Rideshare services' place in Ann Arbor still under scrutiny

By Jack Turman, Daily Staff Reporter
Published September 10, 2014

Following the Ann Arbor City Council’s resolution to further regulate ridesharing companies in the city, traditional taxi companies are frustrated with the exceptions granted to companies such as Uber and Lyft.

Last week, councilmembers voted to request that City Administrator Steve Powers negotiate operating agreements, which included liability insurance, passenger safety and vehicle inspection, with ridesharing companies. Contrary to traditional taxi or limousine services, ridesharing companies employ non-professional drivers who use their own vehicles.

Uber, which uses a smartphone app to connect drivers and riders, has multiple transportation services. However, the service that has faced the most scrutiny is UberX, Uber’s driving service with less-stringent driver requirements. Michigan residents have questioned this service because some believe that it violates the 1990 Michigan Limousine Transportation Act.

Under the Act, limousine drivers are required to obtain commercial insurance, have their vehicle inspected, register their limousine for $50 and have a Certificate of Authority, which is a one-time fee of $300 with a renewal fee of $50.

Uber Michigan Manager Michael White said UberX drivers are usually part-time drivers who are students over 21 and retirees trying to make money to pay off student loans or pay bills. White added that UberX drivers have to pass federal, state and county background checks, a driving record review, a mechanical vehicle inspection and online safety training.

However, UberX drivers use their own vehicles and are required to have their own Michigan insurance policy rather than commercial insurance, which is the center of the argument.

White said whenever an UberX driver is transporting someone, he or she is covered by Uber’s primary commercial insurance policy, which includes $1 million of liability insurance.

“Any time that that person is actually providing transportation to somebody, they are covered by a commercial insurance policy that meets or exceeds the state requirements for a limousine and is more than double the requirements for an Ann Arbor taxi,” White said.

Michael Frezell, communications manager for the Michigan Department of Transportation, and John Heed, former chief operating officer of Select Ride — the parent company of Arbor Limousine and Yellow Car — argue that UberX violates the Limousine Transportation Act because it does not require drivers to have a chauffeur’s license, a commercial vehicle plate or full-time commercial insurance.

According to MDOT, UberX drivers can be pulled over by police officers, pay a maximum $500 fine and face imprisonment.

Frezell also said UberX drivers selectively using the commercial insurance from Uber and their personal insurance while transporting individuals is putting the driver at risk.

“Your own personal insurance for your vehicle will state that if you operate a vehicle in a for-hire commercial basis, your policy is not valid if you get into an accident,” Frezell said.

Heed said by not having to pay for a chauffeur’s license, ridesharing companies are at an economic advantage compared to companies with commercially insured vehicles.

“They can be cheaper because they get a huge price advantage of not obeying laws that are on the books,” Heed said.

When Uber came to the Detroit area last year, MDOT notified the company about the Limousine Transportation Act by sending them a letter in December. Frezell said they have not received a response from Uber.

“It’s not like the company isn’t aware of the law,” Frezell said.

White believes that Uber is not breaking the law because the idea of connecting riders and drivers through technology was not considered.

“The whole idea of what we’re doing was not even conceptualized yet,” White said. “That was not written to address the type of service we’re providing as a technology company.”

Councilmember Sally Petersen (D–Ward 2), a sponsor of the resolution passed last week, said the first step in addressing these companies is the operating agreement. From the operating agreement, she said she hopes state lawmakers can recognize the significance of this issue and draft legislation.

White said Uber is happy to work with Michigan and its cities to draft legislation that would emphasize the transparency of its pricing and its quality of service.

“We’re open to working with both the state and the cities in Michigan in order to put in place regulations that would apply to our service as long as they provide for economic development, provide for competition and provide for consumer safety,” White said.

However, Heed said UberX needs to obey law as it has been written — not as it suits them.

“Until the laws change, they should comply with the law,” Heed said. “If they are complying with the law, there is no reason for an operating agreement. If they aren’t complying with the law, the operating agreement is not legal.”