BILL ANALYSIS Ó
AB 2293
Page A
ASSEMBLY THIRD READING
AB 2293 (Bonilla)
As Amended May 15, 2014
Majority vote
UTILITIES & COMMERCE 13-0 INSURANCE 11-0
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|Ayes:|Bradford, Bonilla, |Ayes:|Perea, Hagman, Allen, |
| |Buchanan, Chávez, Dahle, | |Bradford, |
| |Fong, Beth Gaines, | |Ian Calderon, Cooley, |
| |Garcia, Roger Hernández, | |Dababneh, Frazier, Beth |
| |Jones, Mullin, Quirk, | |Gaines, Olsen, Wieckowski |
| |Rendon | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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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)California Constitution Article XII:
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 PUC to fix rates and establish rules for the
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transportation of passengers and property by transportation
companies.
1)Establishes, in PUC Decision 13-09-045 (Decision), rules and
regulations relating to public safety risks in the operation of
transportation services utilizing TNCs.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal by the
Legislative Counsel.
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, and Uber, among others,
have broadened the playing field by competing with traditional
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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. 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 an Order Instituting
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> This bill seeks to codify this definition
in statute.
TNCs must also meet the following safety and regulatory
requirements:
a) The TNC must register with the PUC.
-----------------------------
<1> California Public Utilities Commission Decision 13-09-045
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b) The TNC and their drivers must meet safety requirements
(including insurance, background checks, and vehicle
inspections).
c) The transportation service companies must meet PUC regulatory
requirements.
d) Prohibits TNCs from operating at airports unless permission
is granted by the airport.
e) 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.
f) 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
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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 the driver has the
passenger in the car? This bill attempts to provide a functional
definition of "providing TNC services" by specifying that the
insurance coverage provided by the TNC, as mandated by the PUC,
covers incidents that occur from the time the TNC driver turns the
application that provides the connection between driver and rider
on, and continues that coverage until the time the driver turns
the application off. 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."
While the "app on, app off" rule is intended to ensure that the
commercial insurance of the TNC and the personal insurance of the
driver do not overlap, it is difficult to ensure that no fact
pattern might occur that could result in more than one policy
providing coverage. Because personal automobile insurance
policies name the insured vehicle and rate it specifically, while
the TNCs policy does not list the vehicle of each of its drivers,
existing law could operate to make the personal policy primary,
despite the commercial TNC activity. For this possibility, the
bill declares that the commercial policy is primary if the loss
occurs during commercial activity. Recent amendments specifically
reference existing law within the Insurance Code to ensure that
the intent of this provision takes effect.
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
------------------------------
<2> CPUC Assigned Commissioner's Ruling, Rulemaking 12-12-011, Page
2
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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.
This bill 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."
5)Duty to defend and indemnify. The bill contains language to the
effect that the TNC's insurer has the duty to defend and indemnify
in the event a TNC driver is named as a party in a civil action
for damages resulting from an accident that occurred while the
driver's vehicle was made available for transportation network
services. In addition to paying damages to an accident victim, an
insurer owes a duty to its policyholder to provide a defense in
the event that the policyholder is sued for damages. The private
passenger insurers are concerned that TNC commercial policies will
be narrowly drafted, and that TNC drivers will fear being left
without a defense once they are sued, and will turn to the private
passenger automobile insurer and invoke the duty to defend. As
with the primary/excess issue above, the bill is designed to
minimize the opportunity for these uncertainties, and the express
language that the commercial insurer has the duty to defend and
indemnify is included to eliminate any remaining uncertainty.
Analysis Prepared by : DaVina Flemings / U. & C. / (916) 319-2083
FN: 0003400
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