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: 8/26/14 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 the following 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 maintained by the driver and is specifically written to cover the driver's use of a vehicle in connection with a TNC's App or platform. 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 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 insuring the TNC and the driver in the amount of at least $200,000 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, within the specified time periods, through a policy obtained by a participating driver only if the TNC verifies that the policy is maintained by the driver and is specifically written to cover the driver's use of a vehicle in connection with a TNC's App or platform. 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: CONTINUED AB 2293 Page 6 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 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 a TNC or its insurer, in a claims coverage investigation, to cooperate with insurers that are involved in the claims coverage investigation to facilitate the exchange of information, including the provision of dates and times at which an accident occurred that involved a participating driver and the precise times that the participating driver logged on and off the TNC's App or platform. 15.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. 16.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 CONTINUED AB 2293 Page 7 complaint filed with the PUC against a TNC or a participating driver and the PUC treats the information under confidentiality protections. 17.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. 18.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. 19.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. 20.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 CONTINUED AB 2293 Page 8 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. 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 CONTINUED AB 2293 Page 9 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 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 8/27/14) Association of California Insurance Companies (co-source) CONTINUED AB 2293 Page 10 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 City of Los Angeles Companies (NAMIC) Companies (PADIC) 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 8/27/14) Google Inc. Greater California Livery Association Lyft San Francisco Cab Drivers Association Taxicab Paratransit Association of California The Internet Association United Taxicab Workers Veolia 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, 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, CONTINUED AB 2293 Page 11 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 8/27/14 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED