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 SUSPENSE FILE. AS AMENDED. 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 AB 2293 (Bonilla) Page 1 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 follows: a) Period One : The time when a driver logs onto the TNC's application program and continues as long as the driver has not AB 2293 (Bonilla) Page 2 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 AB 2293 (Bonilla) Page 3 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 requirements. 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 complaint. 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 article. 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 (EPN). 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 AB 2293 (Bonilla) Page 4 "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.