It’s a hard time to be a cab company.
Case in point: Yellow Cab Cooperative, San Francisco’s largest taxi company, filed for Chapter 11 bankruptcy protection late last week.
The move is hardly surprising. The transportation industry -- particularly in major urban centers such as San Francisco, New York City and Chicago, where the taxi service filed for bankruptcy last year -- has been rocked by competition from ride-hailing services including Uber and Lyft.
Pamela Martinez, the company’s president, said as much in court papers, attributing a portion of her company’s financial troubles to a loss of riders, revenue and drivers “caused by competition from ride-sharing services.” In an effort to fight back against these services, Yellow Cab Cooperative recently launched Yo Taxi, its own ride-hailing app.
The real culprit, however, is mounting costs from lawsuits involving the company’s drivers. Last year, according to the report, a passenger was awarded more than $8 million. Because a jury ruled that the driver was an employee, not an independent contractor, the company was liable for the full amount, far more than its $1 million insurance policy. Currently, there are around 150 additional claims “aggregating approximately $10 million.”
Ride-hailing competitors have made life hard for Yellow Cab, but they are running into the same problems that ultimately sank the taxi company’s finances. Uber and Lyft may classify their workers as independent contractors to minimize liability -- a classification that has been challenged in court -- but the tactic doesn’t always protect them from legal costs. Last year, Uber settled with the family of a 6-year-old girl who was struck and killed by one of the company’s drivers.
“We are in the midst of financial setbacks,” Martinez wrote in a letter to the cooperative’s members, obtained by the SF Examiner. “Some are due to business challenges beyond our control and others are of our own making.”