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
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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