BILL ANALYSIS                                                                                                                                                                                                    Ó

                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair

          AB 2293 (Bonilla) - Transportation Network Companies
          Amended: July 2, 2014           Policy Vote: EU&C 10-0, INS 9-1
          Urgency: No                     Mandate: No
          Hearing Date: August 14, 2014                           
          Consultant: Maureen Ortiz       
          Bill Summary:  AB 2293 amends the Passenger Charter-party  
          Carriers' Act to require liability insurance coverage for  
          transportation network companies (TNC) and their drivers.

          Fiscal Impact: 

              One-time costs of approximately $197,000 to the CPUC  
              (Special Fund)

              One-time costs of $25,000 to CDI (Special Fund)

          The California Public Utilities Commission (CPUC) has identified  
          costs of approximately $79,000 for the study, and about $118,000  
          for additional rule-making to bring CPUC regulations into  
          conformance with statute.  The Department of Insurance indicates  
          expenses totaling $25,000 associated with the study.

          Background:   The Internet and the use of smartphones have  
          transformed the methods of which some individuals obtain  
          transportation.  Instead of hailing a cab or calling a  
          reservation car service, a growing number of consumers are using  
          new app-based services that connect drivers with passengers.   
          With GPS and geolocation technology as the foundation of the  
          business model, companies such as Uber, Lyft, and Rideshare  
          enable customers to download an app that alerts participating  
          drivers in the area of the need for a ride.  Drivers with their  
          TNC app turned on get a signal on their smartphones and can  
          accept or reject the ride request.  The customer can see photos  
          of responding drivers and their vehicles, as well as customer  
          ratings of each driver and then accepts or rejects the driver.   
          When a passenger and driver make a match, the ride is provided  
          and payment is made electronically on the smartphone, with  


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          drivers getting a portion and the TNC keeping a percentage.

          Drivers that provide these ride services use their own vehicles;  
          however, some TNC's provide the smartphone for the driver's use.

          Existing law grants the CPUC the authority to supervise and  
          regulate charter-party carrier of passengers (CPC).  Taxicabs  
          are excluded from the definition of charter-party carrier and  
          are instead regulated by cities and counties.

          A recent CPUC decision 13-09-045 created a new category of CPC  
          called Transportation Network Companies (TNCs) defined as an  
          organization or corporation that provides prearranged  
          transportation services for compensation using an online-enabled  
          application or platform to connect passengers with drivers using  
          their personal vehicles.  Among other things, the decision  
          defined specific safety measures, and requires TNCs to maintain  
          commercial liability insurance policies that provide at least $1  
          million per-incident coverage while transportation services are  
          being provided.  However, that time period of when  
          transportation services are provided was not clearly defined.

          Current law and CPUC decisions specify different insurance  
          requirements for categories of charter-party carrier vehicles  
          depending on seating capacity and use, including $750,000  
          commercial liability insurance for up to seven passengers, $1.5  
          million in coverage for up to 15 passengers, and $5 million for  
          16 or more passengers.

          Proposed Law:  Specifically, AB 2293 does the following:

          1) Defines "transportation network company services" as the  
          period of time that commences when a participating driver logs  
          onto the TNCs application program and ceases when the driver  
          logs off the application program.

          2)  Defines three distinct time periods that comprise  
          transportation network company services and specifies the  
          insurance requirements for each of those time periods as  

          a)   Period One  : The time when a driver logs onto the TNC's  
          application program and continues as long as the driver has not  


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          yet accepted a match; and, the period of time after a matched  
          passenger exits the vehicle until the time the driver accepts  
          another match.  The insurance coverage must include liability,  
          medical, comprehensive, collision, and uninsured/underinsured.  
          The policy must provide coverage of $750,000 for death, personal  
          injury, and property damage; but the CPUC will determine the  
          limits for the other coverages.

          b)   Period Two  :  The time from when the driver accepts a match  
          with a passenger until the time the driver picks up the matched  
          passenger. Insurance coverage limits are those imposed on by the  
          CPUC - currently $1 million.

          c)   Period Three  :  The time while the passenger is in the  
          vehicle. Insurance coverage limits are requirements imposed by  
          the CPUC - currently $1 million.

          3)  Requires the TNC to disclose to drivers the insurance  
          coverage and limits of liability that is being provided, and an  
          advisement that the driver's personal automobile insurance  
          policy may not provide coverage while the driver is making  
          himself or herself available for TNC services.  

          4)  Allows the liability insurance coverage requirement to be  
          met by an insurance policy obtained by the TNC; an insurance  
          policy obtained by a participating driver specifically written  
          to cover Period One as specified; or by a combination or those  
          two options.

          5)  Provides that if a driver's insurance policy that meets the  
          coverage obligation lapses, the TNC's insurance policy will  
          provide all required coverage beginning with the first dollar of  
          a claim.  

          6)  Provides that in the event of a loss or injury during the  
          provision of TNC services where the loss exceeds the policy  
          coverage requirements in AB 2293, the TNC or any affiliated  
          parent or subsidiary shall assume all liability above the  
          amounts of the policy coverage limits.

          7)  Clarifies that a driver's personal insurance policy will not  
          provide coverage during times when services are being provided  
          unless the coverage is separate and the policy specifically  


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          states that coverage for TNC service is being provided.

          8)  Requires the CPUC and the Department of Insurance to  
          collaborate on a study of TNC insurance to assess whether  
          coverage requirements are appropriate to the risk of TNC  
          services in order to promote data-driven decisions on insurance  

          9)  Prohibits a TNC from disclosing any personally identifiable  
          information of a passenger to a third party unless the following  
          apply:  a) the customer knowingly consents; b) the information  
          is given pursuant to a legal obligation; or c) the disclosure is  
          to the commission and is required during an investigation of a  

          10)  States Legislative Intent that the Department of Insurance  
          expedite the review of any application for approval of  
          transportation network company insurance products.

          11)  Contains Legislative Findings that the CPUC has initiated  
          regulation of TNC's as a new category of charter-party carriers  
          and is continuing to develop appropriate regulations; it is the  
          intent of the Legislature to continue ongoing oversight of the  
          commission's regulations; and provides that the Legislature does  
          not intend to prohibit the commission from exercising its  
          rulemaking authority in a manner that is consistent with this  

          12)  Requires participating drivers to carry proof of insurance  
          with them at all times during the provision of TNC services, and  
          to provide this proof to any other party and to a police officer  
          in the event of an accident.

          Related Legislation:  AB 612 (Nazarian) would require all  
          charter-party carriers, including transportation network  
          companies (TNCs), to submit all of its drivers to a Department  
          of Justice criminal background check and to participate in the  
          Department of Motor Vehicles (DMV) Employer Pull Notice Program  

          Staff Comments: In its ruling in September 2013, the CPUC  
          required TNCs to carry $1 million of liability insurance  
          coverage, but did not provide a definition of what constitutes  


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          "providing transportation network services".  AB 2293 has been  
          heard by two policy committees in the Senate - first the Energy,  
          Utilities and Commerce Committee, and then in the Senate  
          Insurance Company.

          AB 2293 requires that the CPUC and the Department of Insurance  
          collaborate on a study of TNC insurance in order to support  
          data-driven decision making.  The results of this study will  
          impact near and future commission decisions and will require  
          considerable collaboration between the two entities as well as  
          research into the details of TNC operations.  The bill does not  
          specify any time frame for the completion of that study.

          Additionally, since existing CPUC regulations do not  
          specifically define "providing TNC services" for purposes of  
          determining the times when liability insurance coverage is  
          necessary, the CPUC will need to revise its rules to incorporate  
          the definition contained in this measure.

          The requirement that the Department of Insurance expedite  
          applications for TNC insurance products will result in other  
          applications for insurance products to become less of a priority  
          when adjusting workload at the department.

          Amendments (as approved on August 14, 2014):  Amendments require  
          the driver to maintain TNC insurance of $100/$300/$50 during the  
          period before there is a passenger match and to require the TNC  
          company to provide $1 million commercial liability coverage;  
          revise definition of activity time periods; provide a firewall  
          against the driver's personal insurance; and require a  
          disclosure to drivers that a personal auto policy will not  
          provide coverage for comp/collision damages.