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How does injury liability work in the sharing economy?

Over the past decade or so, new businesses and new business models have allowed average people to put their property to work. These include ride-sharing services like Uber and Lyft as well as temporary lodging services like Airbnb.

There is little debate about the fact that the "sharing economy" is a popular concept. It may even be here to stay. Unfortunately, however, these new business models raise difficult questions about who is ultimately liable when accidental injuries and deaths occur.

A recent article in the New York Times talks about an incident that occurred on Thanksgiving in 2014. While renting a Texas cottage with his family, a man decided to try a rope swing on the property – one that he had seen in a listing for the property on Airbnb. When he tried the swing, the tree broke and a large portion of it landed on the man's head. He later died.

In this particular case, the cottage owner had an insurance policy that covered commercial activity (renting out the property). But many homeowners have insurance policies stating clearly that commercial activity is not covered. The same is true for personal auto insurance policies, which many Uber and Lyft drivers may not realize.

Both Airbnb and Uber offer free insurance coverage for hosts/drivers that supposedly supplement their own coverage. But Airbnb's policy has a $10 million annual cap, which is miniscule in relation to the potential liability associated with the half-a-million rentals that occur each day. As for Uber, the company has tried to deny liability in the aftermath of at least one fatal accident here in California.

Traditional taxi services and hotels often charge more money than their equivalents in the sharing economy. But those costs are higher, in part, because the companies are usually compliant with all applicable safety laws and have insurance policies that will cover most any injury or death claim.

To be sure, this doesn't necessarily mean that the sharing economy is untenable. But questions of safety, liability and insurance coverage loom large. Until those questions are answered and concerns are addressed, users of these services need to know that they may not be getting such a great deal after all.

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