fail to disclose that they are engaged in riskier behaviors or

lie about the uses of their insured property).

183

See JERRY & RICHMOND, supra note 55, at 918 (explaining that liability coverage by defini-

tion is third-party coverage, meaning that it only pays for other people’s damages that the insured

driver caused); Wallace, supra note 7 (reporting that Uber’s liability policy did not cover a Houston

1130 Boston College Law Review [Vol. 56:1097

dents while searching for customers, they have no recompense for their own

injuries.

184

Accordingly, this Part argues that uberX drivers can hold Uber liable for

violating the UCL with its insurance misrepresentations.

185

Section A asserts

that California courts will treat an uberX driver suing Uber under the unfair-

ness prong of the UCL as a consumer rather than as a business competitor.

186

Section B then argues that Uber’s insurance misrepresentations constitute an

unfair business practice within the meaning of the UCL, entitling uberX driv-

ers to restitution and injunctive relief.

187

A. To Use Is to Consume: Courts Should Consider uberX Drivers

Consumers Rather Than Business Competitors of Uber

If uberX drivers sue Uber alleging that its misleading insurance practices

are unfair under the UCL, California courts must first decide whether the ub-

erX drivers are consumers or business competitions within the meaning of the

UCL.

188

Courts should treat the drivers as consumers rather than competitors,

because their claims are not based on harm to the drivers’ business or competi-

tion generally.

189

Unlike the cell phone retailer that sued another cell phone

uberX driver’s medical bills and vehicle damage when he got in an accident because, as Uber ex-

plained, liability coverage only protects the driver from getting sued).

184

See Hourdajian, Insurance for uberX, supra note 8 (showing that during the time uberX driv-

ers are searching for fares, Uber does not provide uberX drivers with first-party coverage, such as

personal injury protection or collision or comprehensive coverage); Wallace, supra note 7 (reporting

that an injured Houston uberX driver had to pay for his own medical bills and vehicle damage after a

ride-sharing accident, though Uber offered to pay for his vehicle after the press got involved). To get

coverage for personal damages that may occur while trolling for fares, an uberX driver would need

first-party coverage, such as personal injury protection, comprehensive coverage, and/or collision

coverage. See J

ERRY & RICHMOND, supra note 55, at 918 (explaining first-party coverage, including

personal injury protection (which pays for the driver’s own medical expenses) and comprehensive and

collision coverages (which pay for damage to the driver’s own vehicle)). Absent such first-party cov-

erage, the only way an uberX driver could obtain compensation for his or her injuries during this peri-

od is if another driver with a liability policy struck the uberX driver. See id. (explaining how liability

coverage pays for third parties’ injuries).

185

See infra notes 188–243 and accompanying text.

186

See infra notes 188–198 and accompanying text.

187

See infra notes 199–243 and accompanying text.

188

See Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 973 P.2d 527, 543–44 (Cal. 1999)

(determining that the plaintiff and defendant were direct competitors before analyzing whether the

defendant’s conduct was unfair under the new competitor standard of unfairness); Rankin v. Global

Tel*Link Corp., No. 13–cv–01117–JCS, 2013 WL 3456949, at *16 (N.D. Cal. July 9, 2013) (deciding

that the plaintiff was a competitor, based on its allegations of monopolization, before analyzing

whether the defendant’s conduct was unfair under the competitor test). But see Drum v. San Fernando

Valley Bar Ass’n, 106 Cal. Rptr. 3d 46, 51, 54 (Cal. Ct. App. 2010) (refusing to decide whether the

plaintiff was a competitor or consumer, because under either standard of unfairness, the plaintiff failed

to state a UCL claim).

189

Compare Cel-Tech, 973 P.2d at 544–46 (applying the competitor standard to the plaintiffs’

claim of unfair business practices because they alleged that the defendant’s below-market pricing

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1131

retailer in the 1999 Supreme Court of California case Cel-Tech Communica-

tions, Inc. v. Los Angeles Cellular Telephone Co., an uberX driver is not direct-

ly competing with Uber for customers.

190

Further, an uberX driver would not

need to allege that Uber’s practice harmed his or her ride-sharing business, as

the businesses owners alleged in Levitt v. Yelp! Inc., a 2014 decision rendered

by the U.S. Court of Appeals for the Ninth Circuit.

191

Although any of these

allegations would trigger the competitor standard of unfairness, none would

make sense in the context of an uberX driver’s action against Uber.

192

Instead, uberX drivers are likely to be considered consumers of Uber, be-

cause they use Uber’s platform arrange ride-sharing transactions.

193

uberX driv-

scheme harmed competition), and Levitt v. Yelp! Inc., 765 F.3d 1123, 1136 (9th Cir. 2014) (applying

the competitor standard of unfairness to the plaintiffs’ claims even though they did not compete with

Yelp! because the “crux” of their case was that Yelp! injured their businesses and helped their com-

petitors), with Wilner v. Sunset Life Ins. Co., 93 Cal. Rptr. 2d 413, 422–23 (Cal. Ct. App. 2000)

(treating the plaintiff as a consumer because she alleged that the defendant engaged in unfair sales

tactics to sell her a bad life insurance policy). Although plaintiffs can try to frame their cases as either

“competitor” or “consumer” claims with their allegations, the courts ultimately decide which standard

to apply. See Levitt, 765 F.3d at 1136 (deciding to treat the plaintiffs as competitors); Rankin, 2013

WL 3456949, at *9, 16–17 (deciding to treat the plaintiff as a competitor because the allegations in

the complaint were based on harm to competition rather than consumer injury, even though the plain-

tiff asked the court to apply the section 5 test for unfairness to consumer actions). Any uberX drivers

suing Uber over its insurance misrepresentations can likely avoid the strict competitor standard, as any

allegations arising from their injuries are unlikely to be related to antitrust or anticompetitive effects.

Cf. Cel-Tech, 973 P.2d at 543–44 (adopting a narrow test for unfairness grounded in antitrust policy to

apply to competitor claims, and applying it to the plaintiff cell phone retailers who alleged that the

defendant’s sales tactics harmed competition).

190

Compare id. 532–44 (noting that the plaintiffs and defendant were in direct competition with

one another, as they both sold cell phones), with Browning, supra note 24, at 84 (quoting Uber’s

statement that its drivers are really the transportation providers, and they use Uber’s platform to con-

duct business, whereas Uber is not a transportation carrier and does not provide transportation ser-

vices).

191

Compare Levitt, 765 F.3d at 1136 (treating the plaintiffs as competitors because they alleged

that Yelp!’s conduct hurt their businesses and helped their competitors), with McKell v. Wash. Mut.,

Inc., 49 Cal. Rptr. 3d 227, 241 (Cal. Ct. App. 2006) (treating the plaintiffs as consumers because they

alleged that the defendant overcharged them personally for underwriting services), and Wilner, 93

Cal. Rptr. 2d at 422–23 (treating the plaintiffs as consumers because they alleged that the defendant

had a pattern of deceiving policyholders about their own life insurance policies).

192

Cf., e.g., Cel-Tech, 973 P.2d at 544 (applying the competitor standard of unfairness after the

plaintiffs alleged anticompetitive pricing); Levitt, 765 F.3d at 1136 (applying the competitor standard

of unfairness after the plaintiffs alleged harm to their businesses); Rankin, 2013 WL 3456949, at *16

(applying the competitor standard of unfairness after the plaintiffs alleged monopolization of the bail

bond industry). Moreover, neither uberX drivers nor taxicab drivers can make viable UCL allegations

against Uber based on anticompetitive conduct, because ride-sharing appears to have increased com-

petition within the transportation market. See O’Neil, supra note 25 (discussing how a few medallion

owners corned the Boston taxicab market and drove up prices; thus, they are angry that TNCs now

provide consumers with more options).

193

See Ehret v. Uber Tech., Inc., No. C–14–0113, 2014 WL 4640170, at *10 (N.D. Cal. Sept. 17,

2014) (applying the consumer standard of unfairness to the Uber customer’s claim against Uber for

the fees she paid to Uber to use its service); Browning, supra note 24, at 84 (describing how mobile

phone apps like Uber merely facilitate ride-sharing between drivers and passengers); Nordman, supra

1132 Boston College Law Review [Vol. 56:1097

ers are users of the Uber ride-sharing platform, just like the Uber passenger

whom the U.S. District Court for the Northern District of California treated as a

consumer in 2014, in Ehret v. Uber Technologies, Inc.

194

uberX drivers are also

comparable to the life insurance policyholder whom the California Second Dis-

trict Court of Appeal treated as a consumer in 2000, in Wilner v. Sunset Life In-

surance Co.

195

Just as the Wilner plaintiff relied on her insurer’s misrepresenta-

tions about her life insurance, uberX drivers similarly rely on Uber for infor-

mation about their insurance coverage.

196

Further, the questionable employment

relationship between Uber and uberX drivers does not preclude application of

the consumer standard, as California’s Fourth District Court of Appeal demon-

strated in 2012, in Aleksick v. 7-Eleven, Inc.

197

Therefore, California courts

should treat uberX drivers suing Uber under the UCL as consumers.

198

note 13, at 6 (explaining how the Uber platform connects drivers with riders and takes a percentage of

drivers’ sales as a fee). Uber acknowledges that uberX drivers are more like users or partners of Uber.

See MacMillan, supra note 38 (quoting Uber’s founder as calling drivers his business partners); Ward,

supra note 47 (quoting an Uber representative stating that drivers conduct their business on the Uber

platform). When faced with a UCL lawsuit from uberX drivers, however, Uber may argue that the

drivers are more like business competitors by likening the uberX drivers using Uber’s platform to the

businesses using Yelp!’s platform in Levitt v. Yelp! Inc. in 2014 in the Ninth Circuit for the U.S. Court

of Appeals. See Levitt, 765 F.3d at 1136 (treating the plaintiff business owners as competitors even

though they compete with each other, not the defendant Yelp!).

194

See Ehret, 2014 WL 4640170, at *10 (treating Uber passenger as a consumer under the UCL

because she used the Uber app and paid Uber the fee it tacked onto her fare); K

OOPMAN ET AL., supra

note 23, at 4 & n.4 (noting that the sharing economy is a marketplace where peers come together to

exchange goods and services, and citing Uber as an example); Nordman, supra note 13, at 6 (explain-

ing how Uber lets ride-sharing drivers use its platform in exchange for a percentage of drivers’ sales).

195

See Wilner, 93 Cal. Rptr. 2d at 422–23 (treating the life insurance policyholder as a consumer

under the UCL and finding the insurer’s practice unfair).

196

See id. (noting that the plaintiff challenged the insurer’s practice of selling life insurance poli-

cies to new customers without informing them that the policies are deliberately underfunded and not

suitable for most people); Bensinger & Bhuiyan, supra note 38 (reporting that many uberX drivers are

inexperienced with the transportation market and thus rely on Uber for insurance information);

Rassman, supra note 10, at 90 (explaining how Uber fails to educate drivers about their potential gaps

in insurance coverage). Uber’s and Lyft’s websites provide information about ride-sharing drivers’

insurance coverage, but do not advise drivers to talk to their personal insurers about coverage. See

Hourdajian, Eliminating Ridesharing Ambiguity, supra note 6 (providing information about Uber’s

insurance); Hourdajian, Insurance for uberX, supra note 8 (providing information about Uber’s insur-

ance); We Go the Extra Mile for Safety, supra note 50 (providing information about Lyft’s insurance);

cf. Fernholz, supra note 47 (reporting that an anonymous Uber representative stated that the drivers

are responsible for determining whether their personal auto insurance will cover their ride-sharing

activities); NAIC Consumer Alert for Ridesharing Drivers, supra note 8 (advising drivers to talk to

their personal auto insurers before driving for a TNC).

197

See Aleksick, 140 Cal. Rptr. 3d. at 798, 807–08 (treating the franchise employee as a consumer

of the franchisor company, which was not her direct employer); Huet, Sharing Economy Workers

Injured on the Job, supra note 41 (questioning whether Uber misclassifies its drivers as independent

contractors rather than employees). Although the issue of whether uberX drivers are employees or

independent contractors remains unsettled, that classification would not change the court’s consumer-

competitor analysis because employees and non-employees can be consumers under the UCL. See

Aleksick, 140 Cal. Rptr. 3d. at 806, 808 n.6 (treating the plaintiff as a consumer of the 7-Eleven fran-

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1133

B. Tipping the Scale: Uber’s Insurance Misrepresentations Fail the

Balancing Test for Unfairness and Violate the UCL

After a California court determines that an uberX driver challenging Ub-

er’s insurance representations should be considered a consumer under the

UCL, the court must decide which test for unfair business practices to apply

and whether Uber’s conduct satisfies that test.

199

Subsection 1 urges California

courts to apply the balancing test to consumer UCL lawsuits, including any

potential suit brought by an uberX driver against Uber.

200

Subsection 2 then

applies the balancing test to an uberX driver’s potential allegations, arguing

that Uber’s insurance misrepresentations constitute an unfair business practice,

which entitles uberX drivers to relief.

201

1. Courts Should Apply the Balancing Test to Consumer UCL Actions

Courts should apply the balancing test for unfair business practices to ub-

erX drivers’ UCL claims against Uber because case law supports the balancing

test’s continued use in consumer lawsuits, and the test effectuates the sweeping

purpose of the UCL.

202

Although the Supreme Court of California has not dic-

tated the standard for unfair business practices that courts should apply to con-

sumer claims, it has declined three times to overrule the balancing test.

203

First,

chisor even though she was not its employee, and hinting that her employer, the local franchise owner,

could be liable to employees under the UCL); Epstein, supra note 41(discussing two class action law-

suits against Uber pending in California that challenge Uber’s classification of uberX drivers as inde-

pendent contractors). See generally Michelle L. Evans, Who Is a “Consumer” Entitled to Protection

of State Deceptive Trade Practice and Consumer Protection Acts, 63 A.L.R. 5th 90–97, 119–31

(1998) (providing an overview of cases in which parties were deemed consumers for the purposes of

state unfair competition laws, including cases in which employees and equipment operators were

considered consumers).

198

See, e.g., Ehret, 2014 WL 4640170, at *10 (treating the Uber passenger as a consumer); Ale-

ksick, 140 Cal. Rptr. 3d at 798, 807 (treating the franchise employee as a consumer); Wilner, 93 Cal.

Rptr. 2d at 423 (treating the policyholder as a consumer).

199

See Camacho v. Auto. Club of S. Cal., 48 Cal. Rptr. 3d 770, 773–79 (Cal. Ct. App. 2006)

(stating that the test for unfair business practices in consumer actions is uncertain, analyzing the three

different possible tests, choosing the “section 5 test,” and applying it to the defendant’s practices).

200

See infra notes 202–218 and accompanying text.

201

See infra notes 219–243 and accompanying text.

202

See Progressive W. Ins. Co. v. Yolo Cnty. Superior Court, 37 Cal. Rptr. 3d 434, 453 (Cal. Ct.

App. 2006) (concluding that the balancing test should still apply in consumer UCL actions because (1)

Cel-Tech did not explicitly overrule it, (2) the Supreme Court of California has not overruled it in the

six years since Cel-Tech, and (3) courts should construe unfairness broadly to fulfill the legislative

intent of protecting vulnerable consumers). The balancing test holds that a business practice is unfair

“if it violates established public policy or if it is immoral, unethical, oppressive or unscrupulous and

causes injury to consumers which outweighs its benefits.” McKell, 49 Cal. Rptr. 3d at 240.

203

See Rose v. Bank of Am., 304 P.3d 181, 187 n.9 (Cal. 2013), cert. denied, 134 S. Ct. 2870

(2014) (refusing to decide which standard for unfairness to apply in a consumer UCL claim because

the parties did not fully brief the issue); Zhang v. Superior Court, 304 P.3d 163, 174 n.9 (Cal. 2013)

(confirming that the standard for unfair business practices in consumer UCL lawsuits remains unset-

1134 Boston College Law Review [Vol. 56:1097

when the Supreme Court of California held in Cel-Tech that the balancing test

no longer applies, it restricted this holding to competitor lawsuits.

204

The Cel-

Tech court explicitly stated, albeit in dicta, that nothing in its UCL discussion

pertained to consumer actions.

205

Then, in 2014, in Zhang v. Superior Court, the Supreme Court of Califor-

nia implied that courts may continue to apply the balancing test to consum-

ers.

206

The court stated in Zhang that the issue of which test to apply in the

consumer context remains unsettled.

207

Finally, in an opinion issued that same

day in 2014, in Rose v. Bank of America, the Supreme Court of California re-

fused to decide which test for unfairness to apply in consumer UCL law-

suits.

208

Because California’s highest court has not expressly overruled use of

the balancing test in consumer actions, lower courts should continue to apply it

in that context.

209

Furthermore, the balancing test serves the broad protective goals underly-

ing the UCL better than the alternative tests.

210

The legislature intended for the

tled); Cel-Tech, 973 P.2d at 544 n.12 (leaving open the issue of which test for unfairness should apply

to consumer UCL lawsuits); see also Smith v. State Farm Mut. Auto. Ins. Co., 113 Cal. Rptr. 2d 399,

416 n.23 (Cal. Ct. App. 2001) (reading Cel-Tech as supporting the continued use of the balancing test

to determine unfairness in the consumer context).

204

See Cel-Tech, 973 P.2d at 544 (adopting a new test for unfairness in the competitor context

after deeming the balancing test too vague for businesses because it does not provide courts or busi-

nesses with any meaningful guidance about what type of conduct the UCL prohibits).

205

Id. at 544 n.12 (“This case involves an action by a competitor alleging anticompetitive practic-

es. Our discussion and this test are limited to that context. Nothing we say relates to actions by con-

sumers . . . We also express no view on . . . federal cases . . . that involve injury to consumers . . . .”).

206

See Zhang, 304 P.3d at 174 n.9 (stating that despite the different tests for unfairness being used,

the court would not address the issue).

207

Id. (stating that “[t]he standard for determining what business acts or practices are ‘unfair’ in

consumer actions under the UCL is currently unsettled . . . . The parties here do not address this ques-

tion, nor do we.”) The court cited cases that alternatively use the revised Cel-Tech test, the section 5

test, and balancing test in support of its contention. See id.

208

Rose, 304 P.3d at 187 n.9 (“The Court of Appeal identified three separate tests for [the plain-

tiff’s claim of] ‘unfairness’ under the UCL, and applied all three of them. Plaintiffs assert in cursory

fashion that the court misapplied one of these tests. We decline to address this claim, which is neither

properly raised nor sufficiently briefed.”).

209

See Lozano v. AT&T Wireless Servs., Inc., 504 F.3d 718, 736 (9th Cir. 2007) (stating that

even though Cel-Tech disapproves of the balancing test for competitors, courts can continue to apply

it to consumers in the absence of clear guidance from the Supreme Court of California as to which test

should apply); Donohue v. Apple, Inc., 871 F. Supp. 2d 913, 928 (N.D. Cal. 2012) (refusing to apply

the section 5 test and instead continuing to apply the balancing test because the Supreme Court of

California has not approved the section 5 test); Progressive, 37 Cal. Rptr. 3d at 453 (applying the

balancing test because it comports with case law and the consumer protection goals of the UCL).

210

See Barquis v. Merchs. Collection Ass’n, 496 P.2d 817, 830 (Cal. 1972) (finding that, given

the creativity of unethical businesses, the legislature intended for courts to have the power in equity to

enjoin each original scheme; thus, the standard for unfairness under the UCL must be broad). The

alternative tests for unfair business practices that California courts apply, in lieu of the balancing test,

are the section 5 test and the revised Cel-Tech test. See Camacho, 48 Cal. Rptr. 3d at 776–77 (estab-

lishing the section 5 test, which states that a business practice is unfair if the consumer suffered a

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1135

UCL to protect all of society—not just individual customers—from businesses

acting unethically and unfairly.

211

To that end, the standard for unfairness to

consumers must be flexible enough to allow courts to intervene whenever

businesses contrive new, unanticipated schemes.

212

The balancing test is suffi-

ciently malleable to achieve this goal, as it allows courts to take many counter-

vailing factors into account.

213

In contrast, the alternative tests undermine the purpose of the UCL by re-

ducing consumer ability to challenge newly invented unfair business schemes.

214

First, the section 5 test for unfair business practices is inappropriate for consum-

er actions, because it is derived from a federal statute, the Federal Trade Com-

mission Act (“FTCA”), which does not serve the same purpose as the UCL.

215

substantial, unavoidable injury that is not outweighed by benefits to other consumers or competition in

general); Gregory v. Albertson’s, Inc., 128 Cal. Rptr. 2d 389, 395 (Cal. Ct. App. 2002) (establishing

the revised Cel-Tech test, which holds that a business practice is unfair if it violates a written public

policy that is established by law).

211

See Arkin, supra note 56, at 157 (describing the broad scope of the UCL, despite passage of

Proposition 64 narrowing the standing rules to require injury in fact). California’s UCL provides only

equitable relief, and not damages for individual plaintiffs, because it is intended to prevent further

harm from befalling the public. See Barquis, 496 P.2d at 830 (discussing the court’s equitable power

to enjoin any business scheme that seems facially unjust); 2004 Cal. Legis. Serv. Prop. 64 (West)

(codified as amended at C

AL. BUS. & PROF. CODE §§ 17203, 17204, 17206, 17535, 17536 (West 2012))

(stating that the public’s intent in passing Proposition 64 was to prevent frivolous UCL lawsuits but

retain the right of private individuals to sue to protect the consuming public).

212

See Nat’l Rural Telecommc’n Coop. v. DIRECTV, Inc., 319 F. Supp. 2d 1059, 1075 (C.D.

Cal. 2003) (explaining that the statutory term “unfair” is defined broadly to give courts the maximum

amount of discretion to deal with harmful business schemes); Cel-Tech, 973 P.2d at 540 & n.9 (ex-

plaining that the drafters of the UCL could not anticipate precisely all of the unfair business schemes

that would arise in the future, so they drafted the UCL using “sweeping” language on purpose and

have continually expanded the UCL’s reach); Camacho, 48 Cal. Rptr. 3d at 776 (stating that requiring

plaintiffs to tether allegations of unfairness to a specific legislative provision conflicts with the goals

of the UCL, as it limits courts’ abilities to strike down unfair practices). Consumers require greater

protection from unfair business practices than business competitors, as consumers are constantly un-

der pressure from businesses to buy their goods and services. See Barquis, 496 P.2d at 829 (referring

to the psychological pressure of advertising); Progressive, 37 Cal. Rptr. 3d at 453 (stating that the

balancing test protects vulnerable consumers from “sharp practices”).

213

See, e.g., Ehret, 2014 WL 4640170, at *10 (balancing Uber’s lack of justification for its de-

ceptive fees against the customer’s overpayment to find that the customer stated a claim against Ub-

er); McKell, 49 Cal. Rptr. 3d at 240–41 (balancing the homeowners’ overpayment of underwriting

fees against the mortgage lender’s motivations, in light of the federal policy favoring home ownership,

to find that the homeowners stated a UCL claim against the lender); Progressive, 37 Cal. Rptr. 3d at

441, 453 (balancing the plaintiff’s economic injuries against the insurer’s lack of justification for its

reimbursement and finding that the plaintiff’s claim against his insurer could proceed).

214

Cel-Tech, 973 P.2d at 540.

215

See Federal Trade Commission Act, 15 U.S.C. § 45(a)(1) (2012) (prohibiting “[u]nfair meth-

ods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting

commerce”); C

AL. BUS. & PROF. CODE § 17200 (West 2012) (prohibiting “any unlawful, unfair or

fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising”); Lozano,

504 F.3d at 736 (rejecting the section 5 test for consumer UCL actions, reasoning it inappropriate to

apply the Federal Trade Commission Act (“FTCA”)’s definition of “unfair” to consumer actions);

Cel-Tech, 973 P.2d at 543–44 (stating that although the FTCA and California UCL have similar pur-

1136 Boston College Law Review [Vol. 56:1097

The FTCA empowers the Federal Trade Commission to act to preserve competi-

tion within markets, which is not necessarily the concern of private citizens su-

ing under the UCL for redress.

216

Likewise, the revised Cel-Tech test for unfair-

ness is improper because it is too restrictive; it bars many consumer UCL actions

that the legislature did not intend to block.

217

Therefore, only the balancing test

affords courts the latitude they need to accomplish the UCL’s sweeping goals.

218

poses, the statutes are enforced very differently); Camacho, 48 Cal. Rptr. 3d at 776–77 (deriving the

“section 5 test” from the FTCA because Cel-Tech looked to the FTCA for guidance) (citing Federal

Trade Commission Act § 5(n), 15 U.S.C. § 45(n)). In 2007, in Lozano v. AT&T Wireless Services,

Inc., the U.S. Court of Appeals for the Ninth Circuit held that courts facing consumer UCL claims

should not copy Cel-Tech’s method of looking to the FTCA for guidance. See 504 F.3d at 736. This is

because Cel-Tech was concerned only with anticompetitive conduct. See id.; Cel-Tech, 973 P.2d at

544 nn.11–12 (noting that the court’s discussion of federal law pertained only to competitor lawsuits

under the FTCA and UCL and, therefore, the discussion did not relate to consumer UCL actions).

216

Compare 15 U.S.C. § 45(a)(2) (empowering the Federal Trade Commission (“FTC”) to en-

force the FTCA), and H.R. Rep. No. 103-138), at 2–4 (1993) (stating the purpose of the FTCA and

the FTC’s broad authority to declare practices unfair), and Averitt, supra note 102, at 228–29 (ex-

plaining the six categories of conduct that violated the FTCA as it existed in 1980, all of which in-

volved anticompetitive conduct and/or antitrust law), with C

AL. BUS. & PROF. CODE § 17204 (allow-

ing any person that has suffered an economic injury as a result of a prohibited practice to bring suit),

and Barquis, 496 P.2d at 829 (holding that the UCL not only prohibits anticompetitive practices

among business competitors, but it also protects vulnerable consumers), and Arkin, supra note 94, at

157 (explaining that the goal of the UCL is broader than just protecting business competitors; it aims

to protect all of society). The California UCL and FTCA have many differences, including: the UCL’s

broader standing provisions; the UCL’s five theories of liability, compared to the FTCA’s two; the

UCL’s longer statute of limitations; and the FTCA’s exemption for insurance companies. See Lenore

Albert & Michael Thurman, Unfair and Deceptive Practices: A Comparison of the FTC Act and Cali-

fornia’s UCL, 22 C

OMPETITION: J. ANTITRUST & UNFAIR COMPETITION L. SEC. ST. B. CAL. 51, 60–

61, 67–68 (2013).

217

See Graham v. Bank of Am., N.A., 172 Cal. Rptr. 3d 218, 233 (2014) (laying out the revised

Cel-Tech test, which states that conduct is unfair if it violates a public policy that is “tethered to spe-

cific constitutional, statutory or regulatory provisions”) (internal quotation marks omitted); see, e.g.,

Aleksick, 140 Cal. Rptr. 3d at 807–08 (using the revised Cel-Tech test to dismiss the franchise em-

ployee’s complaint against the franchisor for its payroll practices); Scripps v. Superior Court, 134 Cal.

Rptr. 2d 101, 105, 116–17 (Cal. Ct. App. 2003) (using the revised Cel-Tech test to dismiss the pa-

tients’ claim against their clinic for refusing to treat them after they sued for malpractice); Gregory,

128 Cal. Rptr. 2d at 395 (using the revised Cel-Tech test to dismiss the citizen’s complaint against the

grocery store chain for leaving its store unoccupied). If California’s Fourth District Court of Appeal

had evaluated the employee’s claim under the balancing test (rather than the revised Cel-Tech test) in

Aleksick v. 7-Eleven, Inc. it may have allowed the claim to proceed, as the franchisor’s payroll prac-

tice seemed to undermine California’s fair labor policies and Labor Code. See Aleksick, 140 Cal. Rptr.

3d at 798, 808 (explaining 7-Eleven’s challenged business practice, whereby the franchisor requires

its franchises to calculate payroll in a way that shorts employees’ wages, and invoking California’s

wage statute); McKell, 49 Cal. Rptr. 3d at 240 (stating that any business practice that “violates estab-

lished public policy” is unfair).

218

Compare McKell, 49 Cal. Rptr. 3d at 240 (describing how the balancing test takes into account

established public policies, consumer harm, societal benefits, defendant motivations, and more), with

Camacho, 48 Cal. Rptr. 3d at 777 (dismissing concerns that the section 5 test, which imposes a re-

quirement that plaintiffs must suffer substantial injury to bring a claim under the unfair prong of the

UCL, further limits standing), and Graham, 172 Cal. Rptr. 3d at 233 (acknowledging that the revised

Cel-Tech test for unfairness is more rigorous than the balancing test and section 5 test), and Wilson v.

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1137

2. Applying the Balancing Test to Uber’s Insurance Misrepresentations,

Courts Should Deem uberX Drivers Entitled to Relief

Applying the balancing test for unfairness to Uber’s misrepresentations

about ride-sharing insurance coverage, Uber’s practices should be found to vio-

late the UCL.

219

The test holds that a business practice is unfair “if it violates

established public policy or if it is immoral, unethical, oppressive or unscrupu-

lous and causes injury to consumers which outweighs its benefits.”

220

Uber’s

practice satisfies this standard of unfairness in multiple ways.

221

Accordingly,

injured uberX drivers are entitled to restitution and injunctive relief from Ub-

er.

222

First, Uber’s misrepresentations about uberX drivers’ inadequate insur-

ance coverage violate established public policy.

223

Uber misrepresents that ub-

Hynek, 144 Cal. Rptr. 3d 4, 11 (Cal. Ct. App. 2002) (stating that the revised Cel-Tech test is signifi-

cantly narrower than the balancing test); see also Arkin, supra note 94, at 157 (explaining the broad

scope of the UCL).

219

See Ehret, 2014 WL 4640170, at *10 (applying the balancing test to determine that Uber’s

misleading gratuity scheme is arguably unfair and allowing the plaintiff’s claim to survive a motion to

dismiss); NAIC Consumer Alert for Ridesharing Drivers, supra note 8 (warning ride-sharing drivers

that they may have gaps in their insurance coverage, as commercial activity voids most personal poli-

cies); Hourdajian, Eliminating Ridesharing Ambiguity, supra note 6 (stating that Uber’s contingent

liability coverage fills the insurance gap between when an uberX driver becomes available or hire and

when he or she accepts a ride request). Unfairness is a question of fact for the judge or jury to decide

on a case-by-case basis. Countrywide Fin. Corp. v. Bundy, 113 Cal. Rptr. 3d 705, 723 (Cal. Ct. App.

2010).

220

McKell, 49 Cal. Rptr. 3d at 240.

221

See id. (stating the factors to consider when applying the balancing test); Bensinger & Bhui-

yan, supra note 38 (stating that Uber representatives told potential uberX drivers at a recruiting event

that they do not need commercial insurance, and then told reporters that many personal policies will

cover drivers during the trolling period); Hourdajian, Eliminating Ridesharing Ambiguity, supra note

6 (telling uberX drivers that they should be confident that they no longer have gaps in their insurance

coverage while ride-sharing); cf. Packel, Lyft, Uber Ridesharing Bids, supra note 11 (reporting that

Pennsylvania insurers opine that Uber’s contingent liability policy, offered to drivers during the

trolling period, does not fix the ride-sharing insurance problem).

222

See Cel-Tech, 973 P.2d at 539 (explaining that private plaintiffs’ remedies under the UCL are

limited to restitution and injunctive relief). This Part assumes that uberX drivers have standing. Cf.

Kwikset Corp. v. Superior Court, 246 P.3d 877, 885, 887 (Cal. 2011) (noting that to have standing to

sue under the UCL’s unfairness prong, the plaintiff must demonstrate an economic injury in fact caused

by actual reliance on the defendant’s misrepresentations, which are at the core of the claim). This Part

also assumes that state law does not explicitly sanction Uber’s conduct, as a law proclaiming Uber’s

insurance scheme legal could provide Uber with immunity. Cf. Cel-Tech, 973 P.2d at 541 (explaining

that if a law sanctions a business practice, it serves as a safe harbor for defendants accused of unfair

competition). Because ride-sharing and TNCs are new to the transportation market, it is unlikely that

states have laws explicitly sanctioning Uber’s insurance scheme. See Browning, supra note 24, at 85

(explaining that the emergence of ride-sharing has raised new questions about applicable regulations

and insurance).

223

See Packel, Lyft, Uber Ridesharing Bids, supra note 11 (reporting the Insurance Federation of

Pennsylvania’s harsh criticism of Uber’s inadequate insurance coverage and education for ride-

sharing drivers).

1138 Boston College Law Review [Vol. 56:1097

erX drivers are fully covered while they drive around searching for fares,

which violates state policies favoring first-party insurance coverage.

224

Uber’s

misrepresentations are similar to those made by the defendant mortgage lender

in 2006, in McKell v. Washington Mutual, Inc., a case in California’s Second

District Court of Appeal.

225

The lender in McKell undermined federal policy

aimed at reducing the cost of homeownership by misrepresenting the cost of

underwriting.

226

Similarly, the remaining gaps in Uber’s insurance coverage

for uberX drivers undermine state efforts to ensure drivers receive compensa-

tion for their own injuries.

227

Uber’s misleading uberX drivers about the ap-

plicability of their personal policies and failing to provide them with personal

injury, comprehensive, collision, or uninsured motorist protection frustrates the

purpose of these local laws.

228

224

See Hourdajian, Insurance for uberX, supra note 8 (providing an overview of Uber’s insur-

ance for uberX drivers, which lacks first-party coverage for drivers while they are driving around

searching for fares); Summary of State Laws Related to Auto Insurance, supra note 65 (indicating that

seventeen states require drivers to carry personal injury protection and thirty-five require drivers to

carry uninsured motorist coverage); Notice to Transportation Network Company Drivers, supra note 8

(advising ride-sharing drivers to consider buying a commercial liability policy with personal injury

protection, comprehensive, collision, and uninsured motorist coverages to ensure that they are person-

ally protected). Recall that first-party coverage compensates the insured for personal losses, such as

personal injury protection and collision coverage. J

ERRY & RICHMOND, supra note 55, at 918.

225

Compare McKell, 49 Cal. Rptr. 3d at 235, 241 (explaining how the mortgage lender over-

charged homeowners for automated underwriting, in violation of federal public policy aimed at mak-

ing homeownership more affordable), with Hourdajian, Eliminating Ridesharing Ambiguity, supra

note 6 (making inaccurate statements to the public about uberX drivers’ insurance coverage while they

are in between fares, specifically that “the vast majority of personal insurance policies cover [the

trolling] period either by the plain terms of the insurance policy, or due to the insurance requirements

set by state”), and Friedhoff, supra note 44 (reporting that the insurance industry says that commercial

activities, such as driving around searching for fares, are not covered by personal policies).

226

McKell, 49 Cal. Rptr. 3d at 240–41.

227

Compare McKell, 49 Cal. Rptr. 3d at 240–41 (explaining how the lender’s activity under-

mined federal policy), and Jerry & Richmond, supra note 55, at 89–90, 97–98 (describing states’

rationale for regulating auto insurance and imposing first-party coverage requirements), and Summary

of State Laws Related to Auto Insurance, supra note 65(demonstrating that the majority of states man-

date some kind of first-party coverage), with Hourdajian, Eliminating Ridesharing Ambiguity, supra

note 6 (telling uberX drivers that they should feel confident that they have sufficient insurance cover-

age, despite the fact that drivers have no first party coverages in place while they drive around search-

ing for fares).

228

See Hourdajian, Insurance for uberX, supra note 8 (showing that uberX drivers are covered by

Uber’s contingent liability policy during the trolling period, but not showing personal injury protec-

tion, uninsured motorist coverage, or collision and comprehensive coverage); Notice to Transporta-

tion Network Company Drivers, supra note 8 (advising ride-sharing drivers to buy commercial insur-

ance and/or first-party coverages); Packel, Lyft, Uber Ridesharing Bids, supra note 11 (noting that

Uber’s insurance scheme fails to meet the Insurance Federation of Pennsylvania’s standards, and that

offering merely contingent liability coverage in between rides will create confusion and delay during

the claims process).

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1139

Second, Uber’s knowingly misleading uberX drivers about their inade-

quate insurance constitutes immoral, unethical, and unscrupulous conduct.

229

Similar to the Wilner insurer who engaged in unethical and unfair conduct by

knowingly selling unsuitable life insurance policies to customers, Uber knows

that most uberX drivers’ personal policies prohibit commercial activity.

230

Ub-

er also knows that its contingent liability policy will not compensate the uberX

driver for any of his or her own injuries, as the Wilner insurer knew that it was

selling underfunded policies.

231

Furthermore, just like it was unscrupulous for

the insurer in Progressive West Insurance Co. v. Yolo County Superior Court in

2005 in California’s Third District Court of Appeal to demand repayments to

which it was not entitled, Uber similarly disregards the law.

232

Uber unscrupu-

lously encourages uberX drivers to submit claims to their personal insurer first

for accidents that occur during the trolling period, despite the fact that personal

policies do not cover commercial activity.

233

229

See Progressive, 37 Cal. Rptr. 3d at 453 (finding that the insurer’s practice of demanding

reimbursement from payees without regard to legality seemed immoral and unethical); Wilner, 93 Cal.

Rptr. 2d at 422–23 (holding that the insurer’s knowingly selling inappropriate and unsuitable life

insurance policies to consumers was obviously “immoral, unethical and unscrupulous,” and therefore

unfair). Compare Hourdajian, Insurance for uberX, supra note 8 (suggesting that uberX drivers’ per-

sonal policies will cover them while they are in between ride-sharing trips), with Packel, Lyft, Uber

Ridesharing Bids, supra note 11 (claiming that Uber knows that uberX drivers’ personal auto insur-

ance will not cover any sort of commercial activity, leaving drivers exposed).

230

Compare Wilner, 93 Cal. Rptr. 2d at 422 (noting that the insurer tried to sell inappropriate life

insurance policies to new customers, knowing that the policies were inferior and probably not in the

best interests of the customers), with Fernholz, supra note 47 (reporting that an Uber representative

stated that drivers know their personal policies may not apply), and NAIC Consumer Alert for Rides-

haring Drivers, supra note 8 (warning uberX drivers that most personal auto policies contain livery

exclusions), and Packel, Lyft, Uber Ridesharing Bids, supra note 11 (claiming that Uber knows about

the remaining gaps in uberX drivers’ personal auto insurance).

231

Compare Wilner, 93 Cal. Rptr. 2d at 423 (noting that the insurer knew that the policies were

deliberately underfunded but failed to tell the policyholders), with Wallace, supra note 7 (reporting

that an Uber representative stated that liability insurance only protects uberX drivers from third-party

lawsuits and does not compensate drivers for their injuries). Uber clearly knows the value of first-

party coverages, as it provides uberX drivers with uninsured motorist coverage, contingent and colli-

sion coverage, and personal injury protection while they are on a ride-sharing trip. See Hourdajian,

Insurance for uberX, supra note 8 (explaining the commercial insurance coverage that Uber provides

for uberX drivers beginning when they accept a ride request).

232

Compare Progressive, 37 Cal. Rptr. 3d at 286 (noting that the insurer’s practice of demanding

repayment from policyholders for any money it pays out, without regard to common law doctrines

limiting the insurer’s legal entitlement to such money, was unscrupulous), with Hourdajian, Insurance

for uberX, supra note 8 (explaining that the contingent liability coverage for uberX drivers only ap-

plies if the uberX driver’s personal insurer denies the claim or pays nothing).

233

See Friedhoff, supra note 44 (reporting that driving around searching for fares is a commercial

activity not covered by personal policies); Huet, Rideshare Drivers Cornered into Secrecy, supra note

54 (reporting that some uberX drivers feel pressured to lie to their insurers about engaging in ride-

sharing to avoid losing their personal policies, which may constitute insurance fraud); Hourdajian,

Insurance for uberX, supra note 8 (implying that uberX drivers must submit claims to their personal

insurers for accidents that occur while they are driving around searching for fares).

1140 Boston College Law Review [Vol. 56:1097

Moreover, Uber’s misrepresentations to uberX drivers about insurance

coverage do not provide a public benefit that outweighs the harm to drivers.

234

An uberX driver that gets into an accident while searching for fares may incur

injuries in the form of medical bills, vehicle repair costs, and lost wages.

235

Uber cannot provide a proper justification for its insurance scheme that out-

weighs this harm, just as in Ehret, where Uber failed to justify its misleading

fee structure that harmed passengers.

236

Uber’s insurance misrepresentations

arguably produce a public benefit, in that more drivers may have signed up to

provide transportation services through uberX because they do note realize

their insurance exposure.

237

This benefit of having more uberX vehicles on the

road, however, does not outweigh the potential economic and bodily harm to

uberX drivers.

238

Therefore, Uber providing misinformation about uberX driv-

ers’ insurance coverage while they troll for fares constitutes an unfair business

practice.

239

If California courts deem Uber’s insurance misrepresentations to be an

unfair business practice within the meaning of the UCL, injured uberX drivers

234

See McKell, 49 Cal. Rptr. 3d at 240 (stating that if the harm to consumers outweighs the bene-

fit of the business practice, it is unfair under the UCL); Hourdajian, Insurance for uberX, supra note 8

(outlining uberX drivers’ insurance coverage).

235

See Catherine Clifford, Good News for Airbnb Hosts and Uber Drivers: Here Comes Insur-

ance, E

NTREPRENEUR (Dec. 5, 2014), http://www.entrepreneur.com/article/240540 archived at http://

perma.cc/A7ZP-V5KJ (noting that ride-sharing drivers who get into accidents may lose a lot of in-

come while their cars are being repaired); Wallace, supra note 7 (reporting that a Houston Uber driver

who was in an automobile accident had to pay for his own medical bills and vehicle repairs, although

Uber offered to pay for the vehicle damage after the press got involved).

236

See Ehret, 2014 WL 4640170, at *10 (allowing the Uber customer’s UCL claim to proceed

because Uber had not yet provided a justification for its misleading fees).

237

See Badger, Now We Know, supra note 36 (reporting that Uber’s fleet of drivers doubles every

six months); Bensinger & Bhuiyan, supra note 38 (reporting that most uberX drivers are relatively

inexperienced with the transportation market and rely on Uber for information); Hourdajian, supra

note 6 (reassuring uberX drivers that they should be confident that no insurance gaps exist); O’Neil,

supra note 25 (noting that the influx of Uber drivers disrupted the Boston taxicab market, to the bene-

fit of consumers).

238

Cf. JERRY & RICHMOND, supra note 55, at 97–99, 924–25 (describing the lengths state legisla-

tures go through to ensure that all drivers have adequate insurance coverage, including mandating

liability coverage and setting up residual markets through which high-risk individuals can purchase

insurance); NAIC

WHITE PAPER ON TNC INSURANCE, supra note 8, at 8–12 (explaining the risks and

costs associated with ride-sharing, despite TNCs arguments that ride-sharing increases road safety by

reducing the number of personal vehicles on the road).

239

See McKell, 49 Cal. Rptr. 3d at 240 (stating that under the balancing test for unfairness, if the

harm to consumers outweighs the benefit of the business practice, it is unfair under the UCL). Com-

pare NAIC Consumer Alert for Ridesharing Drivers, supra note 8 (warning ride-sharing drivers about

remaining gaps in their insurance coverage, including the fact that most personal policies contain

livery exclusions), and Rassman, supra note 10, at 90 (quoting the Insurance Federation of Pennsyl-

vania’s opinion that Uber’s offering only contingent liability coverage during the trolling period

leaves drivers exposed), with Hourdajian, Eliminating Ridesharing Ambiguity, supra note 6 (trying to

recruit new uberX drivers with representations that any gaps in ride-sharing drivers’ insurance cover-

age no longer exist)

2015] Uber’s Insurance Coverage and Unfair Competition Laws 1141

would be entitled to restitution and injunctive relief.

240

As such, uberX drivers

should receive restitution to compensate them for any economic losses they

incurred as a result of Uber’s misleading them about their insurance coverage

during the trolling period.

241

Further, uberX drivers should seek an injunction

to enjoin Uber from continuing to operate uberX without disclosing to drivers

the truth about their insurance gaps.

242

Such injunctive relief would prevent

Uber from continuing to mislead uberX drivers, thus fulfilling the UCL’s broad

goal of protecting the public from any and all unfair business schemes.

243

ONCLUSION

As ride-sharing services such as uberX gain popularity, courts are seeing

an influx of disputes over insurance coverage for uberX drivers. uberX drivers

lack adequate insurance coverage during the time period when they have the

Uber app on but do not yet have a passenger. This is due in part to Uber mis-

leading uberX drivers about the type and amount of insurance coverage availa-

ble to them. Based on these misrepresentations, injured uberX drivers should

be able to sue Uber under California’s unfair competition law for engaging in

unfair business practices. In such a lawsuit, California courts will likely treat

an uberX driver as a consumer rather than a business competitor of Uber. Fur-

ther, courts should apply the flexible balancing test to determine whether Ub-

er’s practice is unfair, as this test best serves the broad protective intent under-

lying the UCL. Applying this balancing test to Uber’s insurance misrepresenta-

tions, courts should find Uber’s practice unfair and grant injured uberX drivers

restitution and injunctive relief. Accordingly, ride-sharing drivers should try to

hold transportation network companies accountable for their statements. If Ub-

240

See CAL. BUS. & PROF. CODE §§ 17200, 17203 (prohibiting unfair business practices and

providing that anyone who is injured by such practices can seek injunctive relief); Cel-Tech, 973 P.2d at

539 (stating that successful plaintiffs are entitled to restitution under the UCL as well).

241

See Cel-Tech, 973 P.2d at 539 (indicating that UCL plaintiffs can obtain restitution); Clifford,

supra note 235 (describing how ride-sharing drivers may suffer lost wages if involved in an automo-

bile accident); Wallace, supra note 7 (discussing Uber driver who incurred medical bills and vehicle

repair costs after accident); see also NAIC Consumer Alert for Ridesharing Drivers, supra note 8

(warning drivers that their personal auto policies may not cover them once they make themselves

available for hire through a TNC app).

242

See CAL. BUS. & PROF. CODE § 17203 (stating that businesses that engage or propose to engage

in unfair business practices can be enjoined); Packel, Lyft, Uber Ridesharing Bids, supra note 11 (stat-

ing the Pennsylvania insurers opine that Uber needs more insurance coverage and better insurance educa-

tion for ride-sharing drivers); see also C

AL. PUB. UTIL. CODE § 5432 (West Supp. 2015) (requiring

Uber to disclose to ride-sharing drivers, starting in July 2015, that their personal policies will not cover

use of their vehicles in connection with a TNC).

243

See Barquis, 496 P.2d at 830–31 (describing the “sweeping” language of the UCL, which

empowers courts to invalidate any and all business practices that are facially unfair and dishonest);

Arkin, supra note 94, at 157 (explaining that the broad purpose of the UCL is to protect all of society

from the harm caused by unfair and unscrupulous business practices, not just business competitors).

1142 Boston College Law Review [Vol. 56:1097

er truly is all about sharing, it should share the responsibility for the risks it

creates by putting ride-sharing drivers on the road.

ENNIE DAV I S