BILL ANALYSIS Ó SENATE INSURANCE COMMITTEE Senator William W. Monning, Chair AB 2293 (Bonilla) Hearing Date: June 25, 2014 As Amended: June 19, 2014 Fiscal: Yes Urgency: No VOTES: Sen.Energy,Util.&Comm.(06/17/14)10-0/Pass Asm.Floor (05/27/14) 71-0/Pass Asm. Ins. (05/07/14) 11-0/Pass Asm. Utilities & Commerce (04/28/14) 13-0/Pass SUMMARY Would establish standards for insurance policies issued to transportation network companies (TNC) that cover drivers and TNCs while offering TNC services. DIGEST Existing Law: Passenger Charter-party Carriers Act (PUC §§ 5351-5363) 1. Subject to specified exclusions, defines "charter-party carrier of passengers" (CPC) as every person engaged in the transportation of persons by motor vehicle for compensation, whether in common or contract carriage, over any public highway in this state. 2. Grants the CPUC the authority to supervise and regulate every CPC and do all things which are necessary and convenient in the exercise of such power and jurisdiction. 3. Requires the CPUC to ensure that every CPC operates on a prearranged basis within the state and require a waybill or trip report that includes the name of at least one passenger in the traveling party or other specified information; the points of origin and destination; information as to whether the arrangements were made by telephone, written contract, or electronic communication. AB 2293 (Bonilla), Page 2 4. Directs the CPUC to require CPCs to procure and maintain adequate protection against liability imposed by law for the payment of damages for personal bodily injuries, including death resulting therefrom; protection against a total liability on account of bodily injuries to, or death of, more than one person as a result of any one accident; and protection against damage or destruction of property. Existing Law: CPUC Decision 13-09-045 ("CPUC Decision") 5. Creates a new category of CPC called Transportation Network Companies (TNCs) defined as an organization, including, but not limited to, a corporation, partnership, or sole proprietor or other form, operating in California that provides prearranged transportation services for compensation using an online-enabled application or platform to connect passengers with drivers using their personal vehicles. 6. Limits TNCs to providing prearranged services (rides solicited and accepted via a TNC digital platform just before the ride commences are considered prearranged). 7. Prohibits TNC drivers from accepting street hails from potential passengers. 8. Requires TNCs to comply with specified safety measures including instituting a zero tolerance intoxicating substance policy; perform criminal background checks and prohibits persons convicted of specified crimes from providing TNC services; regularly subject each vehicle to a 19-point vehicle inspection; implement driver safety training; and perform regular driving record checks. 9. Requires TNCs 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 that is available to cover claims regardless of whether a TNC driver maintains insurance adequate to cover any portion of the claims. The TNC must: a. Disclose the insurance requirement on each TNC app and website. b. Obtain proof of insurance form each driver and require drivers to carry proof of both personal and commercial AB 2293 (Bonilla), Page 3 insurance. 10. Requires the app to display for the passenger a photo of the driver and a photo of the vehicle, and allow passengers to indicate whether they require a vehicle accessible to an individual with disabilities. 11. Requires TNC drivers to have a valid California driver's license, be at least 21 years of age, provide at least one year of driving history and meet specified driving history standards before providing TNC services. 12. Prohibits drivers from transporting more than 7 passengers per ride. This bill 1. Would codify CPUC definition of TNC, but delete the catchall phrase "other form" regarding the types of organizations that qualify as TNCs. 2. Would require a TNC to disclose to all participating drivers the insurance coverage and limits provided by the TNC policy while the make themselves available for TNC services, and advise the driver that a personal auto policy may not provide coverage while the vehicle is available for TNC services. 3. Would provide that, the TNC insurance policy shall be primary and the TNC insurer shall have the duty to defend when the driver logs on to the app until the driver logs off. 4. Would require TNC liability insurance of at a lower amount [from the moment a participating driver logs on to the TNC app until the match is accepted ("Period One")] which shall be at least $50,000 for death and personal injury for each person up to $100,000, and at least $30,000 for property damage. 5. Would provide that for Period One, the insurance coverage requirement may be met by any of the following: AB 2293 (Bonilla), Page 4 a. A driver's personal auto liability policy that explicitly covers TNC activities. b. A separate TNC liability policy that provides primary coverage if the driver's personal auto policy does not cover TNC services. c. A combination of primary automobile liability insurance policies, including a driver's policy that covers TNC services and the TNC's policy. 1. Would provide that this bill does not limit the liability of a TNC arising out of an auto accident involving a participating driver in any action for damages against a TNC for an amount above the required insurance coverage. 2. Would direct the CPUC and the CDI to collaborate on a study of TNC services to assess whether coverage requirements are appropriate. 3. Would prohibit a TNC from disclosing private personally identifiable information of a TNC passenger unless the passenger consents, or pursuant to a legal obligation, the disclosure is to the CPUC to investigate a complaint filed against a TNC or TNC driver and the CPUC treats the information confidentially. 4. Would makes legislative findings and declarations: a. It is the intent of the Legislature that the California Department of Insurance (CDI) expedite review of any application for approval of TNC insurance products. b. The CPUC has initiated regulation of TNC as a new category of charter-party carriers and continues to develop appropriate regulations for this new service. c. It is the intent of the Legislature to continue ongoing oversight of the CPUC's regulations and respond to changing conditions. 1. Would clarify that the provisions of this bill apply notwithstanding any other law in determining which policy provides primary or excess coverage and the obligations under insurance policies issued to TNCs and, if applicable, AB 2293 (Bonilla), Page 5 TNC drivers. 2. Would declare that no reimbursement is required as provided in Section 6 of Article XIII B of the California Constitution. COMMENTS 1. Purpose of the bill Transportation Network Companies (TNC's) are a 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. 2. Background : TNCs provide transportation services through a real time electronic mechanism, usually a smartphone application, and pair potential passengers with drivers that use their personal vehicles. Some TNCs provide an alternative to traditional taxi companies, although TNC drivers are not permitted to pick up street hails. TNCs have proven very popular with consumers and drivers alike. Testimony at a hearing by the Committee on Energy, Utilities and Communications ("Energy Committee") confirmed that many drivers have relied on the income generated to pay AB 2293 (Bonilla), Page 6 their bills and support their families. Drivers enjoy the potentially lower cost and amenities (different drivers may offer passengers waters, snacks, etc.); some TNC regulars have testified that they feel safer with a TNC than with a taxi cab. In the last two years, the business model has grown internationally and is heavily influencing transportation options. Platform Provider/TNC. The definition of TNC in this bill and the CPUC Decision requires two elements: (1) prearrangement through an online-enable platform and (2) transportation services provided in a vehicle not owned by the platform provider. Although the prearranged transportation services are provided through the joint efforts of the driver and the TNC, the bill and the CPUC refer to the platform provider as the "TNC." The TNC serves as the nerve center behind the enterprise. In general, the TNC recruits drivers and passengers; provides communications equipment, software, and trade dress (like the pink mustache) for the vehicles; tracks the vehicle and compiles the necessary data (such as the location and identities of all of the drivers and potential consumers) to coordinate ride requests with available vehicles; sets charges and fees; collects payment, etc. The CPUC has issued TNC licenses to several companies including Lyft, Uber (providing services as "Raiser," a wholly owned subsidiary), SideCar, Wingz, and Summon. Each TNC operates differently. Wingz only offers rides to airports, charges a flat rate, arranges rides through a website, and schedules rides at least two hours in advance. Sidecar allows the driver to set the rates. Lyft allows the rider to "donate" a contribution based on a recommendation (although it's not clear if a failure to donate the "suggested amount" has adverse consequence-riders are rated by the drivers). Uber provides the driver a smartphone. A TNC may be partnering with any number of individual drivers at any given time. Given their access to vast amounts of data, TNCs have the power to coordinate a fleet AB 2293 (Bonilla), Page 7 of vehicles depending on the number and willingness of available drivers and level of demand. For example, TNCs use a technique, called "surge pricing." By increasing the fees for passengers at a high-demand location and occasion, surge pricing attracts more drivers, gives consumers access to transportation services, and increases revenue for the TNC enterprise. Some ambitious drivers try to chase the surge as demand shifts locations. Surge pricing is only possible because of real time data available for ride requests and driver availability. Paired with consumer data being collected, like that collected by Facebook and Google, one can only guess at the potential for TNCs to provide tailored transportation services to consumers, marketing for other business, and data sharing. (Recent amendments restrict the exchange of personally identifiable consumer information.) TNC Partner/Drivers. Uber refers to its drivers as "partners." This is, perhaps, the best way to describe the relationship since Uber does not employ its drivers as employees or independent contractors. (See Uber's "Partner/Driver Terms and Conditions.) Drivers are matched with consumers when a consumer makes a request through their app and the request is successively forwarded to available drivers through the driver's app until a driver accepts. Once a driver accepts, a match is made. Drivers set their own schedule, supply the gas for the vehicle and related transportation supplies and services, etc. TNC drivers may be casual participants, accepting riders in their spare time or under certain circumstances (e.g., Friday or Saturday nights), or engaged in full time employment. Although many taxi cab drivers, or former taxi cab drivers, partner with TNCs, the bulk of TNC partners are nonprofessional drivers with less familiarity with business regulations and practices. This bill addresses the problem where TNC drivers lack insurance designed for commercial activities. Personal insurance policies contain a "livery AB 2293 (Bonilla), Page 8 exclusion" that excludes commercial activity to one degree or another. The driver, passenger, and any other party may not be protected in case of an accident. The lack of professional experience also causes problems when the driver is unfamiliar with commercial regulations. For example, a June 10, 2014 letter from Michael Peevy, President of the CPUC, to Garret Camp of UberX admonishes the TNC 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 or following basic rules laid out by the CPUC decision. According to the letter, "numerous" TNC drivers lacked proof of insurance and at least two lacked valid driver's licenses. On a few occasions, airport officers have observed a TNC driver using the account of another TNC driver. San Francisco International Airport alone reports that out of about 300 contacts with TNC drivers, 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. PUC Proposed Decision Modifying PUC Decision 13-09-045. In early June, the CPUC issued a proposal to modify PUC Decision 13-09-045 ("CPUC Proposed Decision") currently scheduled to be heard on July 10. The CPUC Proposed decision would define "TNC services" as whenever the TNC driver has the app open, broken down into three periods as follows: Period One: Application open - waiting for a match. Period Two: Match accepted - but passenger not yet picked up. Period Three: Passenger in car - until passenger safely exits car. This would apply the pre-existing requirement to maintain $1 million in liability coverage to all three periods. (Some AB 2293 (Bonilla), Page 9 TNCs claim that the current requirement only applies once a match is made.) It would also require other types of coverage that may be affected by a livery exclusion, including: $5,000 for medical payments. $50,000 for collision/comprehensive; and $1,000,000 for unsinsured/underinsured motorist. The CPUC Proposed Decision would allow the TNC to satisfy the minimum coverage requirements with its own policy or in any combination with a policy maintained by the TNC driver that is specifically written to cover TNC services. The Insurance Commissioner sent a letter to the CPUC President Michael Peevey encouraging the CPUC to adopt the proposed decision with some minor modifications. The Commissioner commended the CPUC for maintaining the $1 million minimum requirement and clarifying that coverage applies during Period One. Insurance Provisions of AB 2293. Most people could not afford to pay for the damages that arise out of auto accidents. Insurance provides the basic security society needs to engage in productive, but potentially risky, behavior. It does this by spreading the risk so that, in the case of a catastrophic incident, the individual need not bear the burden alone. Liability insurance also ensures that victims receive some compensation for injuries. Without insurance, victims would be most likely forced to go to court far more frequently, and only if the at-fault party has the assets to pay. Unlike other parties, insurers are required to set aside assets to pay potential liabilities and attempt in good faith to effectuate prompt, fair, and equitable settlements of claims when liability is reasonably clear. (Ins. Code § 790.03.) AB 2293 (Bonilla), Page 10 Moreover, TNC contractual clauses may make litigating even more difficult for passengers and drivers. Consumer Attorneys of California have expressed concerns that most TNCs have complicated and extensive "agreements" which aim to relieve them of any legal liability and require users to give up their right to a jury trial. Consumers are likely to have limited administrative remedies. The CPUC has few resources to monitor and take actions against wayward TNC drivers. In fact, the State Auditor just released its report, California Public Utilities Commission: It Fails to Adequately Ensure Consumers' Transportation Safety and Does Not Appropriately Collect and Spend Fees From Passenger Carriers, finding that the CPUCs oversight of passenger carriers is insufficient to ensure consumer safety. AB 2293 would establish a framework for insurance that specifically covers TNC drivers by determining the obligations of the insurer. The major provisions are as follows. a. Definition of Transportation Network Company . AB 2293 codifies the CPUC's definition of TNC adopted last year with a change related to the types of qualified business organization. b. Disclosure to TNC Drivers . Because of the livery exclusion in personal auto policies, and the limited coverage TNCs are currently required to provide, TNC drivers may be left without important types of coverage beyond liability including: collision/comprehensive that protects the vehicle from property damage; uninsured/underinsured motorist coverage that protects the driver, vehicle, and passenger in case of an accident caused by an uninsured/underinsured third party; and medical which pays for medical expenses caused by an accident regardless of fault. AB 2293 would require the TNC to disclose to the driver the coverage provided under the TNC policy and that the driver might not be covered under their own personal AB 2293 (Bonilla), Page 11 policy. A driver's understanding of the insurance coverage issues is critical, but not only for their own interests; lienholders require collision/comprehensive to protect their secured interest in the vehicle. If adopted, the CPUC Proposed Decision would require the TNC to provide these types of coverage in addition to the liability insurance at $5,000 to cover medical payments; $50,000 collision/comprehensive; and $1,000,000 in uninsinsured/underinsured motorist coverage. In fact, some TNCs already offer similar coverage to their drivers. Lyft offers $1 million in uninsured/underinsured coverage, and contingent collision/comprehensive coverage for those drivers who purchase that coverage for their own vehicles up to $50,000 per occurrence with a $2,500 deductible. Uber offers a similar package, but with a $1,000 deductible on the collision and comprehensive coverage. c. App On/App Off - All Periods . Both AB 2293 and the CPUC Proposed Decision frame the driver's TNC activity in terms of whether the driver is available to accept rides by whether the app is on or off. The Proposed Decision breaks that period down into- three distinct periods. AB 2293 implicitly adopts this approach and requires some kind of primary insurance for all periods, but sets a separate liability requirement for Period One. The app on/app off approach provides a bright line, but not necessarily an accurate one. United Policyholders supports the bill, but warns that the app on/app off approach eliminates coverage for drivers that turn off the app when en route to "surge zones" as to avoid intermediate calls for service. On the other hand, Lyft expresses concerns that the app on/app off approach creates an incentive for TNC drivers to leave their apps on, even if they have no intention of accepting. The taxicab industry urges 24 hour commercial coverage to avoid any confusion and points out that independently owned taxi vehicles are often used for personal business but must carry coverage all the time. Both the San AB 2293 (Bonilla), Page 12 Francisco Cab Drivers Association and the United Taxi Cab Workers support 24 hour commercial coverage and argue that many commercial activities will not be covered under AB 2293. Examples include: Turning an app off to avoid sharing a percentage of the fare with the TNC or when rushing to "surge pricing" zones. Servicing regular customers outside the use of the app. Soliciting passengers off the street. a. Duty to Defend . Liability policies carry with it an insurer's duty to defend the insured against civil liability arising from covered activities. But the duty to defend is broader than an insurer's duty to indemnify. The recent amendments narrowed commercial insurer's duty to defend the driver to accidents that occur while the app is on. By narrowing the scope of the duty to defend, the amendments introduce the possibility that personal insurance may have to pay for the defense of a TNC driver who is named in a lawsuit if the driver's app was off. The prior version of the bill would have required the commercial insurer to defend a participating driver or registered owner anytime they were named in a civil action for a loss or injury that occurs when the vehicle is made available for TNC services (before the proposed definition by the CPUC) irrespective of the status of the app. The purpose of the original language was to avoid having a personal auto insurer defend a TNC driver and impact the rates on all personal auto insurance consumers. b. App On/App Off -Period One Liability Requirements . The bill does not set a mandatory minimum liability coverage requirement for Periods Two and Three, but leaves that determination to the CPUC. AB 2293 treats Period One differently and would override the CPUC's Proposed Decision by requiring TNCs to carry liability AB 2293 (Bonilla), Page 13 insurance lower than the other two periods. NOTE: AB 2293 was amended June 19, 2014, per an agreement with the author during the Energy Committee hearing to take amendments proposed in the committee analysis to be adopted in the Insurance Committee. The amendments relating to insurance were set forth in Comment #2 of the committee analysis, including that TNC insurance, among other things: "Require a lower amount of coverage for Period One (app-on to match accepted) that is 50/100/30, which may be satisfied by: [three options]." (Emphasis added.) The bill currently states the liability requirements should be "at least" 50/100/30. References to "at least" are not mentioned in the committee analysis. Insurance Committee staff has confirmed with Energy Committee staff that the references to "at least" were not intentional and were a drafting error. Representatives of the TNC industry argue that until a passenger is matched, the driver is not providing TNC services, and that the activities in Period One pose less risk of losses, especially since there is no passenger in the vehicle. The minimum requirements suggested by the Energy Committee analysis match those recently adopted in Colorado. It is also similar to coverage offered by Uber and Lyft, except that the TNC's operate on the assumption that the personal policies are always primary and the TNCs only provide excess coverage if the personal insurer has denied a claim. Other Standards. The CPUC's Proposed Decision requirement of $1 million of liability insurance for all periods is based on the standards for taxis in San Francisco. The CPUC requires other types of charter party carriers to carry at least $750,000. Los Angeles requires $100,000 per individual for bodily injury up to $300,000. TNCs state that the 50/100/30 standards set in the bill AB 2293 (Bonilla), Page 14 is more than the three times the minimum requirements for personal policies. Committee staff notes that the mandatory minimum liability coverage set for personal use auto policies is determined as a matter of public policy to keep rates low and does not reflects actual risk or damages. The current minimum auto liability insurance requirement of $15,000 per person for bodily injury or death up to $30,000, and $5,000 for property, was set in 1974. Adjusted to 2014 dollars, it would be about $72,000 with a maximum per incident of $145,000. On the other hand, a single serious accident may cost substantially more. Last New Year's Eve, an Uber driver struck Huan, Anthony, and Sophia Liu while crossing the street in San Francisco during Period One. Sophia, at age six, later died at the hospital. Her mother and brother suffered serious injuries. Medical treatment is ongoing. It may be helpful to note that mandatory coverage minimums can set the framework for settlements since insurance is usually only realistic means of recovery unless the at-fault party has significant assets of their own. c. App On/App Off -Period One. Combining Policy Coverage . Consistent with the CPUC's Proposed Decision, AB 2293 would allow a TNC to satisfy the mandatory minimum insurance requirement, for Period One, through either a policy or a combination of policies purchased by the TNC and TNC driver if the driver's policy is designed to cover TNC services. However, at this time there are no known insurance policies covering the driver that "recognize TNC services" and would work in tandem with a TNC policy. Impact on "Innovation." Concerns have been raised that AB 2293 will "stifle innovation." The Internet Association writes that this bill would create a number of unnecessary new requirements for innovative companies in California's "sharing economy" which facilitates the sharing of underutilized resources. In the case of the "sharing AB 2293 (Bonilla), Page 15 economy," one person can leverage idle capacity in a resource they own - such as a car - and make it available to someone with a need for that resource. The owner benefits with additional income and the buyer by access to often cheaper alternative to traditional service providers, such as taxi companies. The Internet Association argues that Internet-based platforms such as those used by Uber and Lyft make possible valuable interactions that were previously impractical. Some TNCs have adapted to the CPUC required commercial coverage last year. In April of this year, Uber instituted a $1.00 "Safe Rides Fee" per ride to support the increased costs of background checks, motor vehicle checks, driver safety education, app development, and insurance. Carsharing. As to mandatory insurance requirements, prior legislative efforts are instructive. Carsharing companies facilitate the sharing of private or pooled vehicles. Vehicle owners may "rent" their vehicles through a third-party program to drivers who only have a minimal need for a personal vehicle. AB 1871 (Jones, 2010), Chapter 454, Statutes of 2010, excluded vehicles shared in these programs from the definition of commercial activity but only on the following conditions: Not for the Profit of the Vehicle Owner. Owners and programs cannot knowingly share the vehicle for commercial use. The annual revenue received by the vehicle's owner generated through a sharing program may not exceed the annual expenses of owning and operating a vehicle. Program Assumes Ultimate Responsibility. The program must provide insurance coverage during the periods which it is being used, at no less than three times that required by private passenger vehicles. On top of that, the sharing program must assume all liability of the owner and shall be considered the owner of the vehicle for all purposes while the vehicle is in use. AB 2293 (Bonilla), Page 16 Innovating Insurance Products . Much of the discussion surrounding this bill assumes that new products will come on line that will be priced at personal use policy rates, except for periods where the vehicle is used to provide TNC services. The fact that insurance is sort of "sharing economy" makes it far more difficult for insurers to offer that type of product. Insurance is based on sharing risk within a pool of insureds; ultimately, the insured in a particular pool are in it together. Public policy has dictated that personal auto insureds need not share the higher rates of commercial insureds. California insurance rates are highly regulated. Premiums must be justified with loss data. At this time, little data is available relative to TNC drivers and the probability of losses; insurers are not sure how to price a new product. If they offered products, they would probably play it safe and charge more. However, overpriced premiums may be forced down by market forces or through the regulatory process. California law provides that no rate shall be approved or remain in effect that is excessive and the Insurance Commissioner is prohibited from approving a rate that is not justified by actuarial data. (Ins. Code § 1861.05.) The Commissioner has an implied power to force insurers to justify existing rates. While an insurer may recover costs and profit for providing insurance, the rates must still reflect a justifiable risk of loss. The TNCs are concerned that higher minimums for Period One will raise their total insurance rates as much as 30% to 40%, despite the argument that Period One does not involve that much risk. In California, the system is designed to address this problem. Pricing Period One rates should eventually reflect actual losses when the data is in, whether viewed separately or with the other periods. Colorado just adopted a proposal similar to AB 2293 in its current form, but may not have as difficult a time offering new products because they lack similar protections against excessive rates. Colorado is a competitive rating state AB 2293 (Bonilla), Page 17 (also known as "file-and-use") and does not require the approval by the insurance regulator before an insurer may implement new rates (however, rates are reviewed and may be ordered corrected afterward). California is a prior approval state and requires that the Insurance Commissioner review and approve those rates which may be subject to an adversarial hearing or negotiations. Estimates have ranged anywhere from less than a year to eighteen months to put a new product out to market (not including insurer development time), but there really is no way of knowing. 1. Summary of Arguments in Support. Most statements are directed at the prior version of the bill, but the arguments still apply. a. Insurance industry representatives argue that AB 2293 provides a middle ground, merely making clear that a TNC's commercial insurance coverage applies during the time a driver is engaged in the commercial activity - from when the driver turns on the app, which indicates the driver is "open for business," and ceases when the driver turns the app off. No other commercial activity is afforded that standard today. b. San Francisco International Airport (SFO) explains that TNCs profit from their operations at SFO. As a public agency responsible for the safety of arriving and departing airline passengers and for pedestrians at the airport, SFO wants to ensure that there is adequate insurance coverage available to compensate TNC customers and pedestrians injured as a result of TNC accidents. AB 2293 helps to ensure that adequate insurance is in place to protect TNC customers and pedestrians at SFO. c. The Consumer Attorneys of California (CAOC) support AB 2293 because it protects all those affected by the TNC business model: the driver, passenger, pedestrian and the public coffers. Unfortunately, most Californians are simply unaware as drivers, users, passengers or third parties of the lack of adequate protection in the current law. AB 2293 (Bonilla), Page 18 1. Summary of Arguments in Opposition . Most statements are directed at the prior version of the bill, but the arguments still apply. a. Consistent with the position of some other TNCs, Uber Technologies states that there is no worrisome gap of insurance as some groups allege. Uber further states that it provides insurance coverage for every aspect of a trip that is more than triple the coverage required of most drivers, even for most types of commercial drivers. Uber explains that the $50,000 per person up to $100,000 coverage that it provides up to the match is three times more than the state minimum. b. The Internet Association opposes the bill in part because it is based on an unsupported assumption that that being logged into an app is inherently commercial or inherently more risky than not being logged on. This misunderstands how TNC drivers are paid; rides can only be requested via the app and so driving about looking for hails not only wastes gas, but is impractical based on how drivers and passengers are matched via the platform. Lyft notes that a driver during Period One may be running personal errands or having a cup of coffee. There is no parallel between a taxicab roaming the streets in search of a new fare, since a TNC driver cannot accept street hails. c. Lyft also objects to the potential incentive a driver may have to stay logged on or purchase less insurance because of a high insurance requirement placed on TNCs. d. United Taxicab Workers and the San Francisco Cab Drivers Association object to AB 2293 for two reasons: (1) it fails to close ride service insurance gaps, leaving the public without recourse to coverage in commonly occurring situations, and (2) it codifies in state law the CPUC's definition of ride services, preempting a pending legal challenge the CPUC's Decision as an unlawful exercise of its jurisdiction. AB 2293 (Bonilla), Page 19 2. Questions a. Operating the App while Driving. Does operating a TNC app while driving violate Vehicle Code Section 23123.5 prohibiting a person from driving a motor vehicle while using an electronic wireless communications device to write, send, or read a text-based communication (not including voice-based operations)? b. Participants in a Sharing Economy Exempt from Regulation. Whether an enterprise should be excused from standard regulation problem raises threshold questions. For one, what constitutes the "sharing economy"? Who must be doing the sharing? Secondly, if an enterprise constitutes part of a sharing economy, what aspects of an enterprise should be free from the regulations applicable to the nonsharing counterparts? c. Partnerships and Civil Liability. TNCs have viewed themselves more as brokers of, rather than providers of, transportation services. But a jury may just as well find them to be partners in a transportation enterprise. Partnership law holds all partners accountable for any action taken in the scope of the enterprise. Activities occurring while "open for business" may fall within that scope. Given the difficulties that the CPUC will likely have in enforcing TNC regulations against drivers, should the TNC partners carry insurance that reflects more closely the civil liability model? d. Multiple Aps. Lyft expresses concerns about determining which insurers are responsible if a driver gets into an accident prior to accepting a ride while providing services through multiple TNCs at the same time. Should each TNC insurer be responsible equally for its share of the maximum coverage of one single policy? Should each TNC policy provide for "stacking," i.e. each policy would remain liable up to each individual limit? (If three apps were open, should a plaintiff be able to seek $1 million from each insurer or only $333,333?) If the TNCs involved maintained coverage with different AB 2293 (Bonilla), Page 20 maximum limits, should each insurer be responsible for its proportional share relative to the aggregated maximum limit? 1. Suggested Amendments . Given the concerns discussed above, the author may wish to adopt amendments as provided below. a. Definition of TNC. The current definition in the bill does not quite conform to that offered by the CPUC and lacks a catchall provision. This might exclude limited liability companies. Amendments would place "or other form" after "sole proprietor." b. Definition of TNC Services. Would define "Transportation Network Services" in a way to follow the app on/app off model including the descriptions of Periods One through Three, consistent with the CPUC Proposed Decision. c. Periods Two and Three Insurance Coverage. Would revise and recast the mandatory coverage requirements for Periods Two and Three, and would also permit a TNC to satisfy the requirement through the purchase of its own policy, a policy purchased by the driver, or combined coverage for the purposes of satisfying the minimum coverage requirement. The TNC may only meet the requirement through a combination of policies or through the driver's policy if it verifies that the participating driver obtains and maintains a policy that is specifically written to meet the TNC coverage requirement. If the participating driver-obtained policy ceases to exist at any time, including but not limited to lapses, denial of claims, and cancellations, then the transportation network company's insurance shall provide all required coverage beginning at dollar one. d. Additional Coverage. Would require the TNC to provide coverage for medical payment, comprehensive/collision, uninsured/and underinsured motorists, including Period One, as required by the CPUC. AB 2293 (Bonilla), Page 21 e. Period One Coverage. Would revise and recast the mandatory coverage requirements for Period One, and require a minimum of $750,000 in commercial liability insurance and would also permit a TNC to satisfy the requirement through the purchase of its own policy, a policy purchased by the driver, or combined coverage for the purposes of satisfying the minimum coverage requirement. The TNC may only meet the requirement through a combination of policies or through the driver's policy if it verifies that the participating driver obtains and maintains a policy that is specifically written to meet the TNC coverage requirement. If the participating driver-obtained policy ceases to exist at any time, including but not limited to lapses, denial of claims, and cancellations, then the transportation network company's insurance shall provide all required coverage beginning at dollar one. f. TNC Assumes Liability for TNC Drivers in the Course of Providing Services. Would require the TNC or any affiliated parent or subsidiary or limited liability company to assume the liability of the driver in the event of a loss or injury that occurs while a driver is providing TNC services for Period One. g. Personal Auto Firewall. Would deem the vehicle as a public or livery conveyance and prohibits a personal auto policy from providing coverage, including the duty to defend or indemnify, for that purpose, unless those services are specifically provided for in the policy which must be priced and approved by the Department of Insurance for that purpose. h. Legislative Declarations. Would declare that the Legislature does not intend to prohibit the CPUC's exercise of rulemaking authority or limit the liability of the TNC driver. i. Duty to Cooperate with Insurer. Would require the TNC to cooperate with insurers involved in a claims investigation, including providing required information. The amendment should specify that this is deemed a legal AB 2293 (Bonilla), Page 22 obligation for the purposes of sharing personally identifiable information in Section 5435 of the bill in print. j. Proof of Coverage. Requires TNC drivers to carry evidence of financial responsibility and exchange appropriate information at the time of an accident. 1. Prior and Related Legislation . AB 612 (Nazarian) would have treated TNCs as standard charter party carriers and set additional public safety standards. Recent amendments struck the provisions specific to TNCs and those that relate to insurance. POSITIONS Support Association of California Insurance Companies (sponsor) Personal Insurance Federation of California (sponsor) Allstate Insurance Company American Insurance Association California Airports Council Consumer Attorneys of California Independent Insurance Agents and Brokers of California Paul Koretz, Councilmember, City of Los Angeles National Association of Mutual Insurance Companies Pacific Association of Domestic Insurance Companies Property Casualty Insurers Association of America San Francisco International Airport State Farm The Sullivan Group The Surplus Lines Association of California United Policyholders Oppose Google Inc. Greater California Livery Association The Internet Association Lyft San Francisco Cab Drivers Assocation Taxicab Paratransit Association of California AB 2293 (Bonilla), Page 23 Uber Technologies, Inc. United Taxicab Workers Veolia Consultant: Hugh Slayden (916) 651-4773