Limited Government Groups Lead Charge for Tort Reform

In early April, the Taxpayers Protection Alliance highlighted the significant and growing problem of ruinous litigation. Trial lawyers are willing to do whatever it takes to get a hefty payout, even if it means introducing flimsy evidence and exploiting confusingly worded statutes such as the Graves amendment. Ranging from The James Madison Institute to the R Street Institute to the 60 Plus Association, limited-government groups are urging the federal government to update liability laws to protect consumers from runaway costs while preserving accountability for those responsible for actual wrongdoing. Lawmakers should listen and provide much-needed rules of the road to a rapidly growing and changing transportation network.

As Jerry Theodorou, Director of the Finance, Insurance and Trade Policy Program at the R Street Institute, noted recently, the Graves amendment could greatly expand existing liability protections with a few simple changes. This would significantly benefit rideshare platforms and their millions of customers. He rightly points out, “P2P platform providers should not be responsible for driver negligence [because] drivers are independent contractors, not employees of the platform, thereby not subject to vicarious liability … policymakers should consider the needs of the novel P2P business model by modernizing regulations to be inclusive of this critical industry.”

Doug Wheeler, Director of the George Gibbs Center for Economic Prosperity at The James Madison Institute, agrees, noting that while the Graves amendment—which focused on car rental companies—“was targeted, narrowly drawn, and effective in its purpose,” “the transportation landscape has changed substantially” and rideshare platforms and app-based delivery services now face the lion’s share of litigation. Saul Anuzis, President of the 60 Plus Association, also makes a well-thought-out case for legal reform.

Ahead of lawmakers’ markup of the surface transportation reauthorization bill slated for the end of April, these groups are absolutely right to focus on the Graves amendment. Introduced by House Transportation and Infrastructure (T&I) Committee Chairman Sam Graves (R-Mo.), this 2005 law established a clear national standard: rental and leasing companies should only be held liable for their own negligence, not simply for owning a vehicle. But the Graves amendment does not cover rideshare apps and “Transportation Network Companies” (TNCs)—which connect riders with drivers on a mass scale and have completely transformed the automotive market over the past two decades. TNCs today face very similar problems faced by rental companies then.

TNCs have been sued in instances where the driver didn’t even work for a TNC, or when the driver wasn’t on the clock at the time of the accident. TNCs have bizarrely been taken to court even when the driver at fault was an inebriated third-party or ran a red light. While states in general should be in the driver’s seat when it comes to designing their tort systems, legal certainty is sorely needed at the federal level because of the nationwide design and operating model of TNCs. State jurisdictions allowing plaintiffs to sue TNCs when the plaintiff is clearly at fault jeopardizes the ride-sharing experience in all jurisdictions. And because TNCs have deep pockets, unscrupulous lawyers will always have an incentive to pursue meritless claims.

Ridesharing platforms have fundamentally reshaped transportation, but federal liability frameworks have simply not kept pace with their hybrid role as both technology intermediaries and transportation providers. These companies operate at a national scale yet remain exposed to a fragmented and often inconsistent web of tort laws that invite opportunistic litigation. Clear rules of the road defining when platforms can be held responsible and when liability properly rests with individual actors would not eliminate legitimate claims but would curb expensive and duplicative lawsuits that fail to improve safety outcomes.