BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 1871| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 1871 Author: Jones (D) Amended: 8/20/10 in Senate Vote: 21 SENATE BANKING, FINANCE, AND INS. COMMITTEE : 10-0, 6/30/10 AYES: Calderon, Cogdill, Correa, Florez, Kehoe, Liu, Lowenthal, Padilla, Price, Runner NO VOTE RECORDED: Cox ASSEMBLY FLOOR : 75-0, 6/3/10 - See last page for vote SUBJECT : Motor vehicle insurance coverage: personal vehicle sharing SOURCE : Author DIGEST : This bill facilitates the ability of car-sharing companies to expand their pool of vehicles by taking advantage of privately owned vehicles while they are not in use with no adverse consequences for the owners of those vehicles or the owners' insurer. Senate Floor Amendments of 8/20/10 establish a private passenger vehicle sharing program and further refine how its rules will dovetail with current insurance practice affecting individuals. ANALYSIS : CONTINUED AB 1871 Page 2 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 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. This bill: 1. Provides that no private passenger motor vehicle insured by its owner by a policy of insurance subject to specified Insurance Code provisions applicable to private passenger automobile insurance and uninsured and underinsured coverage, shall be classified as a commercial vehicle, for-hire vehicle, permissive use vehicle, or livery solely because its owner allows it to be used for personal vehicle sharing as long as all of the following circumstances apply: A. The personal vehicle sharing is conducted pursuant to a personal vehicle sharing program. B. Any annual revenue received by the vehicle's owner and generated by personal vehicle sharing of that vehicle does not exceed the annual expenses of owning and operating the vehicle, including depreciation, interest, lease payments, auto loan AB 1871 Page 3 payments, insurance, maintenance, parking, fuel, cleaning, automobile repair, and costs associated with personal vehicle sharing, including, but not limited to, the installation, operation, and maintenance of computer hardware and software, signage identifying the vehicle as a personal sharing vehicle, and any fees charged by a personal vehicle sharing program. C. The owner of the private passenger motor vehicle does not knowingly place the vehicle into commercial use by a personal vehicle sharing user while engaged in personal vehicle sharing. 2. Define various terms, including: A. "Personal vehicle sharing", which is define to mean the use of private passenger motor vehicles by persons other than the vehicle's owner, in connection with a personal vehicle sharing program. B. "Personal vehicle sharing program", which is defined to mean a legal entity qualified to do business in the State of California engaged in the business of facilitating the sharing of private passenger vehicles for noncommercial use by individuals within the state. C. "Private passenger motor vehicle" means a vehicle that is insured, or is subject to being insured, under a personal automobile liability insurance policy insuring a single individual or individuals residing in the same household, as the named insured, but does not include a vehicle with fewer than four wheels. 3. Provides that a personal vehicle sharing program shall, for each private passenger vehicle that it facilitates coverage for the vehicle and operator of vehicle that are the use of, do all of the following: A. During all times when the vehicle is engaged in personal vehicle sharing, provide insurance equal to or greater than the insurance coverage maintained by AB 1871 Page 4 the vehicle owner and reported to the personal vehicle sharing program, however, the personal vehicle sharing program shall not provide liability coverage less than three times the minimum insurance requirements for private passenger vehicles. Compliance with the terms and conditions of this bill shall be deemed to avoid the application of the limitation on damage recoveries set forth in Section 3333.4 of the Civil Code. B. Provide the registered owner of the vehicle with a specified DMV form or other suitable proof of compliance with the insurance requirements of this Act and the California Financial Responsibility Law. C. Collect, maintain, and make available to the vehicle owner, the vehicle owner's primary automobile liability insurer on file with the DMV, and to any other government agency as required by law, at the cost of the personal vehicle sharing program, verifiable electronic records that identify the date, time, initial and final locations of the vehicle, and miles driven when the vehicle is under the control of a person other than the vehicle's owner pursuant to a personal vehicle sharing program. D. Provide the vehicle's owner and any person that operates the vehicle pursuant to a personal vehicle sharing program with a disclosure that contains information explaining the terms and conditions contained in this section. E. Not knowingly permit the vehicle to be operated for commercial use by a personal vehicle sharing user while engaged in personal vehicle sharing. F. Use only private passenger vehicles. G. Facilitate the installation, operation, and maintenance of computer hardware and software and signage, necessary for a vehicle to be used in a personal vehicle sharing program, including payment AB 1871 Page 5 of the cost of damage or theft of that equipment and any damage caused to the vehicle by the installation, operation, and maintenance of that equipment. 4. Provides in the event of a loss or injury that occurs during any time period when the vehicle is under the operation and control of a person, other than the vehicle owner, pursuant to a personal vehicle sharing program, or otherwise under the control of a personal vehicle sharing program, the personal vehicle sharing program shall assume all liability of the owner and shall be considered the owner of the vehicle for all purposes. 5. Specifies nothing in the bill limits the liability of the personal vehicle sharing program for its acts or omissions that result in injury to any persons as a result of the use or operation of a personal vehicle sharing program. 6. Requires a personal vehicle sharing program be liable until both of the following occur: A. The private passenger motor vehicle is returned to a location designated by the personal vehicle sharing program. B. The earliest of one of the following occurs: (1) The expiration of the time period established for the particular use of the vehicle. (2) The intent to terminate the personal vehicle sharing use is verifiably communicated to the personal vehicle sharing program. (3) The vehicle's owner takes possession and control of the vehicle. 7. Requires the personal vehicle sharing program assume liability for a claim in which a dispute exists as to AB 1871 Page 6 who was in control of the vehicle when the loss occurred giving rise to the claim. 8. Requires the vehicle's private passenger motor vehicle insurer indemnify the personal vehicle sharing program to the extent of its obligation under the applicable insurance policy, if it is determined that the vehicle's owner was in control of the vehicle at the time of the loss. 9. Requires, in the event that the owner of the vehicle is named as a defendant in a civil action, for a loss or injury that occurs during any time period when the vehicle is under the operation and control of a person, other than the vehicle's owner, pursuant to a personal vehicle sharing program, or otherwise under the control of a personal vehicle sharing program, the personal vehicle sharing program shall have the duty to defend and indemnify the vehicle's owner. 10.Provides, while a private passenger motor vehicle is used by a person other than its owner pursuant to personal vehicle sharing facilitated through a personal vehicle sharing program, all of the following shall apply: A. The insurer of that vehicle on file with the Department of Motor Vehicles may exclude any and all coverage afforded pursuant to its policy. B. The primary and excess insurer or insurers of the owners, operators, and maintainers of the private passenger motor vehicle used in a personal vehicle sharing program shall have the right to notify an insured that it has no duty to defend or indemnify any person or organization for liability for any loss that occurs during use of the vehicle in a personal vehicle sharing program. 11.Provides that no policy of insurance subject to Section 11580.1 or 11580.2 shall be canceled, voided, terminated, rescinded, or nonrenewed solely on the basis that the private passenger motor vehicle has been made available for personal vehicle sharing pursuant to a AB 1871 Page 7 personal vehicle sharing program. Background 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. However, under current law, if the owner accepts 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 without adverse consequences for the owner. The bill is also intended 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. FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 7/29/10) American Planning Association, California Chapter City Carshare City of sacramento CommonSource Community Action to Fight Asthma Consumer Attorneys of California Divvy.com Environmental Defense Fund Gettaround, Inc. Go-Op, Inc. National Resources Defense Council Relay Rides Sierra Club Spride, Inc. ASSEMBLY FLOOR : AB 1871 Page 8 AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall, Bill Berryhill, Blakeslee, Block, Blumenfield, Bradford, Brownley, Buchanan, Caballero, Charles Calderon, Carter, Chesbro, Conway, Cook, Coto, Davis, De Leon, DeVore, Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill, Huber, Huffman, Jeffries, Jones, Knight, Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande, Niello, Nielsen, Norby, V. Manuel Perez, Portantino, Ruskin, Saldana, Silva, Skinner, Smyth, Solorio, Swanson, Torlakson, Torres, Torrico, Tran, Villines, Yamada, John A. Perez NO VOTE RECORDED: Tom Berryhill, De La Torre, Salas, Audra Strickland, Vacancy JJA:do 8/23/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****