Are you sitting down? Really? Are you sitting down? I am about to blow your mind. The world has gone topsy-turvy. I am agreeing with Councilmember Kunselman on an issue. I know, I know, who would have thunk it. Well here it is.
I don’t think Uber and Lyft should be allowed to skirt our limousine laws and regulations. I think they should abide by our local taxi cab ordinance and the State of Michigan Limousine regulations.
Uber and Lyft are new “transportation network companies” (TNC) (also known as ride share servies) that uses a smartphone app to call for drivers. These companies provide dispatch services for drivers who are independent contractors who use their own personal vehicles to perform the transportation service. The customer signs up on their smartphone and orders a ride. The driver picks up the customer and drives them to their requested destination. No money changes hands; all payments are handled through the app using a credit card.
The issue is that these drivers are not regulated the same as taxi or limousine drivers, they do not carry the proper insurance and are not held to the same liability as regular metered taxi/limousine companies. CM Kunselman wants to amend our city ordinance to require the TNCs to abide by our local Taxi laws as well as the state Limousine laws.
First, lets start with the background information. I warn you that this is a very long post with lots of information.
Resolution to amend Chapter 85 (Taxicabs) of Title VII of the Code of The City of Ann Arbor
At the Ann Arbor council meeting on August 18, 2014, CM Kunselman presented a resolution to amend out taxi cab ordinance to include non-metered taxis. Here are the changes he proposed:
CM Kunselman who sits on the Taxi cab board described what he feels is truly at issue here, which is public safety. Some of his comments are paraphrased here:
We want to know who the drivers are who are picking up residents within our community. We want to identify who these drivers are and do they have the proper insurance. This ordinance identifies that the rules exist and that the rules are clear in city ordinance. This is a first draft and can be modified. This does not eliminate the ride share services it just sets the bar equally for all drivers. The companies want to continue to self regulate public safety, and he wants his colleagues to identify a business that self regulates public safety. It doesn’t happen
See the video below for his actual words and more details (3:37):
Later in the meeting Cm Kunselman made some more comments. His paraphrased comments are:
The reason these companies are making a profit is that they are cheating the law of requirements for the insurance and for the chauffeurs license. What about the companies that are complying with the law. The companies that are complying with the law and are using the associated cost of business as part of the rates that they charge. That is why Uber and Lyft are charging less; they are not paying for the true cost of business.
See the video below for his actual words and more details (1:21):
In an opposing viewpoint, Councilmember Taylor commented (paraphrased):
These proposed changes are a solution to a problem that is not actually a problem. Uber and Lyft…they provide safe services. They enable Ann Arborites to support a car-less lifestyle. The businesses provide full insurance paid for by the company while the driver is on company time.
Really? While I agree that these services give a cheap alternative to regular limousines and taxis, CM Taylor has not done his homework completely on this.
Lets first start with the insurance question, which I feel is the most important.
Uber offers different services. They have the Uber Black service that uses licensed chauffeurs that typically carry commercial insurance on their vehicles. They also have Uberx service that does not have chauffeured licensed drivers and does not require them to carry commercial insurance.
This insurance discussion pertains to Uberx vehicles and Lyft services.
Here is a link to Uber’s actual insurance policy for the Uberx drivers . This is the original policy before Uber added some contingent coverages in March 2014.
Personal Auto Insurance
So you ask what’s the big deal, Uber and Lyft have insurance? Everyone is covered, right? Wrong. The Uber/Lyft policies explicitly state that a driver must have personal auto insurance. The fact is this. Typically, your personal auto insurance policy does not cover the driver or the vehicle when they are carrying passengers in exchange for compensation. It only covers personal use, not commercial/business use in any way.
I called my AAA insurance rep and asked him to verify this. He pointed me to an exclusions clause in my contract which is the standard personal auto policy that they have. This is a standard clause throughout the insurance industry, so most likely your auto insurance policy includes this exclusion. Here it is:
(sidenote: Who knew that pizza delivery drivers are not covered by their auto insurance? I didn’t.)
What this means is that once you are on duty as an Uber/Lyft driver, your personal auto insurance is not valid. You have no coverage. The driver, the passenger, and the car itself is not covered while carrying passengers for compensation.
Uber/Lyft argue back that they have full commercial liability insurance to cover the drivers during a trip and that they now have, as of March 2014, contingent collision/comprehensive insurance to cover the vehicles during a trip and a contingent liability insurance to cover the driver when they are logged in to the app. but between trips.
They never used to have this contingent liability coverage until March 2104 and here’s why.
Last New Year’s Eve in n San Francisco, an Uber driver hit and killed a 6 year girl who was in a crosswalk.1
In fact, he hit three people in the crosswalk, her mother and brother also. Uber denied responsibility because the driver was between trips. They are getting sued by the family…no surprise. One result is that Uber/Lyft now added this contingent liability insurance 4 months after the incident.
(There is much info on the internet about this…take a look. I am just referencing one article here.)
So while denying responsibility in court, they added liability coverage for between trips, albeit at a much lower level. This may have helped the driver in this incident, but nonetheless has come too late for him. Hard to believe that the Uber/Lyft never envisioned this scenario happening to begin with.
So one question to ask is “Why have a lower level of liability coverage when there are no passengers in the vehicle?
Yes, there are no passengers, but it is in a sense just as risky (if not more), to drive around checking the app on your cell phone than driving with no distraction. Uber requires drivers to interact with their app. There are no taxi stands for the drivers to wait in. It is a risky situation. But, hey, at least they have some coverage, right? I would prefer that they have the same insurance levels while driving with passengers as when signed on to the app and waiting for passengers.
Accident coverage-Liabilty and medical
So then what happens in an accident when there are liability/medical claims by passengers?
Read this NBC news article2 that talks about a real situation
Back on September 25th, 2013, co-worker Nikolas Kolintzas thought Herrera was dead. He was unconscious. Blood was coming from his mouth and head.
The pair were in San Francisco for a tech conference. Both had used “Uber Black” in the past, which sells rides from licensed chauffeurs of black sedans and SUVs. “UberX” was the hot startup’s latest, cheaper offering.
When they filed a claim with the driver’s insurance company, as instructed by Uber, the driver’s insurance company refused to pay their medical bills, asserting that the driver was “driving for profit,” according to the lawsuit they filed against Uber.
The suit claims unspecified compensatory damages for medical expenses, wage loss, breach of duty, and general negligence….
Kolintzas and Herrera are still waiting for someone to take responsibility for their medical bills.
Uber declined to comment on the case, citing the pending litigation.
What this says loud and clear to me is that Uber did not pay up…at least not right away….and maybe not ever. They want the driver to go through their personal insurance first, even though we all know that the passenger will not be covered unless the driver has commercial insurance…which they most likely don’t. If the passenger has mounting medical bills or the accident was the driver’s fault, the driver faces financial ruin due to a potential lawsuit from the passenger liability claims.
Do the Uberx/Lyft drivers understand this? There are consequences to this. Their entire insurance policy can be canceled because of this claim. Do the drivers understand that the user agreement that they signed when signing up to be a driver releases the companies from all liability? They can be personally sued by the passengers for liability if Uber/Lyft does not pay and actually even if they do pay. They can be sued and will have to pay out of their own pocket which could lead to financial ruin for their family.
Do the Uberx/Lyft passengers understand this? Do the users/passengers understand that the user agreement that they signed when signing up to use the service puts all the liability on the drivers, who personal insurance does not cover liability due to the exclusion clause prohibiting carrying passengers for compensation?
In another example, a pedestrian was hit by a fire hydrant that was thrown in the air when an Uber driver crashed into another car.4 Uber still refuses to pay anything on the claim. Her’s an excerpt from the article:
The plaintiff in the suit, Claire Farhbach, was a bystander, not a customer, and that unique twist in the injury suit has experts from the taxi industry waiting to see if Uber will step up to the plate to pay for Farhbach’s injuries, or if Uber will leave driver Djamol Gafurov on the hook for the bill.
Fahrbach was walking up Divisadero street near Hayes at quarter of midnight March 12 when Gafurov’s black town car, operating as a private taxi, collided with another car on Divisadero while turning left. One of the cars then collided with a fire hydrant, and in the words of the civil suit, “this impact caused the fire hydrant to be violently sheared from its base and propelled through the air a number of feet northbound…when the fire hydrant struck (Farhbach) with a tremendous amount of force.”
The hydrant flew 81 feet from its original position, according to the police report.
The suit notes that Fahrbach sustained lacerations to her body, a fracture in her lower leg, and multiple herniated discs that “more likely than not will require surgical intervention in her future.”
Gafurov’s private taxi was operating as a “partner” of Uber, which is how the company defines its relationship to the network of drivers on its website. No private taxis or drivers are considered to be employees of Uber, as the company has repeatedly maintained. Uber provides software that lets passengers connect with drivers, like a digital dispatch, and the ridesharing service then takes a cut of the fare.
Have you ever been in an auto accident and have to deal with medical bills? I have and it was not fun, but I learned a lot. First I have to give a shout out to my AAA rep who was wonderful! AAA actually paid out enough to pay off my entire car loan even though I did not put down a down payment 10 months earlier. No medical bills for me.
In my car accident last year, it was not minor, not major…I actually don’t know how to classify it. I had a flashing yellow light, a teenager ran the flashing red light. I hit her (I had the right away) and totaled my 10 month old car. It was very surreal. I still remember the airbag wrapping around my face. I had a passenger in the car with me and we both had injuries.
After one ambulance ride later, an entire night in the ER, and weeks of occupational therapy for my broken finger, I had multiple medical bills. AAA paid them all without problem. It is all coordinated with the hospital. My only problem was getting UMICH hospital to classify the doctor’s appointments as an auto accident. That wasn’t an insurance issue, but a UMICH issue.
(sidenote: If UMICH would like to save some money and headaches for their patients they could fix their billing department. My oh my it is screwed up.)
(sidenote2: Another interesting thing I learned is that my health insurance does not cover occupational therapy (OT), but my auto insurance does. If I would have broken my finger at home in a household accident, I would either have to pay $300 an hour out of pocket for the OT or be stuck with a finger that would not bend all the way into my fist.)
An Uberx/Lyft liability claim won’t be simple, mostly because they don’t want it to be. A very disconcerting article written by Jim Holm3 who is an insurance agent speaks to the quality of the insurance coverage offered by Uber/lyft. They both use the James River Insurance Company. If you only read one reference link in my blog post this is the one you should read. Excerpts for his article:
Perhaps the most appalling of their actions was to include what I would term a Draconian hold harmless clauses in the user and driver agreements that placed the ultimate responsibility for loss on the users and drivers, including covering the TNC’s legal expense if it came to that. My guess is that very few people actually read the Terms of Service they agree to when taking on the TNC’s app. After all, wouldn’t most people make the “reasonable expectation” that the TOS would be fair to all parties and NOT Draconian?
The first time I reviewed Lyft’s insurance policy I was similarly surprised to note that the carrier was James River Insurance Company. My astonishment was due to two reasons.
1. James River Insurance Company’s website has a long list of products. Not included are any transportation-related risks. It appeared to me that an inexperienced insurance buyer was being insured by a similarly inexperienced insurance purveyor, and,
2. James River Insurance Company’s website states it operates on a non-admitted basis in all fifty states. There are many states that will not allow a non-admitted company to provide primary auto liability coverage. Specifically in my own state of Minnesota, not too many years ago, our regulators prevented a non-admitted company from providing primary auto liability for taxis.
There is a simple solution for the non-admitted problem. James River Insurance Company could have found an admitted insurance company to “front” for them. They would pay a nominal amount for that company to issue the policy and then reinsure that company 100% for losses and loss expense that occurs.
Of course that solution would have demanded some sophistication on the part of the TNC, their broker, or the insurance company.
Insurance is complicated. There are primary payers and secondary payers. The whole process takes time. Although my coverage was coordinated and my hospital bills were paid directly, this won’t happen if you are injured in or from an UBerX/Lyft vehicle. It appears that even if Uber/Lyft pay, it will most likely be after the fact. What that means for you and me is that we are responsible for all the bills until we get reimbursed. Think about that? Really think about that. All the medical bills will come from the passengers pockets while everyone is arguing…in court…. about who is responsible for paying the bills…Uber or Lyft , the driver’s insurance, the passenger’s personal auto insurance or the passenger’s medical insurance.
The contingent collision/comprehensive coverage only covers the vehicle during a trip, not between trips. Between trips Uber/Lyft expect your personal auto policy to cover the vehicle. But as we see above, it won’t.
Now I know some of you are going to counter that the AAA language says while carrying passengers….when you are between trips that should qualify for use on your personal insurance policy. That is a big assumption. While logged into the app you are driving around basically as a taxi waiting for fares. Most would consider that acting as a taxi driver.
If Uber/Lyft drivers want to be the test case in court, be my guest, but you better have some good lawyers. Overturning this clause will not be easy. And the driver will be out the insurance money until it is settled. Another issue is how you vehicle is financed. If you have a loan on your car or even a lease, you are required to carry auto insurance until the vehicle is paid off. If you don’t technically have insurance, can the banks call back your loan? Something to think about. I actually don’t know the answer to that.
Not much to discuss here. Anyone who drives the public in exchange for money should get a chauffeurs license. It cost something like $50. It is something easy to do with a simple test to take. Don’t think it is necessary, then why do school bus drivers, cabs and limo drivers all have to have them?
Background checks and driver screening
Now we come to the issue of safety Uberx/Lyft claim that they do background checks and pre-screen the drivers. But do they?
NBC5 in Chicago decided to test Uber’s background checks and found drivers with multiple moving violations, DUIs and felonies were all approved to drive for Uber. They even had a known felon apply to be a driver and got accepted. Read more about it here. It makes you question whether the screen all the drivers, some of the drivers or none of the drivers. Also note at the end of the article there is another incident where Uber is refusing to pay a liability claim for a passenger after the driver’s insurance company refused to pay.
An application filled out on-line along with a background check through the computer does not necessarily prove that the drivers is safe. This sort of process actually encourages the anti-social type of weird individual to sign up. There is something to be said for a taxi/limossine driver who has to show up for work, to check in with a manager and check out a taxicab before picking up passengers. It instills an accountability in the driver. They are working a shift for an employer.
Olivia Nuzzi wrote an informative article on the Daily Beast about sexual harassment5 that describes her experience with an Uber driver. She has discovered that all drivers have the passengers personal information, their full names and their contact info. The can stalk you. If you give them a bad rating , the driver then knows how to contact you and possibly where you live. It is something to think about.
Typically when you hail a cab the driver picks you up and drops you off without knowing personal info about you. Yeah maybe you get dropped off at your home but they don’t have your email and phone number. When you order a limo service, the dispatch might have the info, I am not sure if the driver does.
I have never used Uber or Lyft. I don’t plan on doing it any time soon. If I had to for some reason I would use the Uber Black service because those drivers are know to have commercial insurance and chauffeurs license. Typically, I would just hail a cab if I needed one. In my mind using Uberx or Lyft is akin to hitchhiking. Most of the time you get a ride from a normal everyday person, but sometimes you don’t. There is little screening and no liability. Hitchhiking is the original form of ridesharing and I see these new TNCs as the same thing. That is until Uber/Lyft start to take responsibility. Currently, they are only taking your money in exchange for use of an app.
Although I wouldn’t necessarily call using Uberx/Lyft “dangerous” I would call it less safe than a regular taxi cab or limo service. It is just plain riskier. It is similar to buying something off Craig’s list. Answering an ad on Craig’s list and meeting the seller in a parking lot won’t always get you attacked or robbed, but the probability is higher than if you purchased something from Ebay or from a local store. Just like the probability of buying anything over the internet may result in getting taken versus hand picking the item in a store. Same thing goes if you hire a handyman who leaves a leaflet on your doorstep because he is cheaper versus calling a licensed plumber or electrician. Not all of the handymen will rip you off, but the probability is higher that they might. You get what you pay for. Knowing that fact is key so that your intuition is up when you get in the car.
Denying that fact and stating that Uber/lyft is “safe” is shortsighted, as CM Taylor and others said at the council meeting.
Trade off or a disaster waiting to happen
So what happens if Uber/Lyft are allowed to operate while not following all the laws and regulations that are required of other taxi/limo companies? These companies will profit more due to a lower cost of business that the existing taxi/limo companies. They can charge less and therefore get more of the local pool of customers. The end result may be the demise of the local taxi/limo companies. Now you may say…so what, taxis/limos are too expensive…but it will have a dramatic effect on our local transit abilities.
Taxis/limos are 24hr services. You need a ride, they come. Sometimes you have to wait, but so what. When you are getting off a train at midnight at the Amtrak station, you are always glad to see taxis waiting there. If local taxis go out of business, there will be no guarantee that an Uber/Lyft driver will be available at the time to pick you up necessarily. Remember, these are part time drivers with no obligation to cover the middle of the night trips.
Taxis/Limos are not supposed to be a primary use of transit. I don’t care that it helps some lead a car-less lifestyle, not when the risks to me as a local driver or as a pedestrian is increased because of the insurance issues. I don’t care that drunk college kids want to take a Uber/Lyft home from the bar. They just spent how much money on drinks and now they are going to complain about cab fare? How about you pass on the last drink and them use the cash for the cab fare. That their entitlement to cheap car fare could potentially eliminate my access to 24 hour taxi service due to unfair competition in the car for hire market irks me to no end.
Now some might argue that all this does not matter. That taxis/limos are too expensive and the end justify the means. Really? If regulation is not necessary then why do we have it for the Taxi service in Ann Arbor? Why does the state regulate the limousines? In fact why does government regulate any industry at all? Why can’t they just self regulate just like Uber/Lyft want? Government does it to protect the public. Sometimes to protect the public from themselves. Sometimes to keep the public from judging a situation by the price and then suffering the consequences after the fact.
In this blogpost on the uberdriverdiaries.com, a driver writes about his experience as an Uber driver.7 He is upset that Uber never told him that driving for them is considered illegal in many states and now he faces fines and could potentially lose his license. If you are a driver for Uberx/Lyft make sure to call your insurance provider to check on your insurance. Don’t believe everything that Uber/Lyft tells you, check it out for yourself.
CM Kunselman brings up the self-regulation point at the council meeting. He asks that if it is ok for Uber and Lyft to self regulate then why don’t we get rid of all the laws and regulations for all the Taxi and limo companies. Ann Arbor does not have to have a taxicab ordinance that regulates rates. Listen to him here:
I agree with this. At the very least, locally we should level the playing field for the taxis. They are forced by the City of Ann Arbor to charge a certain rate. They are forced to register their drivers with the City. If Uber and Lyft don’t have to then why should the local companies. It is the only fair thing to do.
My Final thoughts
Another reason this whole situation bugs me so much is that it is another example of the devaluation of the workforce and society. A common trend in today’s conservative world is that everyone is overpaid, everything costs to much, and companies should run as lean as possible no matter the effect on the workforce. You read story after story about teachers with high salaries, tuition being too high, doctors charging too much, businesses decreasing benefits. You read about people who want free water service in Detroit, cheap taxi fare through the new TNC serices, lower property taxes. Everyone justifies in their own way. They want everything to cost them less…unless of course it affects their salary.
What eventually happens is that we devalue services and salaries down to the point where it will be buyer beware for everything. Do Taxis/Limos cost too much because of regulation requirements or because of high salaries? If you eliminate regulation requirements and go to a true Laissez-faire society is that for the better? Will the price charged actually represent the true cost to society? I don’t think so, at least not when it has to do with safety. Instead of the business paying for insurance or liability claims, the driver and the passenger now will. It just shifts the responsibility from business on to the individual which is a conservative/Libertarian/Tea Party mantra. Society is changing, but not in a good way. Everything we have gained in the past 6o years with health laws, safety laws, environmental protection, employee rights, employee benefits, employee salaries are being slowly chipped away. And this is being done in the guise of lowering the cost of business. In actuality it is just shifting the cost or the responsibility on to the individual.
I’ve been told that the times are changing and this is the wave of the future. I even had one friend say that I was on the wrong side of history. I beg to differ. The TNCs (ride sharing) as the exist now are not sustainable. As the lawsuits pile up and the liability claims get denied, these companies will either disappear or will have to re-brand themselves. Once the insurance companies wake up and realized the problem, maybe a hybrid policy can be developed that will cover these part time drivers. But as of now, nothing exist. Drivers are risking everything when they drive for Uberx/Lyft. Many states have issued warning to consumers about the insurance problem, but it has not been loud enough or wide enough. Drivers don’t know about the pitfalls and users don’t know either. With that said the Uber Black model of using existing Limo companies who have commercial insurance and supplying them with the Uber app and customers seems like a good way to go.
My hope is that the Ann Arbor city council rethinks their position on this. I really hope the State of Michigan steps in and also decides to regulate the TNC companies. Many other states have already done so or in the process of doing just that. This is where the City of Ann Arbor and the State of Michigan is not changing with the times.
So when you call for a Uberx/Lyft car ask yourself if you really want to hitchhike to your destination because that is basically what you are doing.
** You may have noticed that all my examples have to do with Uber drivers and not with Lyft. In fact there is not much on the internet in regards to Lyft liabilty claims that I found. I am not sure if this is because Lyft pays their liability claims and they don’t make the press whereas Uber fights them or simply because Uber is so much bigger than Lyft and gets more press accordingly.
1 Kale Williams and Kurtis Alexander, “Uber sued over girl’s death in S.F”. SFgate.com“, January 28, 2014.
2 Ben Popken, “States Warn of Rideshare Risks for Passengers“, NBCnews.com,
3 Joe Fitzgerald Rodriguez, “Lawsuit over injury from airborne fire hydrant tests Uber’s insurance practices”, SFBG.com August 8, 2014.
4 Jim Holm, “Have Uber and Lyft Used Insurance to Their Advantage?” , Enhanced insurance Blog., July 28. 2014.
5 Olivia Nuzzi, “Uber’s Biggest Problem Isn’t Surge Pricing. What If It’s Sexual Harassment by Drivers? , The Daily Beast, March 28. 2014
7 Uberdriverdiaries.com “I Could Lose My License – Thanks to Uber”
Mary Richards and Tracie Snowder, “Ride-sharing accidents could leave you with staggering bills, experts warn”, KSL.com Utah