New approaches to risk and liability

• Author: Janelle Orsi
• Profession: Is the Director of the national nonprofit Sustainable Economies Law Center, and she is a 'sharing lawyer' in private law practice in Oakland, CA
• Pages: 555-573

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CHAPTER ELEVEN

NEW APPROACHES TO

RISK AND LIABILITY

PART 1: SHARING ECONOMY/SHARING

RISK/SHARING RESPONSIBILITY

Loss Is Scary, but Uncertainty Is Scarier

Sharing is society’s most promising form of social security. Sharing

reduces burdens on individuals and spreads risks and responsibilities

among many. On the flip side, however, sharing triggers some of our

greatest insecurit ies. A basic fact about the sharing economy is that the

more people share, the more we expose each other to risk. Fears about

loss and liability often dominate people’s thoughts as they contemplate

the formation of agreements and organ izations to share.

However, loss and liability are, themselves, probably not what scare

people the most. What is really scar y is the uncertainty about how we will

respond to them. Time magaz ine once started an article by saying: “The

brain loathes uncertainty. In laboratory experiments, humans actually

fear uncertainty more than physical pain.”1 Although the article didn’t

actually cite t he studies (leaving us, ironically, uncertain about their

reliability), there is somethi ng that rings quite true about th is statement.

For example, I’ve learned that fender benders are a breeze. This

is not to say that they are pleasant or cheap; they are, however, some-

what predictable because car insurance companies have plans and pro-

cedures in place for responding to t hen. Social custom also d ictates our

1. Amanda Ripley, Learning to Live with the Fear of the Flu, T, Sept . 22, 2009.

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response—we get out of our vehicles, make su re everyone is all right,

and trade contact and insu rance information. Many people handle all of

it with confidence and grace.

In the shari ng economy, what are the plans, procedures, and cus-

toms that will d ictate how we respond to loss? Further, how will we

manage it with the same conf idence and grace we’ve learned to apply

elsewhere? These questions have yet to be answered thoroughly for

many things we’ll do in the sharing economy, since so much of it is new

to us. For example, if we are paying a neighbor to regularly borrow her

car, how do we handle a situation where we cause a fender bender and

how will insur ance companies handle it?

The sharing economy demands thoughtful and creative risk man-

agement. First, this means taking steps to decrease risk of loss and to

mitigate its impact. Second, and importantly, thorough planning can

dramatical ly reduce the uncertainty of how we will respond and how we

will restore what is lost. By elimi nating a large amount of uncert ainty,

thoughtful risk management will open up doors and open up minds to

a more sharing society.

It’s important to acknowledge, however, that risk management in

the sharing economy is still largely unchar ted territory. The primary

purpose of this chapter is to highlight some of the unique chal lenges

sharing economy lawyers may face and to provide some guidance in

think ing through t he issues. Nevertheless, there remains a vast field to

explore and many best practices to develop.

Taking Risks in a Sharing Economy

Here are some examples of ways that we commonly expose ourselves to

risk in the shar ing economy, along with some of the questions t hat come

up in connection:

1. Lending our things: By borrowing and lending thi ngs like cars,

electronics, equipment, and tools, people make opt imal use of

resources we have, and greatly reduce our needs to buy a nd own

consumer goods. Instead of letti ng our car sit in the driveway all

day, we might let a neighbor regularly borrow it. However, this

brings up uncertainties: What happens if t here’s an accident? Is

the neighbor covered by our insurance? W ho should be respon-

sible for out-of pocket costs? Should fault matter?

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