BILL ANALYSIS AB 1871 Page 1 ASSEMBLY THIRD READING AB 1871 (Jones) As Amended May 11, 2010 Majority vote INSURANCE 7-2 ----------------------------------------------------------------- |Ayes:|Solorio, Blakeslee, | | | | |Caballero, Carter, Feuer, | | | | |Hayashi, Niello | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Anderson, Hagman | | | | | | | | ----------------------------------------------------------------- SUMMARY : Authorizes private passenger automobile owners to make their vehicle available for use by a vehicle sharing program without impacting the owners' private passenger automobile insurance policy. Specifically, this bill : 1)Contains declarations of legislative intent that the purpose of the bill is to hold a vehicle owner, and the vehicle owner's insurer, harmless for losses that occur while the vehicle is being used in a carsharing program. 2)Provides that no vehicle insured as a private passenger motor vehicle in compliance with the Financial Responsibility Law shall be classified as a commercial or for-hire vehicle solely on the basis of the vehicle being used in a personal vehicle sharing program, provided that the revenue generated for the owner does not exceed the expenses of operating the vehicle. These expenses include lease or loan payments, insurance, parking, depreciation, fuel and maintenance. 3)Requires that the personal vehicle sharing organization maintain appropriate insurance for the periods that the vehicle is being used by any driver other than the owner. 4)Defines "personal vehicle sharing" as privately owned vehicles that are allowed to be used by drivers other than the owner as part of a communal pool of vehicles. 5)Specifies that a personal vehicle sharing program is an entity AB 1871 Page 2 that facilitates personal vehicle sharing, and that: a) Provides liability insurance for private vehicles when used by drivers other than the owner in amounts equal to or greater than what the owner maintains, but in no event less than three times the amount required by the Financial Responsibility Law; b) Provides the vehicle owner with appropriate proof of financial responsibility to satisfy Vehicle Code requirements; and, c) Collects and maintains verifiable electronic records that identify the date, time and location when a vehicle is being used by a driver who is not the owner. 6)Specifies that, notwithstanding any other provision of law or provision of the owner's insurance policy, the owner's automobile insurer is not liable under any circumstances for any loss or event that occurs during a time when the vehicle is under the control of a driver who is not the owner pursuant to a personal vehicle sharing program. 7)Prohibits an insurer from canceling, rescinding, terminating, voiding, or nonrenewing an owner's automobile insurance policy due to the owner making the vehicle available for a personal vehicle sharing program. EXISTING LAW : 1)Requires owners and operators of private passenger automobiles to maintain "financial responsibility," which usually takes the form of privately purchased insurance in at least the amounts per accident of $15,000 per person for bodily injuries, $30,000 for all bodily injuries, and $5,000 for property damages. 2)Provides that an insurance policy covering an automobile is primary in the event the vehicle is involved in an accident that causes a loss to a third party. For example, if a vehicle owner allows a friend or relative who is not listed in the owner's policy to drive the vehicle, and the friend or relative causes a loss in an accident, the policy covering the vehicle, and not the friend or relative's policy, is the AB 1871 Page 3 primary source for payment of damages. 3)Contains very limited prohibitions on an automobile insurer from classifying a private passenger vehicle as a commercial or for-hire vehicle, including use as a volunteer for a nonprofit organization. FISCAL EFFECT : Undetermined COMMENTS : 1)According to the author, carsharing companies would like to expand their pool of vehicles by taking advantage of privately owned vehicles while they are not in use. However, under current law, if the owner accepted compensation for allowing the vehicle to be used in a vehicle sharing program, an insurer could reclassify the vehicle as a commercial vehicle, and increase the premiums charged to the owner. The bill is designed to enable the carsharing company to enter into agreements with vehicle owners, and ensure that the owner is not disadvantaged. Further, the bill is designed to ensure that the owner's private passenger automobile insurer is also not disadvantaged when the vehicle is in use by the vehicle sharing program. 2)Carsharing companies have been growing in urban areas across the country, as well as in California. These companies provide short-term rental use of vehicles by drivers who have only minimal need to a personal vehicle, and do not want to incur the expenses associated with owning and maintaining a vehicle in an urban area. 3)According to the Environmental Defense Fund and the Sierra Club, vehicle sharing programs are one mechanism that can reduce the number of miles that are driven in urban areas, thereby reducing emissions and congestion. By making more options available, more people will be able to meet their urban transportation needs without having to own a car. The American Planning Association, California Chapter, and the Community Action to Prevent Asthma make similar points concerning reducing emissions and encouraging carsharing. 4)Companies such as Gettaround, Inc., and City CarShare support the bill, which would enable them to supplement or replace AB 1871 Page 4 company owned fleets with temporary use private vehicles owned by others during periods when the owner does not need the vehicle. They point to research that shows carsharing programs can reduce participants' miles driven, thereby reducing greenhouse gases. Creating this additional model for organizing a program will encourage an expansion of these efforts. 5)The insurers, who have "oppose unless amended" positions, recognize that the bill contains provisions that attempt to provide them protection against inappropriate liability. However, they point to additional issues, such as how the mandatory rating factor of "miles driven" enacted by Proposition 103 is impacted by a proposal that has as its purpose additional miles driven on their insureds' cars. They also note that the bill's protections address liability, but not theft or vandalism to the vehicle, or property damage to the vehicle itself. However, both the Association of California Insurance Companies and the Pacific Association of Domestic Insurance Companies have expressed the desire to work with the author on this "innovative idea." Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086 FN: 0004279