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HB 4032: Insurance when Uber drivers are in between passengers

February 6, 2015 by Steven M. Gursten

HB 4032’s required coverage appears to overcome exclusion problems when drivers are transporting passengers, but not when drivers are in-between passengers

Yesterday, I wrote about House Bill 4032 (the new “Uber bill” that was introduced on January 15, 2015), and its proposed auto insurance requirements for app-based ride-sharing services (notably Uber). I covered how those No Fault and liability insurance requirements would apply both when a driver is – and is not – transporting riders. I also raised a few loopholes that have not been squarely addressed by the bill in its present form.

Today, I will discuss my single biggest concern as an auto accident attorney about Uber in Michigan. This is a concern I’ve written about previously, and it’s how the auto insurance coverages required by HB 4032 would be affected by the “commercial use” exclusions that I see in so many personal auto insurance policies. That presumably would apply to drivers for companies like Uber.

First let me explain a “commercial use” exclusion: It’s a clause in the vast majority of auto insurance policies that says that if the driver uses her personal vehicle for “commercial use” (i.e., transporting passengers and/or goods or freight in return for monetary compensation) and if the driver is involved in a motor vehicle accident during her “commercial use” of the vehicle, then that crash will be excluded from coverage. That’s the exclusion under the policy.

“Commercial use” exclusions have caused hundreds of people who have been seriously injured in this state to suddenly find themselves deemed “uninsured.” But with the advent of app-based ride-sharing companies like Uber, this exclusion could take on increased significance.

Michigan’s Insurance Commissioner, the Director of the Michigan Department of Insurance and Financial Services (DIFS) offered the same concern, stating in a press release:

“Most individual insurance policies purchased for personal vehicles have exceptions that exclude coverage for commercial-type activities such as transporting passengers for hire. Drivers should contact their insurance agent to determine if their policy provides sufficient coverage before driving for a TNC. It may be necessary to purchase a commercial policy to cover TNC activities.”

As an attorney, I read contracts and insurance policies – lots of them. And having analyzed HB 4032’s auto insurance requirements in light of the possible “commercial use” exclusion, here’s my best guesses on how this would all play out (if the bill passes) when car accidents involving Uber drivers and passengers inevitably occur:

  • When an Uber driver is transporting passengers or riders, HB 4032’s proposals would protect Uber drivers, passengers/riders, other drivers, passengers of other vehicles, pedestrians and others – even if the Uber driver’s personal auto insurance policy contains a “commercial use” exclusion.
  • When an Uber driver is on duty, but is not transporting passengers or riders, it appears that if there’s a “commercial use” exclusion in an Uber driver’s personal auto insurance policy, then despite HB 4032’s requirement, this could jeopardize No Fault insurance coverage for the Uber driver, Uber passengers or riders and others.

I will discuss both of my conclusions in greater detail tomorrow.

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