BILL ANALYSIS �
AB 2293
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ASSEMBLY THIRD READING
AB 2293 (Bonilla)
As Amended April 10, 2014
Majority vote
UTILITIES & COMMERCE 13-0 INSURANCE
11-0
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|Ayes:|Bradford, Bonilla, |Ayes:|Perea, Hagman, Allen, |
| |Buchanan, Ch�vez, Dahle, | |Bradford, |
| |Fong, Beth Gaines, | |Ian Calderon, Cooley, |
| |Garcia, Roger Hern�ndez, | |Dababneh, Frazier, Beth |
| |Jones, Mullin, Quirk, | |Gaines, Olsen, Wieckowski |
| |Rendon | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Establishes guidelines for regarding insurance
coverage for Transportation Network Companies (TNCs) to ensure
personal and financial safety of consumers. Specifically, this
bill :
1)Codifies the California Public Utilities Commission's (PUC)
definition of TNC.
2)Requires TNCs to inform drivers about the insurance coverage
and limits offered by the TNC when providing TNC services and
that a driver's personal auto coverage may not provide
coverage when operating as a TNC.
3)Defines when personal and commercial auto insurance is in
effect.
4)Clarifies that commercial automobile insurance coverage has
the duty to defend and indemnify when the TNC driver is on
duty.
EXISTING LAW :
1)California Constitution Article XII:
a) Establishes private corporations and persons that own,
operate, control, or manage a line, plant, or system for
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the transportation of people or property, and common
carriers, as public utilities subject to control by the
Legislature.
b) Allows the PUC to fix rates and establish rules for the
transportation of passengers and property by transportation
companies.
1)Establishes, in PUC Decision 13-09-045 (Decision), rules and
regulations relating to public safety risks in the operation
of transportation services utilizing TNCs.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS : According to the author, "Transportation Network
Companies (TNC's) are an exciting 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."
1)Hire a driver via online-enabled application: California law
currently recognizes and regulates three modes of passenger
transportation for compensation: taxi services - regulated by
cities and/or counties; charter party carrier services
(limousines), and passenger stage companies - regulated by the
PUC.
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A niche model of transportation services has sprung up in
cities across the United States, including California.
Patrons can simply prearrange transportation services
utilizing an online-enabled application on their smart phone
device. Small start-up companies such as Lyft, SideCar, and
Uber, among others, have broadened the playing field by
competing with traditional charter-party carriers and taxi cab
services in select cities in California.
Uber sends drivers in either luxury vehicles or personal
vehicles to pick up passengers whose credit cards are
automatically charged flat fees or fares calculated by GPS.
Lyft and SideCar connect people needing rides with drivers who
pick them up in personal vehicles. Fares for Lyft and SideCar
are calculated based on distance or by the amount you wish to
pay.
2)How does the state regulate this new business model: As the
first of its kind, this new model of transportation services
operated for a number of years without regulatory oversight in
California. In fact, there is no evidence that any other
state maintains regulatory oversight of this new business
model.
However, in December 2012, the PUC initiated an Order
Instituting Rulemaking to determine whether and how services
arranged through online-enabled applications might affect
public safety. The PUC sought comment on issues including:
how the PUC's existing jurisdiction should be applied to
businesses such as Uber, SideCar, and Lyft; the consumer
protection and safety implications of these new methods for
arranging transportation services; whether and how the new
transportation business models differ from longstanding forms
of ridesharing; and the new transportation business models'
potential effect on insurance and transportation access.
In a September 2013 Decision, the PUC established a new
transportation business model called Transportation Network
Companies (TNCs). The PUC defined TNCs as an "organization
whether a corporation, partnership, sole proprietor, or other
form, operating in California that provides prearranged
transportation services for compensation using an
online-enabled application (app) or platform to connect
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passengers with drivers using their personal vehicles."<1>
This bill seeks to codify this definition in statute.
TNCs must also meet the following safety and regulatory
requirements:
a) The TNC must register with the PUC.
b) The TNC and their drivers must meet safety requirements
(including insurance, background checks, and vehicle
inspections).
c) The transportation service companies must meet PUC
regulatory requirements.
d) Prohibits TNCs from operating at airports unless
permission is granted by the airport.
e) The TNCs are required to submit a report within 90 days
of the decision on how they will address the potential
divide for services to the disabled community.
f) Annual reporting requirement.
TNC's currently permitted by the PUC are Lyft, Uber-X (aka
Rasier), Wingz (formerly Tickengo), and Summon (formerly
InstantCab). The Decision empowers the PUC to exercise its
safety and enforcement authority against TNCs that violate any
regulatory or safety requirements.
In its Decision, the PUC committed to revisit the issue in
September 2014 to review regulations, data and reports from
TNCs and hold an all-day stakeholder workshop. Additionally,
the PUC plans to review outdated safety regulations pertaining
to the charter-party carriers (i.e. limousines).
3)Drawing the bright line personal and commercial auto
insurance: Last year, a TNC driver fatally struck a child and
injured two family members as they crossed the street in
downtown San Francisco. This sparked major concern about who
is responsible for the loss of life and injuries sustained by
the pedestrians of this unfortunate accident.
In March 2013, the PUC issued an Assigned Commissioner's
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<1> California Public Utilities Commission Decision 13-09-045
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Ruling (ACR) requesting comment on proposed modification to
the Decision which adopted rules and regulations for TNCs.
According the ACR, "the proposed modifications are in response
to: 1) our review of the insurance requirements we adopted and
their potential impact on public safety, 2) our review of the
policies TNCs submitted with their applications, 3) the
absence of a definition of providing Transportation Network
Company services, and 4) what insurance coverage must be in
force and effect while a driver is providing TNC services."<2>
The public comment period concluded April 7, 2014. A final
decision is still pending.
In the absence of a clear definition of "providing TNC
services," this gray area has potentially created a gap in
insurance coverage. This raises the question - does business
activity begin once the driver logs into the TNC's software
application, when the driver accepts the fare (match) or when
the driver has the passenger in the car? This bill attempts
to provide a functional definition of "providing TNC services"
by specifying that the insurance coverage provided by the TNC,
as mandated by the PUC, covers incidents that occur from the
time the TNC driver turns the application that provides the
connection between driver and rider on, and continues that
coverage until the time the driver turns the application off.
Moreover, this bill specifies that commercial coverage ceases
when the driver logs off from the TNC's application program.
The author states that, "it is incumbent upon the Legislature
to determine a clear line for when commercial activity begins
and ends for TNC drivers. 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."
4)Keeping the TNC driver informed: To ensure drivers are fully
aware about the insurance coverage and limits when providing
TNC services, this bill requires a TNC to inform drivers that
their personal auto insurance will likely not cover them
should an incident occur. It is likely that many drivers are
unaware of the standard livery exclusion in personal auto
policies. Without notice, they may not review their personal
policies to see if such exclusion is included in their own
policy. Requiring TNCs to develop its own disclosure form may
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<2> CPUC Assigned Commissioner's Ruling, Rulemaking 12-12-011,
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result in confusion on behalf of the drivers. Drivers may not
read or understand the "fine print" describing the insurance
coverage and limits. The PUC may be better suited to develop
a standard disclosure agreement between the TNC and
participating drivers given their regulatory authority over
this new transportation industry.
This bill clarifies that the insurance offered by the TNC is
the primary policy. For instance, if a driver is completing
commercial activity for a TNC, the TNC insurance should serve
as the primary insurance - not the personal auto policy -
which will likely refuse coverage. The author opines that,
"clarifying the issue of primary and excess insurance ensures
that the TNC policy has the duty to indemnify and the duty to
defend the driver in the event of a claim. It also prevents
the situation where both policies are somehow considered
primary and we see a delay in any insurance action while both
policies dispute the issue of primary coverage."
5)Duty to defend and indemnify. The bill contains language to
the effect that the TNC's insurer has the duty to defend and
indemnify in the event a TNC driver is named as a party in a
civil action for damages resulting from an accident that
occurred while the driver's vehicle was made available for
transportation network services. In addition to paying
damages to an accident victim, an insurer owes a duty to its
policyholder to provide a defense in the event that the
policyholder is sued for damages. The private passenger
insurers are concerned that TNC commercial policies will be
narrowly drafted, and that TNC drivers will fear being left
without a defense once they are sued, and will turn to the
private passenger automobile insurer and invoke the duty to
defend. As with the primary/excess issue above, the bill is
designed to minimize the opportunity for these uncertainties,
and the express language that the commercial insurer has the
duty to defend and indemnify is included to eliminate any
remaining uncertainty.
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083
FN: 0003395
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