On New Year's Eve, 2013, a cab driver named Syed Muzzafar struck a mother and her two children in the crosswalk of San Francisco's Tenderloin district, killing the six-year-old Sofia Liu. The tragic event immediately took on controversial overtones when Muzzafar told police at the scene he was working for Uber, the transportation startup.

Uber initially released a statement saying the crash "did not involve a vehicle or provider doing a trip on the Uber system." Later it updated that statement to clarify that "the driver in question was a partner of Uber ... the driver was not providing services on the Uber system during the time of the accident."

It’s fuzzy language, but it boils down to this: Uber wants to operate in the real world with the relative freedom and impunity most online startups enjoy — but without the regulations placed on most taxi services. Uber has said on many occasions that it's a technology company, not a transportation provider. It wants to be neutral, much as YouTube doesn’t bear responsibility for its users' videos and Craigslist doesn’t verify items for sale. Uber’s position is that it’s not responsible for anything a driver does before a ride is booked and after a fare is paid. "We're in the middle, we are the marketplace," says Uber founder and CEO Travis Kalanick.

"The driver was not providing services on the Uber system during the time of the accident."

Chris Dolan, a San Francisco lawyer, is challenging that approach. Yesterday, he filed a wrongful-death lawsuit against Uber seeking damages on the behalf of the Liu family. Dolan argues that because Muzafar was logged in to the Uber app — meaning he appeared as a driver to anyone looking for a ride and could see customers requesting pickups — that he was indeed actively working for Uber and that the company should be liable for damages caused by the accident. "Uber is hanging these drivers out to dry," says Dolan. "And in doing so, they are endangering the public."

"Uber is hanging these drivers out to dry."

Uber declined to comment for this story, but the letter of the law might be on the startup's side for now. In September of 2013 California became the first state to issue regulations on ride-sharing services like Lyft, Sidecar, and UberX. The California Public Utility Commission (CPUC) created the category of Transportation Network Company (TNC) to "apply to companies that provide prearranged transportation services for compensation using an online-enabled application (app) or platform to connect passengers with drivers using their personal vehicles."

Muzzafar was an UberX driver and not part of the Uber Black program. The difference is that UberX drivers are contractors rather than employees of Uber. And while Uber has commercial insurance that covers black car drivers the entire time they are on the road, it only covers UberX drivers actively working a fare. That squares with the California Public Utility Commission regulations, which state that ride-sharing companies must have commercial insurance to cover "vehicles and drivers in transit to or during a TNC trip."

In a testy exchange with The New York Times, Uber's CEO said, "We work our butts off to go above and beyond what is expected even by the regulators, including insurance, background checks. And so it always comes back to, did Uber do something wrong?"

A lawyer who makes a living suing over injuries

Dolan argues in his lawsuit that whether or not the UberX driver has a fare, if they are logged into the app they are creating an economic benefit for Uber and so should be covered by the company. "When a customer opens up the app, Uber wants them to see lots of available rides. Those are drivers logged in to the app who aren’t actively working a fare." As a lawyer who makes his living off personal injury claims, of course, Dolan has a self-interested position in arguing that companies like Uber, which has raised hundreds of millions in funding, a liable for all accidents on its network.

The lawsuit also contends that UberX drivers logged in but not actively working a fare are likely to be far more impaired drivers than those with passengers. "These guys are checking their phones to see where the customers are," says Dolan. "If the symphony lets out and requests start coming in, they need to check their GPS and be quick to accept a fare." According to Muzzafar and his lawyer, on the night of the accident he was actively working for UberX and had already serviced one fare prior to the crash. "He was working for Uber," his lawyer, Graham Archer, told the Boston Globe. "He was waiting for a fare." He was simply between customers when the tragedy occurred.

The CPUC wouldn’t comment specifically on this case, pointing instead to its language on insurance requirements. Spokesman Andrew Koch did note that the new rules are not set in stone. "Our proceeding has a phase two. Going forward we will ensure that the overarching goals of public safety, equity, and innovation are being achieved. We will have a public process in the next year to consider the performance of this new mode of transportation and accompanying regulations."

Who's responsible for the gray area in between fares?

Dolan believes that the laws will have to change in order to close the loophole of UberX drivers who are on the road looking for business but don’t have a fare. "There is a wide gulf between the $15,000 in personal liability insurance a driver must carry and the million dollar commercial policy required for ride-sharing vehicles," he points out. If this case proceeds, it will likely play a role in shaping what are still new and relatively untested laws, and whether or not Uber can maintain the same kind of limited liability that tech startups enjoy online.

"Transportation has evolved from horse and buggy to cable cars to personal autos to ride-sharing services," says Dolan. "The law has to evolve alongside it to maintain the same level of accountability."