BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



           ----------------------------------------------------------------- 
          |SENATE RULES COMMITTEE            |                       AB 2293|
          |Office of Senate Floor Analyses   |                              |
          |1020 N Street, Suite 524          |                              |
          |(916) 651-1520         Fax: (916) |                              |
          |327-4478                          |                              |
           ----------------------------------------------------------------- 
           
                                           
                                    THIRD READING


          Bill No:  AB 2293
          Author:   Bonilla (D)
          Amended:  8/22/14 in Senate
          Vote:     21


           SENATE ENERGY, UTIL. & COMMUNIC. COMM.  :  10-0, 6/17/14
          AYES:  Padilla, Fuller, Block, Cannella, Corbett, De León,  
            DeSaulnier, Hill, Pavley, Wolk
          NO VOTE RECORDED:  Knight

           SENATE INSURANCE COMMITTEE :  9-1, 6/25/14
          AYES:  Monning, Corbett, Correa, DeSaulnier, Mitchell, Nielsen,  
            Roth, Torres, Vidak
          NOES:  Lieu
          NO VOTE RECORDED:  Gaines

           SENATE APPROPRIATIONS COMMITTEE  :  5-1, 8/14/14
          AYES:  De León, Hill, Lara, Padilla, Steinberg
          NOES:  Gaines
          NO VOTE RECORDED:  Walters

           ASSEMBLY FLOOR  :  71-0, 5/27/14 - See last page for vote


           SUBJECT  :    Transportation network companies: insurance coverage

           SOURCE  :     Association of California Insurance Companies
                      Personal Insurance Federation of California


           DIGEST  :    This bill, beginning July 1, 2015, amends the  
          Passenger Charter-Party Carriers' Act to require liability  
                                                                CONTINUED





                                                                    AB 2293
                                                                     Page  
          2

          insurance coverage for transportation network companies (TNCs)  
          and their drivers.


           Senate Floor Amendments  of 8/22/14 revise the insurance coverage  
          requirement and related duties of TNCs.

           ANALYSIS  :    

          Existing law: 

          1.Authorizes the Public Utilities Commission (PUC) to regulate  
            various transportation services, including charter-party  
            carriers of passengers, defined as persons engaged in the  
            transportation of others by motor vehicle for compensation on  
            a prearranged basis over any public highway, but not including  
            taxicabs regulated by local agencies.

          2.Requires that the PUC 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 for up to 15 passengers, and $5 million for 16 or  
            more passengers. 

          3.Requires every city or county to regulate taxicabs with  
            seating capacity for up to eight passengers that are operating  
            in their jurisdictions.

          4.Requires every owner of a vehicle used in the transportation  
            of passengers for hire not regulated by the PUC, including  
            taxicabs, to maintain liability insurance of at least $15,000  
            for death and personal injury, $30,000 for death or injury of  
            two or more persons, and $5,000 for property damage (15/30/5),  
            all per incident.

          5.Requires personal automobile insurance with minimum liability  
            coverage of 15/30/5 and excludes coverage for any commercial  
            use of a vehicle under a personal automobile insurance policy.

          6.Requires liability insurance for nonprofit ridesharing  
            vehicles, which are exempt from charter-party carrier  
            regulations, to be no less than three times the amount  
            required for noncommercial vehicles.

                                                                CONTINUED





                                                                    AB 2293
                                                                     Page  
          3


          7.Authorizes the PUC to enforce laws and regulations applicable  
            to charter-party carriers, conduct inspections and  
            investigations, suspend or revoke permits, impound vehicles,  
            and impose fines and misdemeanor penalties.

          Existing PUC decision:

          1.Establishes TNC as a new category of charter-party carriers  
            subject to its jurisdiction and defines a TNC as an  
            organization operating in California that provides prearranged  
            transportation services for compensation using an  
            online-enabled application (App) or platform to connect  
            passengers with drivers using their personal vehicles.

          2.Requires each TNC to maintain commercial liability insurance  
            policies providing not less than $1 million coverage per  
            incident involving a vehicle and driver while "providing TNC  
            services."

          This bill:

          1.Requires a TNC to disclose in writing to participating  
            drivers, as part of its agreement with those drivers, the  
            insurance coverage and limits of liability that the TNC  
            provides, as specified.

          2.Requires a TNC to also disclose in writing to participating  
            drivers, as part of its agreement with those drivers, that the  
            driver's personal automobile insurance policy will not provide  
            collision or comprehensive coverage for damage to the vehicle  
            used by the driver from the moment the driver logs on to the  
            TNC's App or platform to the moment the driver logs off the  
            transportation network company's App or platform.

          3.Provides that specified requirements will apply to TNC  
            insurance from the moment a participating driver accepts a  
            ride request on the TNC's App or platform until the driver  
            completes the transaction on the App or platform or until the  
            ride is complete, whichever is later:

             A.   TNC insurance shall be primary and in the amount of $1  
               million for death, personal injury, and property damage.   
               The requirements for the coverage required may be satisfied  

                                                                CONTINUED





                                                                    AB 2293
                                                                     Page  
          4

               by any of the following:

                (1)     TNC insurance maintained by a participating  
                  driver.

                (2)     TNC insurance maintained by a transportation  
                  network company or a combination of both.

          1.TNC insurance coverage provided shall also provide for  
            uninsured motorist coverage and underinsured motorist coverage  
            in the amount of $1million from the moment a passenger enters  
            the vehicle of a participating driver until the passenger  
            exits the vehicle.  The policy may also provide this coverage  
            during any other time period, if requested by a participating  
            driver relative to insurance maintained by the driver.

          2.Provides that the insurer, in the case of insurance coverage  
            provided shall have the duty to defend and indemnify the  
            insured.

          3.Provides that a TNC may meet its obligations, as it pertains  
            to under and uninsured motorist, through a policy obtained by  
            a participating driver only if the TNC verifies that the  
            policy is specifically written to cover TNC services and is  
            maintained by the driver.

          4.Provides that following requirements shall apply to TNC  
            insurance from the moment a participating driver logs on to  
            the TNC App or platform until the driver accepts a request to  
            transport a passenger, and from the moment the driver  
            completes the transaction on the App or platform or until the  
            ride is complete, whichever is later, until the driver either  
            accepts another ride request on the App or platform or logs  
            off the App or platform:

             A.   TNC insurance shall, be primary and in the amount of at  
               least $50,000 for death and personal injury per person,  
               $100,000 for death and personal injury per incident, and  
               $30,000 for property damage.  The requirements for the  
               coverage required may be satisfied by any of the following:

                (1)     TNC insurance maintained by a participating  
                  driver.


                                                                CONTINUED





                                                                    AB 2293
                                                                     Page  
          5

                (2)     TNC insurance maintained by a TNC that provides  
                  coverage in the event a participating driver's insurance  
                  policy has ceased to exist or has been cancelled or the  
                  participating driver does not otherwise maintain  
                  insurance or a combination of both.

          1.Provides that a TNC shall also maintain insurance coverage  
            that provides excess coverage of $500,000 per occurrence to  
            cover any liability arising from a participating driver using  
            a vehicle in connection with a TNC App or platform within the  
            time periods specified which liability exceeds the required  
            coverage limits.

          2.Provides that the insurer providing insurance coverage shall  
            be the only insurer having the duty to defend any liability  
            claim arising from an accident occurring within the time  
            periods specified.

          10.Provides that a TNC may meet its obligations through a policy  
            obtained by a participating driver only if the TNC verifies  
            that the policy is specifically written to cover TNC services  
            and is maintained by the driver.

          11.States that coverage under a TNC insurance policy shall not  
            be dependent on a personal automobile insurance policy first  
            denying a claim nor shall a personal automobile insurance  
            policy be required to first deny a claim.

          12.Provides that in every instance where TNC insurance  
            maintained by a participating driver to fulfill the insurance  
            obligations has lapsed or ceased to exist, the TNC shall  
            provide the coverage required beginning with the first dollar  
            of a claim.

          13.Provides that during the period of time from the moment a  
            participating driver in a TNC logs on to the TNC App or  
            platform until the driver logs off the online-enabled  
            application or platform or the passenger exits the vehicle,  
            whichever is later, all of the following shall apply:

             A.   The participating driver's or the vehicle owner's  
               personal automobile insurance policy shall not provide any  
               coverage to the participating driver, vehicle owner, or any  
               third-party, unless the policy expressly provides for that  

                                                                CONTINUED





                                                                    AB 2293
                                                                     Page  
          6

               coverage during the period of time to which this  
               subdivision is applicable, with or without a separate  
               charge, or the policy contains an amendment or endorsement  
               to provide that coverage, for which a separately stated  
               premium is charged.

             B.   The participating driver's or the vehicle owner's  
               personal automobile insurance policy shall not have the  
               duty to defend or indemnify for the driver's activities in  
               connection with the TNC, unless the policy expressly  
               provides otherwise for the period of time to which this  
               subdivision is applicable, with or without a separate  
               charge, or the policy contains an amendment or endorsement  
               to provide that coverage, for which a separately stated  
               premium is charged.

          14.Requires the PUC and the Department of Insurance (CDI) 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, and shall report the findings of this  
            study to the Legislature no later than December 31, 2017.

          15.Provides that a TNC shall not disclose to a third-party any  
            personally identifiable information of a transportation  
            network company passenger unless one of the following applies:

             A.   The customer knowingly consents.

             B.   Pursuant to a legal obligation.

             C.   The disclosure is to the PUC in order to investigate a  
               complaint filed with the PUC against a TNC or a  
               participating driver and the PUC treats the information  
               under confidentiality protections.

          16.Defines "transportation network company (TNC)" to mean an  
            organization, including, but not limited to, a corporation,  
            limited liability company, partnership, sole proprietor, or  
            any other entity, operating in California that provides  
            prearranged transportation services for compensation using an  
            online-enabled application or platform to connect passengers  
            with drivers using a personal vehicle.


                                                                CONTINUED





                                                                    AB 2293
                                                                     Page  
          7

          17.Defines "participating driver" or "driver" to mean any person  
            who uses a vehicle in connection with a TNC's App or platform  
            to connect with passengers.

          18.Defines "transportation network company insurance" to mean a  
            liability insurance policy that specifically covers  
            liabilities arising from a driver's use of a vehicle in  
            connection with a TNC's App or platform.

          19.States that these provisions commence July 1, 2015.

           Background
           
           Smartphones Transform How to Get a Ride  .  The Internet and  
          proliferation of smartphones have transformed many aspects of  
          life and commerce, including how to get a ride.  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 accept  
          or reject the driver.  When a passenger and driver make a match,  
          the ride is provided, and payment is made electronically on the  
          smartphone, with drivers getting a portion.

          App-based ride services were born in California and began  
          operation in the Bay Area in 2012.  Uber, the largest ride  
          service company, is now available in more than 100 cities in 35  
          countries and was recently valued at about $17 billion.

          Drivers with these new services use their own vehicles and most  
          have other jobs.  Lyft reports that 54% of its drivers have a  
          full-time job, 30% work part-time, with more than a third  
          driving less than five hours a week, and only 10% driving more  
          than 30 hours per week.  Some drivers turn on their app and  
          accept riders in their spare time or focus on weekends and  
          evenings in busy entertainment districts when "surge" fares are  
          in effect.  Uber has two models - Uber drivers who are licensed  
          limousine drivers, and UberX drivers using their own vehicles.   

                                                                CONTINUED





                                                                    AB 2293
                                                                     Page  
          8

          Many taxi drivers also are signing up with the new services to  
          supplement taxi income or switching fulltime to the new model.

           Varied Public Safety Regulations for Different Transportation  
          Modes  .  The PUC regulates many types of transportation,  
          including "passenger stage corporations" and "charter party  
          carriers" that transport persons by motor vehicle for  
          compensation on a prearranged basis.  The "Passenger  
          Charter-Party Carriers Act," first enacted in 1961, contains  
          numerous special provisions, exclusions, classifications, and  
          permits for a wide range of transportation modes including a  
          limousine with seating capacity up to eight passengers, a bus  
          with capacity up to 15 passengers, a large bus with 16 or more  
          passengers, as well as vehicles used for nonprofit ridesharing,  
          round-trip sightseeing, youth camps, farmworkers, motel guests,  
          hot air balloon ride passengers, school children, and more.   
          Different insurance and other requirements apply depending on  
          the size and use of vehicles and other factors.

          Taxicabs are excluded from the definition of charter-party  
          carrier, with the key distinction being that charter-party  
          carrier transport must be prearranged through written contract  
          or telephone and not be through street hails.  Thus, taxis are  
          exempt from PUC regulation and instead are regulated by cities  
          and counties.  Airports also have regulations and permit  
          requirements for all types of vehicles.

          The last major revision of the "Passenger Charter-Party Carriers  
          Act" was in 1990 in response to what news reports called a "Gold  
          Rush-like boom in the limousine industry" after the 1984  
          Olympics in Los Angeles when chauffer service proved profitable.  
           Taxis and licensed limousine operators called for more  
          regulation and enforcement against "bandit" limousines that were  
          operating without a license and commercial insurance, and,  
          according to the Los Angeles Checker Cab Company, "represent a  
          threat to healthy competition in the transportation industry and  
          to public safety and welfare."  Airports especially responded  
          with increased enforcement, claiming the PUC had abdicated its  
          enforcement.

           PUC Begins Regulation of Transportation Network Companies  .  In a  
          September 2013 decision, the PUC began regulation of the new  
          app-based ride services.  The PUC exercised its jurisdiction  
          over charter-party carriers, but created a distinct new category  

                                                                CONTINUED





                                                                    AB 2293
                                                                     Page  
          9

          called TNCs.  In order to balance innovation, consumer choice,  
          and public safety, the PUC tailored specific new rules in  
          response to the introduction of new technology into an existing  
          industry.  The decision requires TNCs to obtain a permit from  
          the PUC, conduct criminal background checks of drivers,  
          establish a driver training program, implement a zero-tolerance  
          policy on drugs and alcohol, conduct vehicle inspections, and  
          obtain authorization from airports before conducting any  
          operations on or into airport property.  The decision also  
          requires each TNC 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."

           FISCAL EFFECT :    Appropriation:  No   Fiscal Com.:  No   Local:  
           No

          According to the Senate Appropriations Committee:

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

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

           The PUC has identified costs of approximately $79,000 for the  
            study, and about $118,000 for additional rule-making to bring  
            PUC regulations into conformance with statute.  CDI indicates  
            expenses totaling $25,000 associated with the study.

           SUPPORT  :   (Verified  8/25/14)

          Association of California Insurance Companies (co-source)
          Personal Insurance Federation of California (co-source)
          Allstate Insurance Company 
          American Insurance Association
          California Airports Council 
          California App-Based Drivers Association 
          California Credit Union League
          California Democratic Party
          California Teamsters Public Affairs Council
          City of Los Angeles
          Companies (NAMIC) 
          Companies (PADIC) 
          Consumer Attorneys of California 

                                                                CONTINUED





                                                                    AB 2293
                                                                     Page  
          10

          Consumer Federation of California 
          Independent Insurance Agents and Brokers of California
          Liberty Mutual Insurance
          National Association of Mutual Insurance 
          Pacific Association of Domestic Insurance 
          Property Casualty Insurers Association of America
          San Diego County Regional Airport Authority 
          San Francisco International Airport 
          San Francisco Metropolitan Transit Agency
          State Farm 
          The Sullivan Group 
          The Surplus Lines Association of California 
          United Policyholders 

           OPPOSITION  :    (Verified  8/25/14)

          Google Inc.
          Greater California Livery Association
          Lyft
          San Francisco Cab Drivers Association
          Taxicab Paratransit Association of California
          The Internet Association
          Uber Technologies, Inc.
          United Taxicab Workers
          Veolia

           ARGUMENTS IN SUPPORT  :    The author states that this bill  
          protects public safety and consumers by requiring TNC insurance  
          to cover the actions of a TNC driver when the app is on until it  
          is turned off and clarifying that TNC insurance coverage is  
          primary with the TNC insurance having the duty to defend in the  
          event a civil action is commenced.  It requires that TNCs  
          disclose to their drivers the TNC insurance coverage limitations  
          and that a driver's personal auto insurance may not cover the  
          driver while providing TNC services.  The author states that  
          this will ensure drivers are insured at all times, protect the  
          public from the results of lack of coverage or questions of  
          coverage, and reduce unnecessary lawsuits.

           ASSEMBLY FLOOR  :  71-0, 5/27/14
          AYES:  Achadjian, Alejo, Bigelow, Bloom, Bocanegra, Bonilla,  
            Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau,  
            Chávez, Chesbro, Cooley, Dababneh, Dahle, Daly, Dickinson,  
            Eggman, Fong, Fox, Frazier, Beth Gaines, Garcia, Gatto, Gomez,  

                                                                CONTINUED





                                                                    AB 2293
                                                                     Page  
          11

            Gonzalez, Gordon, Gorell, Gray, Grove, Hagman, Hall, Harkey,  
            Roger Hernández, Holden, Jones, Jones-Sawyer, Levine, Linder,  
            Logue, Lowenthal, Maienschein, Mansoor, Medina, Melendez,  
            Mullin, Muratsuchi, Nestande, Olsen, Pan, Perea, John A.  
            Pérez, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas,  
            Skinner, Stone, Ting, Wagner, Waldron, Weber, Wieckowski,  
            Wilk, Williams, Yamada, Atkins
          NO VOTE RECORDED:  Allen, Ammiano, Conway, Donnelly, Nazarian,  
            Patterson, V. Manuel Pérez, Quirk-Silva, Vacancy


          JG:e  8/25/14   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

                                   ****  END  ****





























                                                                CONTINUED