Uber, Lyft and TNC’s win (Again) in California: New Insurance Requirements Approved


thZTS2BGFXIn late August, the California Assembly voted 70-0 to pass AB2293, an Act specifying insurance requirements for transportation network companies (TNC) like Uber, Lyft and Sidecar.  I recently posted an article about the TNC’s victory in Minneapolis (“Uber, Lyft and other Transportation Network Companies Hitting the Streets in Minneapolis”). TNC’s connect passengers and drivers through smartphone apps with the driver using his or her own personal automobile to provide “taxicab” rides to customers.  Tech savvy companies such as Uber and Lyft are poised to significantly erode, if not entirely replace, the taxicab industry within the next few years. Upon passage of AB2293, Robert Callahan, the Internet Association’s California director, applauded lawmakers. “Ridesharing has revolutionized the way we move around our communities, and Californians have embraced it as a safe, innovative and cost effective transportation option,” he said. “Californians love Uber and lawmakers have heard them loud and clear,” Uber spokeswoman Eva Behrend added.

The Act, which becomes effective July 1, 2015, amends Chapter 8 of Division 2 of the California Public Utilities Code.  Below is a summary of the significant aspects of the bill.

A “transportation network company” is defined to mean companies that provide “prearranged transportation services for compensation using an online-enabled application or platform to connect passengers with drivers using a personal vehicle.”

A “participating driver” or “driver” is defined to mean “any person who uses a vehicle in connection with a transportation network company’s online-enabled application or platform to connect with passengers.”

The Act 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 transportation network company’s online-enabled application or platform.”

Under the Act, the TNC must advise its drivers in writing that the driver’s personal automobile insurance policy will not provide coverage when using a vehicle in connection with a transportation network company’s online-enabled application or platform and will not provide collision or comprehensive coverage for damage to the vehicle from the moment the driver logs on to the TNC’s online-app to the moment the driver logs off the TNC’s online-app.

The Act specifies the insuring obligations of the TNC and driver during three different periods of time:

First, from the moment a driver logs on to the TNC’s online app until the driver accepts a request to transport a passenger. During this time period, the TNC insurance is “primary” and is $50,000 for death and personal injury per person, $100,000 for death and personal injury per accident, and $30,000 for property damage. This obligation can be satisfied by insurance maintained by the driver or insurance maintained by the TNC if the driver does not maintain insurance or if the driver’s policy has ceased to exist or has been canceled, or a combination of both policies. If the obligation will be satisfied in whole or in part through a driver’s policy, the TNC must verify that insurance is maintained by the driver and that the policy is specifically written to cover the driver’s use of a vehicle in connection with the TNC online app. The TNC is also required to maintain $200,000 of “excess” coverage insuring the TNC and driver to cover any liability arising from a driver using a vehicle during this time period.

Second, from the moment a participating driver accepts a ride request until the ride is complete.  During this time period, the TNC insurance is “primary” and is $1,000,000 for death, personal injury, and property damage. The $1 million obligation can be satisfied by insurance maintained by the driver or insurance maintained by the TNC, or a combination of both. If the obligation will be satisfied in whole or in part through a driver’s policy, the TNC must verify that the policy is maintained by the driver and that the policy is specifically written to cover the driver’s use of a vehicle in connection with the TNC online app. The TNC insurance must also provide $1 million in UM/UIM coverage from the moment the passenger enters the vehicle until the passenger exits the vehicle. (Whether the $1 million of UM/UIM coverage must apply to the driver if injured is not addressed in the legislation).

Third, from the moment the ride is complete until the driver either accepts another ride request or logs off the app. The insurance requirements relating to this relating time period are the same as those required when the driver has logged onto the online app.

In any case where the insurance obligation is to be satisfied from the driver’s policy, if the driver’s policy has lapsed or ceased to exist, the TNC is required to provide the coverage required by the Act from the first dollar of a claim.

The Act also contains a provision stating that it shall not be construed to require a personal auto policy provide any coverage during the period of time the driver is logged onto a TNC’s online app. Further, during the period of time between the moment a drive logs on to a TNC online app and when the driver logs off or passenger exits the vehicle, whichever is later, the following rules apply: (1) the personal auto policy of the driver (or vehicle owner) will not provide coverage to anyone, unless the policy expressly provides for coverage during this period of time; and (2) a personal auto insurer may, in its discretion, extend coverage while the vehicle is used in connection with a TNC’s online app during this time period only if the policy expressly provides for the coverage during this time period.

The Act encourages the California Department of Insurance to expedite review of any application for approval of transportation network company insurance products so that these products become available for purchase before July 1, 2015.

Finally, the Act does not limit the liability of a TNC in any action for damages against a TNC for an amount above the required insurance coverage.

This blog is for informational purposes only.  By reading it, no attorney-client relationship is formed.  The law is constantly changing and if you want legal advice, please consult an attorney. Gregory J. Johnson © All rights reserved. 2014.

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