BILL ANALYSIS                                                                                                                                                                                                    




                                                                  AB 2293
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          Date of Hearing:   April 28, 2014

                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
                               Steven Bradford, Chair
                   AB 2293 (Bonilla) - As Amended:  April 10, 2014
           
          SUBJECT  :   Transportation Network Companies: insurance coverage:  
          disclosure

           SUMMARY  :   Establishes guidelines for regarding insurance  
          coverage for Transportation Network Companies (TNCs) to ensure  
          personal and financial safety of consumers.  Specifically,  this  
          bill  :  

          1)Codifies the California Public Utilities Commission's (PUC)  
            definition of TNC.

          2)Requires TNCs to inform drivers about the insurance coverage  
            and limits offered by the TNC when providing TNC services and  
            that a driver's personal auto coverage may not provide  
            coverage when operating as a TNC.

          3)Defines when personal and commercial auto insurance is in  
            effect.

          4)Clarifies that commercial automobile insurance coverage has  
            the duty to defend and indemnify when the TNC driver is on  
            duty.

           EXISTING LAW  : 

          1)Article XII of the California Constitution: 

             a)   Establishes private corporations and persons that own,  
               operate, control, or manage a line, plant, or system for  
               the transportation of people or property, and common  
               carriers, as public utilities subject to control by the  
               Legislature.

             b)   Allows the California Public Utilities Commission (PUC)  
               to fix rates and establish rules for the transportation of  
               passengers and property by transportation companies.

          1)Establishes, in PUC Decision 13-09-045, rules and regulations  
            relating to public safety risks in the operation of  









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            transportation services utilizing TNCs. 

           FISCAL EFFECT  :   Unknown.

           COMMENTS  :   According to the author, "Transportation Network  
          Companies (TNC's) are an exciting new technology that connects  
          drivers with passengers in search of transportation.  However,  
          it is important that we ensure sufficient consumer protections  
          are in place as this technology advances.  AB 2293 ensures that  
          drivers are aware of the insurance coverage and limits of  
          liability that a TNC provides while a driver makes him or  
          herself available for TNC services.  This ensures that a driver  
          is clear about the coverage offered and is not left with the  
          false impression that personal auto insurance will cover TNC  
          activities. Most importantly, AB 2293 clearly defines when this  
          insurance coverage applies eliminating the gray area that  
          currently can lead to insurance gaps.  The bill clarifies that  
          TNC insurance coverage applies when the driver logs on to the  
          TNC application and coverage ends when the driver logs off the  
          application. AB 2293 creates clear parameters of when TNC  
          insurance covers a driver and as a result, protects the driver,  
          passengers, pedestrians, and third parties from potential gaps  
          in insurance where a driver may find himself without any  
          coverage and an injured third party may be left without coverage  
          to pay for medical bills or property damage."

           1)Hire a driver via online-enabled application  : California law  
            currently recognizes
            and regulates three modes of passenger transportation for  
            compensation: taxi services - regulated by cities and/or  
            counties; charter party carrier services (limousines) and  
            passenger stage companies - regulated by the PUC.  

            A niche model of transportation services has sprung up in  
            cities across the United States, including California.   
            Patrons can simply prearrange transportation services  
            utilizing an online-enabled application on their smart phone  
            device. Small start-up companies such as Lyft, SideCar, Uber,  
            among others, have broadened the playing field by competing  
            with traditional charter-party carriers and taxi cab services  
            in select cities in California.

            Uber sends drivers in either luxury vehicles or personal  
            vehicles to pick up passengers whose credit cards are  
            automatically charged flat fees or fares calculated by GPS.   









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            Lyft and SideCar connect people needing rides with drivers who  
            pick them up in personal vehicles. Fares for Lyft and SideCar  
            are calculated based on distance or by the amount you wish to  
            pay.

           2)How does the state regulate this new business model  :  As the  
            first of its kind, this new model
            of transportation services operated for a number of years  
            without regulatory oversight in California. In fact, there is  
            no evidence that any other state maintains regulatory  
            oversight of this new business model.  

            However, in December 2012 the PUC initiated a Rulemaking to  
            determine whether and how services arranged through  
            online-enabled applications might affect public safety.  The  
            PUC sought comment on issues including: how the PUC's existing  
            jurisdiction should be applied to businesses such as Uber,  
            SideCar, and Lyft; the consumer protection and safety  
            implications of these new methods for arranging transportation  
            services; whether and how the new transportation business  
            models differ from longstanding forms of ridesharing; and the  
            new transportation business models' potential effect on  
            insurance and transportation access.

            In a September 2013 Decision, the PUC established a new  
            transportation business model called Transportation Network  
            Companies (TNCs). The PUC defined TNCs as an "organization  
            whether a corporation, partnership, sole proprietor, or other  
            form, 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."<1>  AB  
            2293 seeks to codify this definition in statute. 

            TNCs must also meet the following safety and regulatory  
          requirements:

                     The TNC must register with the PUC.
                     The TNC and their drivers must meet safety  
                 requirements (including insurance, background checks,  
                 vehicle inspections)
                     The transportation service companies must meet PUC  
                 regulatory requirements 
                     Prohibits TNCs from operating at airports unless  



               -------------------------
          <1> California Public Utilities Commission Decision 13-09-045








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                 permission is granted by the airport.
                     The TNCs are required to submit a report within 90  
                 days of the decision on how they will address the  
                 potential divide for services to the disabled community.
                     Annual reporting requirement.

            TNC's currently permitted by the PUC are Lyft, Uber-X (aka  
            Rasier), Wingz (formerly   Tickengo), and Summon (formerly  
            InstantCab).  The Decision empowers the PUC to exercise its  
            safety and enforcement authority against TNCs that violate any  
            regulatory or safety requirements.

            In its Decision, the PUC committed to revisit the issue in  
            September 2014 to review regulations, data and reports from  
            TNCs and hold an all-day stakeholder workshop. Additionally,  
            the PUC plans to review outdated safety regulations pertaining  
            to the charter-party carriers (i.e. limousines).  

           3)Drawing the bright line personal and commercial auto  
            insurance  : Last year, a TNC driver fatally struck a child and  
            injured two family members as they crossed the street in  
            downtown San Francisco. This sparked major concern about who  
            is responsible for the loss of life and injuries sustained by  
            the pedestrians of this unfortunate accident.  

            In March 2013, the PUC issued an Assigned Commissioner's  
            Ruling (ACR) requesting comment on proposed modification to  
            the Decision which adopted rules and regulations for TNCs.   
            According the ACR, "the proposed modifications are in response  
            to: 1) our review of the insurance requirements we adopted and  
            their potential impact on public safety, 2) our review of the  
            policies TNCs submitted with their applications, 3) the  
            absence of a definition of "providing Transportation Network  
            Company services, and 4) what insurance coverage must be in  
            force and effect while a driver is providing TNC services."<2>  
             The public comment period concluded April 7, 2014. A final  
            decision is still pending.

            In the absence of a clear definition of "providing TNC  
            services", this gray area has potentially created a gap in  
            insurance coverage.  This raises the question - does business  
            activity begin once the driver logs into the TNC's software  
            application, when the driver accepts the fare (match) or when  


            --------------------------
          <2> CPUC Assigned Commissioner's Ruling, Rulemaking 12-12-011,  
          Page 2








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            the driver has the passenger in the car?  AB 2293 defines  
            "providing TNC services", for the purposes of determining the  
            applicability of insurance coverage, as when the driver logs  
            on to the TNC's application program. Moreover, this bill  
            specifies that commercial coverage ceases when the driver logs  
            off from the TNC's application program.  The author states  
            that, "it is incumbent upon the Legislature to determine a  
            clear line for when commercial activity begins and ends for  
            TNC drivers. This will ensure drivers are insured at all  
            times, protect the public from the results of lack of coverage  
            or questions of coverage, and reduce unnecessary lawsuits."
           
          4)Keeping the TNC driver informed:  To ensure drivers are fully  
            aware about the insurance coverage and limits when providing  
            TNC services, this bill requires a TNC to inform drivers that  
            their personal auto insurance will likely not cover them  
            should an incident occur. It is likely that many drivers are  
            unaware of the standard livery exclusion in personal auto  
            policies. Without notice, they may not review their personal  
            policies to see if such exclusion is included in their own  
            policy. Requiring TNCs to develop its own disclosure form may  
            result in confusion on behalf of the drivers. Drivers may not  
            read or understand the "fine print" describing the insurance  
            coverage and limits. The PUC may be better suited to develop a  
            standard disclosure agreement between the TNC and  
            participating drivers given their regulatory authority over  
            this new transportation industry.

            AB 2293 clarifies that the insurance offered by the TNC is the  
            primary policy. For instance, if a driver is completing  
            commercial activity for a TNC, the TNC insurance should serve  
            as the primary insurance - not the personal auto policy -  
            which will likely refuse coverage. The author opines that,  
            "clarifying the issue of primary and excess insurance ensures  
            that the TNC policy has the duty to indemnify and the duty to  
            defend the driver in the event of a claim.  It also prevents  
            the situation where both policies are somehow considered  
            primary and we see a delay in any insurance action while both  
            policies dispute the issue of primary coverage". Due to the  
            complex nature of this provision concerning commercial  
            insurance policies, this will be addressed in Assembly  
            Insurance Committee.

                
           REGISTERED SUPPORT / OPPOSITION  :   









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           Support 
           
          American Insurance Association
          Association of California Insurance Companies (ACIC/PCI)
          Independent Insurance Agents and Brokers of California (IIABCal)
          National Association of Mutual Insurance Companies
          Pacific Association of Domestic Insurance Companies
          Personal Insurance Federation of California
          State Farm

           Opposition 
           
          The Internet Association
          Uber Technologies, Inc.
          United Taxicab Workers
           
          Analysis Prepared by  :    DaVina Flemings / U. & C. / (916)  
          319-2083