A San Francisco Superior Court jury ruled last month that a Yellow Cab driver was an “ostensible employee” of Yellow Cab, making the company liable for a car crash caused by the cab driver. The jury awarded $8 million to a passenger injured in the crash.

The accident occurred when a 28 year old lawyer took a Yellow Cab home from San Francisco International Airport in April 2011. Traffic on Highway 101, on which they were driving, came to a complete stop. The cab driver did not notice the traffic had stopped and hit the car in front of him at 60 to 65 miles an hour. The lawyer was paralyzed on one side of her body, suffered symptoms of traumatic brain injury, and is unable to work.

The lawyer sued Yellow Cab for her injuries. The case went to trial. During the trial, Yellow Cab admitted the accident was completely the driver’s fault, but argued that it was not responsible because the driver was an independent contractor. Yellow Cab claimed that although the drivers are in the business of driving people, Yellow Cab was in the business of providing the vehicles, a dispatch service, and the color scheme only.

Yellow Cab’s distinction between “employee” and “independent contractor” matters significantly: if a worker is an employee, the employer is liable for any damages caused by the employee during the course of employment; if a worker is an independent contractor, the company using his or her services is not liable for any damages caused by the worker while the work is being done.

The jury ruled that although the driver was not a Yellow Cab employee, he was an “ostensible employee”, which makes the company responsible for his actions. The jury reasoned that a passenger who gets into a Yellow Cab assumes that there is a company that backs up the cab and the driver. Unfortunately, Yellow Cab only carried $1 million in liability insurance. It’s unclear if Yellow Cab will be able to pay the rest, or will file for bankruptcy or offer a lesser amount to the injured woman. In Chicago, Yellow Cab was found liable for $26 million in damages to a passenger who was seriously injured in a cab accident. The company filed for bankruptcy nine hours later.

There is a very thin line between who is an employee and who is an independent contractor. In most cases, the determining factor is how much control the company has over the worker. The greater the level of control the company has, the more likely it is that the worker is an employee. If the worker is able to decide when to do the work, how to do the work, and how much to charge, it’s more likely the worker is an independent contractor. Courts also consider how much entrepreneurial opportunity the worker has in deciding whether a worker is an independent contractor or an employee. If the worker has opportunities to take on additional work and make more money, the worker is most likely an independent contractor than an employee. Ride sharing companies such as Uber and Lyft have also faced the issue of whether its drivers are independent contractors or employees.

This tragic accident is an illustration of how dangerous cab rides can be, and how critical it is that cab companies carry sufficient liability insurance to cover any serious injuries that may occur to their customers. Cab companies and other companies that transport passengers for hire are legally called “common carriers”, and have a heightened duty to safely transport passengers. If they fail in that duty, they can be held legally liable for damages, including medical expenses, lost wages, pain and suffering, and more.

If you have been injured in a San Francisco automobile accident, call Micha Star Liberty, San Francisco automobile accident attorney at 415-896-1000 or 510-645-1000. She works with clients throughout the Bay area who have been injured in an accident. Call today to learn more.

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