Earlier this month we started to talk about ridesharing services like Uber and Lyft and California’s efforts to regulate them. (Read the post here.) Cab companies objected loudly to the state’s seemingly casual treatment of the industry’s new lower-cost competitor. One reason transportation network companies could charge their customers less is that they were not required to carry commercial liability insurance on the drivers in the network. Further, TNCs were not required, as cab companies are, to carry workers’ compensation insurance, either.
The result was the lower fare, but passengers could have paid a very high price if their TNC driver were in an accident. Without a commercial policy behind them, the TNC drivers would have to turn to their own insurance. However, personal auto insurance does not cover commercial activities. If the driver were at fault, the insurance situation would be even more convoluted.
California formally adopted regulations for TNCs last year, including a requirement that the company, not the individual operator, carry commercial liability insurance. That insurance must have a per-incident coverage limit of at least $1 million.
It must have seemed like a good idea — if not entirely fair to the cab industry — but the scheme was soon tested. While cab companies must have insurance in place 24/7, the state had only required that TNCs cover the drivers “while providing TNC services.”
The terms proved inadequate after a TNC driver struck and killed a pedestrian — a 6-year-old girl — in San Francisco on Dec. 31, 2013. At the time of the accident, the driver did not have a TNC passenger. The question, then, was whether he was “providing services” to the TNC, triggering its insurance coverage.
The family has filed a wrongful death lawsuit against both the driver and the TNC. The interpretation of regulation’s language goes to whether the company’s or the driver’s insurance will pay damages and other costs in the event the family prevails. (The driver has since been charged with vehicular manslaughter; the criminal charges will not affect the outcome of the wrongful death claim.)
State regulators reacted quickly and proposed new language that would clarify when a driver is providing TNC services. We’ll discuss the basics in our next post.
Los Angeles Times, “California regulator warns about gaps in ride-sharing insurance,” Marc Lifsher and Salvador Rodriguez, Feb. 5, 2014
California Public Utilities Commission, “Order Instituting Rulemaking on Regulations Relating to Passenger Carriers, Ridesharing, and New Online-Enabled Transportation Services,” June/July 2014 (revised)