By Douglas Levy
The Daily Record Newswire
Over the past few years, web-based ride-booking services Uber and Lyft have become viable alternatives for consumers nationwide seeking a lift.
But like most services that spawned from technological advancements, the law hasn't been nearly as fast to keep up with them.
And in Michigan, no statewide regulation exists for such services.
"People would naturally assume that if a company like Uber opens its operations in your town and begins accepting fares for money, then there must have been some regulatory or legal compliance they had to go through," said Grand Rapids attorney Thomas G. Sinas.
"And that's just not the case."
Plaintiffs'-side no-fault and personal injury attorneys like Sinas say that until statewide rules are in place, insurance disputes involving Uber drivers will continue to be difficult.
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Who's 'transporting'?
The general rule under the insurance priority scheme, said Sinas, of the Sinas Dramis Law Firm, is that the injured parties turn to their own insurance carriers.
But there's an exception to that rule: if a passenger is in a vehicle that's in the business of transportation, per Section 500.3114(2), that passenger get personal injury protection benefits from the insurer of the motor vehicle.
However, the question whether Uber is in the business of transporting passengers gets tricky, as Sinas said Uber insists their drivers are independent contractors. In a recent California suit, a judge certified a class of Uber drivers to determine whether they are Uber's employees. Uber is appealing the ruling.
If that's so, Sinas added, the independent contractors are the ones transporting passengers, not Uber.
"I think what [Uber is] arguing is, with the technology they use, they are a broker," said Douglas Young of Detroit-based WilsonYoung PLC, who represents policyholders.
"They link together people who want rides with people who want to provide rides. They're not providing anything but the software to communicate. They're taking the legal position that they're like Facebook for autos."
But because Uber presents itself as a be-all-end-all name, Farmington Hills attorney Wolfgang Mueller said consumers can be misled easily.
"I think [Uber would] be liable under an apparent agency theory, that, because Uber holds itself out as this ride service, the people calling think they're calling Uber," and not the individual drivers, he said.
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Languishing legislature
A five-bill package introduced May 2015 in the Michigan House would clear things up, though. HB 4637-41 would give the green light statewide for "transportation network company drivers," laying out the rules of the road for how they have to operate. The bills also would clarify that those drivers are independent contractors and that Uber is not in control of them.
Although the House approved the package in June, it has stalled in the Senate. In addition, Senate Bills 184 and 188 - which would define what insurance a transportation network company's vehicles had to carry and require drivers to carry a chauffeur's license - were referred to the Senate Committee of the Whole in June 2015, where they remain.
Yet, Sinas said, Uber continues to operate.
Since then, a Kalamazoo man who had been working as an Uber driver shot and killed six people and injured two in February, reportedly in between picking up fares.
A Washington, D.C., federal judge in September 2015 refused to dismiss Uber from a lawsuit in which an Uber rider claimed the driver attacked him with a knife. The judge ruled that the plaintiff's allegations evinced an employer-employee relationship.
And in early April, Uber was fined $10 million in California for falsely stating the quality of its background checks, which violated consumer protection laws.
Sinas said Michigan doesn't have that kind of consumer protection laws, meaning Uber could potentially be making similar claims here and in other states - with no regulatory framework in place to halt them.
"That to me is the biggest issue; there are just no rules set," he said. "And in our particular state, it's a big problem, because how do you deal with no-fault coverage?"
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Coverage concerns
Without any regulatory distinction, a passenger's insurer and the Uber driver's insurer would be fighting over who's responsible for the PIP benefits, Sinas said.
He said Uber has claimed it has purchased policies for up to $1 million for accidents across the country, "but those policies, they say, will only apply if there's an accident during what they call a 'pre-arranged ride' - which I describe as, if there's a butt in the back seat, then the $1 million policy applies."
But complications can arise before that even happens.
He said that if the driver is texting the passenger in order to locate him or her, "your butt is not in that seat. So you don't have a pre-arranged ride. And if that driver is texting you and runs over someone, Uber's [$1 million] 'commercial liability policy' is not going to apply."
Further, Sinas said nearly every personal policy has a livery exclusion, which means transporting of people and/or goods for hire is not covered. Although some carriers offer ride-share insurance policies, he said they're not available consistently, so Uber drivers are simply buying personal policies.
Young said that Uber drivers who have looked into insurance policies for taxis are finding those premiums to be a lot more than personal policies because of liability and increased exposure. He added that some carriers are experimenting with adding endorsements to policies, which would allow Uber drivers to negate the business-use exclusion on their policies.
Yet, Young said, "I think it will take a while for Uber to become so recognized that traditional policies will understand and pick up this exposure."
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Beefing up the policy
Until then, Sinas said, Uber drivers will have to continue to follow state law that says no one can drive in Michigan without a minimum $20,000 liability policy - "so if there's an accident, an injured passenger is stuck with whatever insurance the driver bought."
Young noted that the $20,000 single/$40,000 aggregate minimum statutory limit of liability hasn't changed since the no-fault act was put into law.
Sinas said that in the short term, until regulation is enacted, consumers would be best to increase their uninsured and underinsured motorist coverage, "because the last thing you want to do is to be involved in a serious accident with an Uber vehicle and come to find out that driver has no liability coverage or has a $20,000 policy, and the corporate defendant who you think would step in would say, 'No, we have no responsibility there.'"
That can be daunting for people who, based on where they live, don't have, or need, an auto policy at all.
"The people who might be using Uber are the people in the big urban cities like Chicago or New York who might not even have their own car," Mueller said. "Talk about taking the umbrella away when it's starting to rain."
Published: Tue, Apr 19, 2016
