BILL ANALYSIS Ó 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 612 - Nazarian Hearing Date:
June 17, 2014 A
As Amended: June 10, 2014 FISCAL B
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DESCRIPTION
Current law authorizes the California Public Utilities
Commission (CPUC) to regulate various transportation services,
including charter-party carriers of passengers, defined to mean
persons engaged in the transportation of persons by motor
vehicle for compensation on a prearranged basis over any public
highway in California, but not including taxicabs licensed or
regulated by local agencies. (Public Utilities Code §§ 5360 and
5360.5)
Current CPUC decision establishes transportation network company
(TNC) as a new category of charter-party carriers subject to its
jurisdiction and defines a TNC as an organization operating in
California that provides prearranged transportation services for
compensation using an online-enabled application (app) or
platform to connect passengers with drivers using their personal
vehicles (D. 13-09-045).
Current law and CPUC decisions require charter-party carriers
with seating capacity for up to seven passengers (limousines) to
carry $750,000 commercial liability insurance effective
full-time. (Public Utilities Code § 1040, General Order 115-F)
Current CPUC decision requires each TNC to maintain commercial
liability insurance policies providing not less than $1 million
coverage per incident involving a vehicle and driver while
"providing TNC services."
This bill would require all charter-party carriers, including
TNCs, to have $750,000 primary commercial automobile insurance
effective full-time.
Current law requires personal automobile insurance with minimum
liability coverage of at least $15,000 for death and personal
injury, $30,000 for death or injury of two or more persons, and
$5,000 for property damage (15/30/5), and excludes coverage for
any commercial use of a vehicle under a personal automobile
insurance policy. (Insurance Codes §§ 660 and 11580.1)
This bill requires TNCs to disclose to its drivers, in a
standard written disclosure agreement signed by each driver,
information about insurance coverage and an advisory that
personal automobile insurance may not provide coverage when
operating as a charter-party carrier.
Current law requires charter-party carriers to enroll in the
California Department of Motor Vehicle (DMV) Employer Pull
Notice program to receive automatic notice of adverse entries or
actions on a driver's driving record (Public Utilities Code §
5384 and Vehicle Code § 1808.1)
Current CPUC decision requires TNCs to participate in the DMV
Employer Pull Notice program once non-employees are allowed, but
in the meantime requires TNCs to check driving records prior to
approving a TNC driver and quarterly thereafter.
This bill requires charter-party carriers, including TNCs, to
participate in the DMV program to regularly check the driving
record of any driver employed by, or under contract to, the
carrier to operate a vehicle in transportation for compensation.
Current law requires a charter-party carrier to provide for a
mandatory controlled substance and alcohol testing certification
program as adopted by the CPUC, which includes pre-employment,
post-accident, reasonable suspicion, follow-up, and
return-to-duty testing.
Current CPUC decision requires TNCs to implement a
zero-tolerance policy for its drivers, disclose to riders how to
report a driver suspected of being under the influence of
intoxicating substances, and suspend a driver promptly after a
zero-tolerance complaint is filed.
This bill requires a charter-party carrier, including a TNC, to
provide for a mandatory controlled substance and alcohol testing
certification program as adopted by the commission.
Current CPUC decision requires TNCs to conduct criminal
background checks for each applicant before becoming a TNC
driver, which must utilize a national check and sex offender
database, with specified offenses making an applicant
ineligible.
This bill requires a charter-party carrier, including a TNC, to
utilize a Department of Justice (DOJ) background check with
electronic fingerprints for driver applicants, with specified
offenses making an applicant ineligible.
Current CPUC decision require charter-party carriers to have
permanent markings, registration number, and a CPUC-issued decal
on vehicles. (General Order 157-D)
Current CPUC decision requires TNCs to have "trade dress" on
each vehicle providing TNC services that is visible to a
passenger or law enforcement official, although it may be
removable.
This bill requires charter-party carriers, including TNCs, to
permanently display a CPUC-issued decal on the vehicle and
requires TNCs to register any vehicle used for TNC services with
the CPUC.
BACKGROUND
Smartphones Transform How to Get a Ride - The Internet and
proliferation of smartphones have transformed many aspects of
life and commerce, including how to get a ride. Instead of
hailing a cab, or calling a reservation car service, a growing
number of consumers are using new app-based services that
connect drivers with passengers. With GPS and geolocation
technology as the foundation of the business model, companies
such as Uber, Lyft, and RideShare enable customers to download
an app that alerts participating drivers in the area of the need
for a ride. Drivers with their TNC app turned on get a signal
on their smartphones and can accept or reject the ride request.
The customer can see photos of responding drivers and their
vehicles, as well as customer ratings of each driver and accept
or reject the driver. When a passenger and driver make a match,
the ride is provided, and payment is made electronically on the
smartphone, with drivers getting a portion.
App-based ride services were born in California and began
operation in the Bay Area in 2012. Uber, the largest ride
service company, is now available in more than 100 cities in 35
countries and was recently valued at about $17 billion.
Drivers with these new services use their own vehicles and most
have other jobs. Lyft reports that 54 percent of its drivers
have a full-time job, 30 percent work part-time, with more than
a third driving less than 5 hours a week, and only 10 percent
driving more than 30 hours per week. Some drivers turn on their
app and accept riders in their spare time or focus on weekends
and evenings in busy entertainment districts when "surge" fares
are in effect. Uber has two models - Uber drivers who are
licensed limousine drivers, and UberX drivers using their own
vehicles. Many taxi drivers also are signing up with the new
services to supplement taxi income or switching fulltime to the
new model.
Varied Public Safety Regulations for Different Transportation
Modes - The CPUC regulates many types of transportation,
including "passenger stage corporations" and "charter party
carriers" that transport persons by motor vehicle for
compensation on a prearranged basis. The "Passenger
Charter-Party Carriers Act," first enacted in 1961, contains
numerous special provisions, exclusions, classifications, and
permits for a wide range of transportation modes including a
limousine with seating capacity up to eight passengers, a bus
with capacity up to 15 passengers, a large bus with 16 or more
passengers, as well as vehicles used for nonprofit ridesharing,
round-trip sightseeing, youth camps, farmworkers, motel guests,
hot air balloon ride passengers, school children, and more.
Different insurance and other requirements apply depending on
the size and use of vehicles and other factors.
Taxicabs are excluded from the definition of charter-party
carrier, with the key distinction being that charter-party
carrier transport must be prearranged through written contract
or telephone and not be through street hails. Thus, taxis are
exempt from CPUC regulation and instead are regulated by cities
and counties. Airports also have regulations and permit
requirements for all types of vehicles.
The last major revision of the "Passenger Charter-Party Carriers
Act" was in 1990 in response to what news reports called a "Gold
Rush-like boom in the limousine industry" after the 1984
Olympics in Los Angeles when chauffer service proved profitable.
Taxis and licensed limousine operators called for more
regulation and enforcement against "bandit" limousines that were
operating without a license and commercial insurance, and,
according to the Los Angeles Checker Cab Company, "represent a
threat to healthy competition in the transportation industry and
to public safety and welfare." Airports especially responded
with increased enforcement, claiming the CPUC had abdicated its
enforcement. AB 1506 (Moore) clarified CPUC and airport
enforcement and revised requirements applicable to limousines,
among other changes.
CPUC Begins Regulation of Transportation Network Companies - In
a September 2013 decision, the CPUC began regulation of the new
app-based ride services. The CPUC exercised its jurisdiction
over charter-party carriers, but created a distinct new category
called Transportation Network Companies (TNCs). In order to
balance innovation, consumer choice, and public safety, the CPUC
tailored specific new rules in response to the introduction of
new technology into an existing industry. The decision requires
TNCs to obtain a permit from the CPUC, conduct criminal
background checks of drivers, establish a driver training
program, implement a zero-tolerance policy on drugs and alcohol,
conduct vehicle inspections, and obtain authorization from
airports before conducting any operations on or into airport
property. The decision also requires each TNC to maintain
commercial liability insurance policies providing not less than
$1 million per-incident coverage for incidents involving
vehicles and drivers "while they are providing TNC services."
The Insurance Gap - Several incidents in recent months,
including a death on New Year's Eve in San Francisco, brought to
light a serious gap in insurance coverage in connection with TNC
service. While the CPUC decision required coverage while
"providing TNC services," the debate has centered on how to
define "providing TNC services," generally described as
involving three distinct periods:
Period 1 - driver turns app on waiting for a passenger
match;
Period 2 - match accepted but passenger not yet picked up;
and
Period 3 - passenger in the vehicle until passenger exits
the vehicle.
On April 7th, after an investigative hearing, the California
Department of Insurance notified the CPUC of its conclusion that
"as long as TNCs are encouraging non-professional drivers to use
their personal vehicles to drive passengers for a profit, a risk
for which personal automobile insurance is not available, TNCs
should bear the insurance burden." CDI stated that drivers'
existing personal automobile insurance does not cover
TNC-related driving and that adding TNC exposure to the personal
automobile insurance pool may increase personal automobile
insurance rates. "CDI concludes that personal auto insurers
should not be mandated to cover a risk which is associated with
the business model of the TNCs." The CDI recommended that the
$1 million primary commercial liability insurance should apply
to all three periods.
New CPUC Proposed Decision Requires App-on to App-off Insurance
- The CPUC issued a proposed decision on June 11th to clarify
"providing TNC services" as whenever the TNC driver has the app
open and/or is available to accept rides from a subscribing TNC
passenger, thereby applying the $1 million commercial liability
insurance requirement as primary during all three periods. The
proposed decision also requires medical payment coverage in the
amount of $5,000, comprehensive and collision coverage in the
amount of $50,000, and uninsured/underinsured motorist coverage
in the amount of $1 million per incident. The CPUC's proposed
decision states that a TNC may satisfy the insurance
requirements with its own policy or in combination with a TNC
driver's policy specifically written for that purpose, further
stating "we encourage the insurance industry to create new
products specific to TNC drivers."
The proposed decision is open to public comment and eligible for
a vote at the CPUC's July 10 public meeting. The CPUC plans to
convene a workshop by September 2014 to get an update on TNC's
commercial insurance policies and how these policies have
performed.
Colorado Enacts First TNC Law - On June 5, 2014, Colorado became
the first state to enact a law recognizing TNCs with regulations
substantially similar to the CPUC's decision, except for
insurance requirements. For Period 1 (app-on before match), the
law requires a driver or TNC to maintain a primary auto policy
with 50/100/30 coverage that is either a commercial policy or a
rider to a personal automobile insurance policy. Recognizing
the nascent nature of the TNC business and lack of actuarial
data to establish insurance rates, the law also requires the
state insurance agency to conduct a study to determine whether
the levels of coverage required under the bill are appropriate
for the risk posed by TNC services.
Enforcement of Ongoing Public Safety Concerns - On June 10,
2014, the CPUC President sent letters to each TNC with a CPUC
permit admonishing them for violating rules regarding services
provided at airports. The letter describes concerns raised by
five major airports that TNC drivers have been operating at
airports without permits and are not complying with rules in the
TNC decision. According to the letter, many TNC drivers lacked
proof of insurance and at least two lacked valid driver's
licenses. On some occasions, airport officers have observed a
TNC driver using the account of another registered driver. San
Francisco International Airport (SFO) alone reports that out of
about 300 contacts with drivers for TNCs, 70 percent failed to
display the proper "trade dress." Drivers will typically
respond to inquiries from airport officers that they did not
know what they were doing was illegal or that a permit from the
airport was needed.
SFO reports the following data from its enforcement officials
regarding TNC drivers at SFO from April 16 to June 2, 2014:
298 contacts resulting in verbal admonishments for
violating CPUC decision;
10 drivers with 2 admonishments, no citations yet;
55% able to present complete waybill (with photo of
driver, license plate of vehicle and proof of TNC trip in
progress);
15% of drivers had complete, properly displayed trade
dress;
8% of drivers had some trade dress displayed, but not
correctly;
77% of drivers did not have any trade dress displayed;
21 drivers cited for 28 Vehicle Code violations; 9 for
no proof of insurance, 5 for improper display of license
plate, 8 for no registration certificate, 2 for unlicensed
driver, 2 for no possession of driver's license, 1 for
expired registration and 1 for no CPUC license number; and
25 vehicles were being operated by persons other than
the registered owner.
COMMENTS
1. Author's Purpose . According to the author, this bill
applies basic consumer safety requirements that currently
apply to other entities that transport people for hire to
online-enabled transportation companies, including
commercial liability insurance that covers the driver,
passengers, and the public in all situations; drug testing
and LiveScan criminal background checks of drivers; DMV
pull notices that send alerts of driver DUIs and moving
violations; and permanent vehicle markings to aid
enforcement against violations.
2. Creating a Level Playing Field . This bill imposes
requirements equally on charter-party carriers, including
carriers that utilize an online-enabled application or
platform to connect passengers with drivers. The bill does
not refer to these carriers as TNCs. The effect is to undo
the CPUC's conclusion that TNCs are a special category of
charter-party carriers subject to different regulations
because of the technology used to prearrange a ride.
3. A Lower Amount of Insurance Coverage But Effective
Fulltime . This bill makes TNCs subject to the same
$750,000 insurance requirement that currently applies to
charter-party carriers with seating capacity for up to
seven passengers. That amount is less than the $1 million
coverage the CPUC decision requires for TNCs, but it must
be primary insurance effective fulltime, while the CPUC's
$1 million coverage is required only while "providing TNC
services." As stated by the sponsor, requiring primary
commercial coverage is appropriate "because it covers all
situations - whether driving commercially or for personal
use. It works because it is underwritten for the higher
risks associated while driving commercially.' Airports
support this requirement because it ensures that a TNC
driver will have coverage whenever on airport property,
regardless of whether the TNC app is on or not.
Taxicab groups state that TNCs are de facto taxis and
should be required to have full-time commercial livery
insurance. The San Francisco Cab Drivers Association claim
to have identified 3,500 to 6,500 TNC vehicles operating in
San Francisco in recent months compared to 1,900 licensed
taxis, which "have caused extreme congestion, adding
obstacles, danger and higher risk to the roadways." They
point to dangers when TNC drivers shut off their apps while
driving from less lucrative areas to "surge pricing zones"
where they can make up to several times the normal fare,
such as entertainment districts or the ballpark when a game
ends. Requiring commercial insurance only when a TNC
driver's app is on also could result in insurance fraud if
TNC drivers leave their apps on just to get coverage
through the TNC policy.
TNCs oppose this requirement stating that it fails to
recognize that TNC drivers use their personal vehicles for
TNC services, many only occasionally or part-time. AB 2293
(Bonilla), also before this committee, requires primary
commercial coverage from app-on to app-off. TNCs have
proposed amendments to AB 2293 to require a lower level of
coverage in Period 1.
4. Informing Drivers of Insurance Coverage Limitations.
This bill requires TNCs to disclose to its drivers, in a
standard written disclosure agreement signed by each
driver, information about insurance coverage and an
advisory that personal automobile insurance may not provide
coverage when operating as a charter-party carrier. This
will help ensure that all drivers are fully aware of the
coverage they have while working with a TNC and also
prevent the false impression that personal auto insurance
will cover such activity. Many drivers may be unaware of
the standard livery exclusion in personal auto policies
and, without notice, may not review their personal policy
to see if coverage for commercial use of a vehicle is
exclusion. The bill also makes a TNC's written disclosure
agreements subject to review and audit by the CPUC in order
to ensure compliance.
5. More Rigorous Drug and Alcohol Testing for all Carriers .
Current law requires charter-party carrier drivers
operating vehicles with seating capacity of up to 15 to
comply with the CPUC's drug and alcohol testing program,
which includes pre-employment testing, post-accident
testing, reasonable suspicion testing, follow-up testing,
and return-to-duty testing. The CPUC decision requires TNCs
to implement a zero-tolerance policy for its drivers,
disclose to TNC passengers how to report a driver suspected
of being under the influence of intoxicating substances,
and suspend a driver promptly after a zero-tolerance
complaint is filed. This bill requires a charter-party
carrier, including a TNC, to provide for a mandatory
controlled substance and alcohol testing certification
program as required by Public Utilities Code Section
1032.1, which is applicable to employees of a passenger
stage corporation, a large bus that seats more than 16
passengers. This would impose a higher standard than
currently applies to either limousine drivers or TNC
drivers, but it may be difficult for TNCs to comply with
because their drivers are not employees.
6. More Thorough Background Checks for all Carriers .
Charter-party carriers currently are not required to
conduct any criminal background checks on their drivers.
The CPUC decision requires TNCS to conduct criminal
background checks for each applicant before becoming a TNC
driver, which must utilize a national check and sex
offender database, with an applicant being ineligible if
convicted in the past seven years of driving under the
influence of drugs or alcohol, fraud, sexual offenses, use
of a motor vehicle to commit a felony, a crime involving
property damage, and theft, acts of violence, or acts of
terror. This bill requires a DOJ background check based on
electronic fingerprints that is widely viewed as being more
comprehensive to screen out bad actors. According to the
sponsor and supporters of the bill, this DOJ check is an
inexpensive and fast way to obtain reliable criminal
background information from the Federal Bureau of
Investigation and DOJ and provides information that is not
publicly available. Also, LiveScan results are sent
directly to the public agency that regulates the driver.
It is a standard recognized way of obtaining criminal
background information for occupations such as private
security guards and other regulated professions. Thus, this
provision, by establishing a higher standard for background
checks for both TNCs and charter-party carriers, could
improve public safety for passengers of both types of
transportation.
7. Permanent Vehicle Markings Assist Enforcement .
Charter-party carriers currently are required to have a
permanent marking on vehicles with a license number and
decal issued by the CPUC. The CPUC decision requires TNCs
to "display consistent trade dress (i.e., distinctive
signage or display on the vehicle) when providing TNC
services." It requires trade dress to be sufficiently large
and color contrasted as to be readable during daylight
hours at a distance of at least 50 feet and sufficient to
allow a passenger or government official to associate the
vehicle with a TNC provider. Magnetic or removable trade
dress is acceptable. Vehicle markings are a valuable tool
for law enforcement, airports and the public to readily
identify and report unsafe or prohibited driving or picking
up street hails, and to identify a carrier involved in an
accident. They enable airport officials to enforce
requirements to have a permit to operate on airport
property. Supporters of this bill object to the CPUC's
requirement that TNC trade dress be removable.
8. DMV Employer Pull Notice Applicable to TNCs . This bill
would apply to TNCs the same requirement applicable to
charter-party carriers to participate in the DMV Employer
Pull Notice. This program provides employers and regulatory
agencies with a means of promoting driver safety through
the ongoing review of driver records. The program
automatically generates a driver record and sends a copy to
the employer on enrollment of the driver; annually from the
date of enrollment; or when a driver has a conviction or an
accident, suspension, revocation of the license or any
other action taken against the driving privilege; and other
occasions. TNCs have been unable to enroll in the program
because their drivers are not considered "employees" as
usually required. Like this bill, the CPUC decision also
required TNCs to participate, and encouraged DMV to amend
the requirements of the program to allow TNCs to
participate. Until that happens, the CPUC requires TNCs to
check driving records prior to approving a TNC driver and
quarterly thereafter. To be effective in applying to TNCs,
this bill should also amend Vehicle Code Section 1808.1 to
require participation for non-employees.
9. Related Legislation .
AB 2068 (Nazarian) defines TNCs as charter-party carriers
and requires insurance coverage and disclosures. Status:
Failed passage in the Assembly Committee on Insurance.
SB 1408 (Hill) prohibits unregulated transportation
operators from taking passengers to public airports.
Status: Held in the Senate Committee on Rules.
AB 2293 (Bonilla) requires TNCs to have primary commercial
liability insurance from app-on to app-off. Status: Set for
hearing in the Senate Committee on Energy, Utilities and
Communications June 17th.
10. Ratepayer Impact . TNCs pay the CPUC permit fees but do
not have regulated rates.
11. Double Referral . Should this bill be approved by the
committee, it will be re-referred to the Senate Committee
on Insurance for its consideration.
ASSEMBLY VOTES *
Assembly Floor (72-1)
Assembly Transportation Committee (15-0)
*Prior votes not relevant.
POSITIONS
Sponsor:
Taxicab Paratransit Association of California
Support:
Association for Los Angeles Deputy Sheriffs
California Airports Council
California Fraternal Order of Police
Consumer Attorneys of California
Long Beach Police Officers Association
Los Angeles County Professional Peace Officers Association
Los Angeles Police Protective League
Riverside Sheriffs' Association
Sacramento County Deputy Sheriffs Association
San Francisco International Airport
Santa Ana Police Officers Association
National Taxi Workers Alliance
New York Taxi Workers Alliance
United Taxicab Workers
Oppose:
Lyft
The Internet Association
Jacqueline Kinney
AB 612 Analysis
Hearing Date: June 17, 2014