BILL ANALYSIS Ó
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
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<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