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When an Uber driver without passengers crashes

Should ride-sharing companies be required to provide primary coverage to drivers without passengers? Or when ‘commercial use exclusion’ in drivers’ personal auto policies precludes coverage?

Uber car

What happens under the “Uber Bill” – House Bill 4032  –  if there’s a crash involving an Uber driver who is on-duty, but not transporting passengers or riders, and her auto insurer denies coverage based on a “commercial use exclusion” in her policy?

Are the driver and any injured victims out of luck? Or must Uber or the ride-sharing company for whom the driver works step in and provide coverage?

Unfortunately, the answer under Michigan law isn’t clear when analyzing  HB 4032. However, I have two suggestions for how to fix the problem:

  • HB 4032 should be amended to require ride-sharing companies to maintain and provide primary auto insurance policies to cover their drivers when they are on-duty, but not presently transporting passengers or riders. Or:
  • HB 4032 should be amended to require that ride-sharing companies must provide insurance coverage in the event of a crash (by an on-duty driver without passengers or riders) that is excluded from coverage under a “commercial use exclusion” in the driver’s personal auto insurance policy.

I’ll  take credit for the first suggestion. As for the second suggestion, credit goes to former Rep. Jon Switalski (D-Warren).

HB 4032 (the “Uber bill”), which was introduced on January 15, 2015, by Rep. Tim Kelly (R-94th District (Saginaw County), proposes auto insurance requirements for app-based ride-sharing services like Uber. HB 4032’s requirements apply to two scenarios:

  1. When a ride-sharing driver is transporting passengers or riders; and,
  2. When a ride-sharing driver is on-duty, but is not presently transporting passengers or riders.

Today, I want to discuss the latter because that’s where I see a problem with “commercial use exclusions” in the ride-sharing drivers’ personal auto insurance policies.

I believe the suggestions I mentioned above can fix the problem.

To read more about HB 4032’s first scenario – and its “commercial use exclusion” implications – please check out my blog post:

House Bill 4032

Under HB 4032, when a driver for an app-based ride-sharing service is on-duty, but is not presently transporting passengers or riders, the following insurance coverage must be in place:

  • “[A]t least” the minimum liability limits for bodily injury and property damage ($20,000/$40,000/$10,000).
  • No Fault PIP and “property protection insurance” coverage.

‘Commercial use exclusion’ implications when a car accident does occur

Aside from my wanting to see higher bodily injury liability limits, my concern as an attorney familiar with these cases is with HB 4032 and in particular, that it does not require the ride-sharing company to maintain and provide a primary policy with the required coverage.

That’s a problem, because it puts the public and the driver at risk in the event a crash occurs and a “commercial use exclusion” in the driver’s personal auto insurance policy excludes coverage. Most policies I’ve seen as an attorney have these types of “commercial use” exclusions in them. That leaves people unprotected and without insurance for injuries and pain and suffering when a car accident occurs.

Under those circumstances, the driver could be denied necessary liability protection and No Fault insurance benefits, also known as PIP benefits in Michigan.

Similarly, any other injured persons who might have claimed No Fault benefits through the driver would be forced to apply for benefits through the Michigan Assigned Claims Plan.

The purpose of a “commercial use exclusion” is to preclude coverage if the covered personal vehicle was being used for “commercial” purposes at the time of a crash. Commercial use is understood to mean transporting passengers and/or goods or freight in return for monetary compensation.

How to fix the problem

In my opinion, the first fix for the problem that I would suggest is as follows:

  • HB 4032 should be amended to require ride-sharing companies to maintain and provide primary (i.e., the first to pay out in the event of a crash) auto insurance policies to cover their drivers when they are on-duty, but not presently transporting passengers or riders.

Such a requirement would be consistent with what HB 4032 requires of ride-sharing companies in the scenario involving drivers who are actively transporting passengers or riders. It would also alleviate any confusion about what the source of coverage will be.

I believe that another fix is also possible:

  • HB 4032 should be amended to require that ride-sharing companies must provide insurance coverage in the event of a crash (by an on-duty driver without passengers or riders) that is excluded from coverage under a “commercial use exclusion” in the driver’s personal auto insurance policy.

The idea for this came from former Rep. Switalski when, last term, he offered up an amendment to a predecessor “Uber bill.”

In November 2014, Rep. Kelly (sponsor of HB 4032) introduced House Bill 5951, which ultimately came to propose auto insurance requirements for app-based ride-sharing services like Uber that were nearly identical to those proposed in HB 4032.

Like HB 4032, Rep. Kelly’s HB 5951 included the following equivocal language about who would be responsible for providing auto insurance coverage for Uber drivers who are on-duty, but are not presently transporting passengers or riders:

“The requirement of this subdivision may be satisfied by a combination of insurance policies maintained by a transportation network company or a transportation network company driver.”

Former Rep. Switalski offered up the following clarification:

“In every instance where insurance maintained by a transportation network company [ride-sharing company] driver to fulfill the insurance requirements of this section has lapsed, failed to provide the required coverage, denied a claim for the required coverage or otherwise ceased to exist, insurance maintained by a transportation network company [ride-sharing company] shall provide the coverage required by this section beginning with the first dollar of a claim.”

Former Rep. Switalski’s proposed amendment was adopted and incorporated into the “Substitute for House Bill No. 5951” (H-4) on December 10, 2014.

That same day, “consideration” of HB 5951 was “postponed temporarily.” Consideration was never resumed and the bill “died” due to inaction at the end of the 2013-14 legislative session.

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Blog Author Steven M. Gursten
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