BILL ANALYSIS Ó
AB 2068
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Date of Hearing: April 21, 2014
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 2068 (Nazarian) - As Amended: April 21, 2014
SUBJECT : Transportation Network Companies
SUMMARY : Declares Transportation Network Companies (TNCs) are
charter-party carriers of passengers and specifies commercial
insurance requirements.
EXISTING LAW :
1)Article XII of the California Constitution:
a) Establishes private corporations and persons that own,
operate, control, or manage a line, plant, or system for
the transportation of people or property, and common
carriers, as public utilities subject to control by the
Legislature.
b) Allows the California Public Utilities Commission (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, rules and regulations
relating to public safety risks in the operation of
transportation services utilizing TNCs
FISCAL EFFECT: Unknown.
COMMENTS: According to the author, "in order to prevent any
potential coverage disputes, cover gaps in insurance coverage
and ensure that the driving public is safe and properly covered,
AB 2068 will close the safety gap and the undue risk that
currently exist when transporting people for hire by defining
TNCs as charter-party carriers and requiring all charter-party
carriers to carry primary commercial insurance continuously
(24-7-365).
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
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counties; charter party carrier services (limousines) and
passenger stage companies - regulated by the PUC.
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, 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.
On November 14, 2012 the PUC issued $20,000 citations to
charter-party carriers Lyft, SideCar, and Uber for illegally
operating. In December 2012, the PUC initiated a 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 defined a new
transportation business model called Transportation Network
Companies (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
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platform to connect passengers with drivers using their personal
vehicles."
In addition, the PUC specified safety and regulatory
requirements for TNC:
The TNC must register with the PUC
The TNC and their drivers must meet safety requirements
(including insurance, background checks, and vehicle
inspections)
The Transportation service companies must meet PUC
regulatory requirements
Prohibits TNCs from operating at airports unless permission
is granted by the airport
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
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 makes clear the PUC's safety and
enforcement authority against TNCs that violate PUC 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).
Subsequent to issuing the Decision, the Taxicab Paratransit
Association of California (TPAC) and Uber Technologies, Inc.
filed an application for rehearing in October 2013 citing, among
other things believes that the PUC's decision unfairly creates a
new class of de facto taxicab transportation that is designed to
be exempt from the local regulatory structure applicable taxicab
services pursuant to Government Code § 53075.5. Uber's
application for rehearing stated that Uber does not provide
transportation services, and as such the PUC has no jurisdiction
over it. According to Uber, it is just a "technology company
that develops software that allows a user to simply procure
transportation service from a licensed TCP holder. The CPUC
granted limited rehearing of insurance requirements, mandatory
drug testing, license plate requirements, and whether or not
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subsidiaries of Uber are TNCs. The final outcome of the
rehearing proceeding has yet to be determined.
3)PUC takes a closer look at TNC regulations ahead of schedule :
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 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."<1>
The public comment period concluded April 7, 2014. A final
decision is still pending.
4) TNCs are charter party carriers of passengers : This bill
appropriately clarifies that TNCs are charter-party carriers
which is consistent with the PUC's Decision which states " it is
reasonable to conclude that TNCs are charter-party passenger
carriers, and therefore we will exercise our existing
jurisdiction over these services pursuant to Article XII of the
California Constitution and the Passenger Charter-party
Carriers' Act, PU Code §5351 et seq".
5)Drawing a bright line between personal vehicle and commercial
insurance : The PUC
Decision requires TNCs to maintain commercial liability
insurance policies providing no less than $1 million per
incident coverage for incidents involving vehicles and drivers
while they are providing TNC services. However, this
unintentionally caused confusion as to the meaning of "providing
TNC services" and under what circumstances does TNC insurance
apply.
---------------------------
<1> CPUC Assigned Commissioner's Ruling, Rulemaking 12-12-011,
Page 2
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In January 2014, the California Department of Insurance (CDI)
advised the PUC of gaps in TNC requirements. CDI's website warns
drivers that their personal insurance policy does not cover
accidents when their cars have been used for commercial
purposes. In addition, the Insurance Commissioner authored a
letter to the PUC asking it to consider clarifying these issues
by requiring TNCs and their drivers to carry a more clear and
comprehensive insurance policy.
AB 2068 modifies the Public Utilities Code to make TNC
commercial insurance the primary insurance consistent with
existing charter-party carriers. However, since the current TNC
model requires drivers to use their personal vehicles to
transport passengers at their choosing, there will be many
instances when the TNC driver will be using the vehicle for
personal use and thereby covered by their personal auto policy.
Due to the complex nature of this provision concerning
commercial insurance policies, it will be addressed in Assembly
Insurance Committee.
6)Keeping the TNC driver informed: Irrespective of what
insurance requirements are
determined, the committee is concerned with ensuring drivers are
properly noticed and educated about the applicable TNC insurance
coverage. Therefore, this author and this committee may wish to
require the add following provision to PU Code 5391: "The
commission shall develop a standard disclosure agreement that
provides information about 1) insurance coverage, 2) limits of
liability, and 3) advises that the driver's personal automobile
insurance policy may not provide coverage while the driver makes
himself or herself available for services as part of a written
agreement made between drivers who offer services and a
charter-party carriers of passengers that utilizes an
online-enabled application or platform to connect passengers
with drivers. Each standard disclosure agreement must be in
writing and signed by the driver. Disclosure agreement records
are subject to review and audit by the commission at the
commission's discretion."
7)Support : TPAC, the bill sponsors, opine that AB 2068 "updates
state law to include online
enabled transportation companies in the codes governing Charter
Party Carriers." In terms of the provision which requires
commercial auto liability insurance to be the primary policy,
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TPAC argues that "commercial auto liability insurance is the
only insurance product on the market today that will cover
vehicles, drivers and passengers in any situation - whether
driving for work, personal or picking up street hails."
Moreover TPAC argues that "CPUC did not require the commercial
insurance to be primary." According to TPAC, "there is no other
insurance product on the market today that provides coverage at
all times that these vehicles are on the road."
8)Opposition : Uber opposes AB 2068 countering that "Uber's TNC
subsidiary Rasier already
holds a policy that provides coverage for every aspect of a trip
that is more than triple the coverage required by drivers in
California. Our ridesharing insurance policy offers $1,000,000
of commercial insurance from the moment the App connects a
driver with a rider, until the driver drops the rider off. There
is also $1,000,000 of uninsured/underinsured motorist coverage
and $50,000 of contingent comprehensive and collision coverage.
Uber provides a contingent liability policy during this time at
$50,000/$100,000/$25,000, when California only requires
$15,000/$30,000/$5,000. Rather, drivers and riders using Uber's
rideshare request platform are covered by insurance in excess of
the amounts required by other California drivers."
Lyft also opposes the bill stating "AB 2068 would only serve to
undo the many benefits that the peer-to-peer transportation
model has already provided to Californians by imposing
significant and unnecessary restrictions that ignore the
fundamental nature of peer-to-peer transportation without any
corresponding public safety benefits. The PUC recognized that
instead of requiring each individual driver to obtain commercial
registration, requiring the TNC itself is the most appropriate
and efficient means of scale peer-to-peer transportation in
California. The only way that the full vision of real-time
ridesharing will be realized is if Lyft takes on certain burdens
and removes them from individual drivers."
9)Related legislation : AB 2293 (Bonilla, 2014) also addresses
the issue of TNCs by specifying
insurance requirements, proper disclosure agreements, among
other things. This bill will be heard in U&C Committee on
Monday, April 28th.
REGISTERED SUPPORT / OPPOSITION :
AB 2068
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Support
None on file
Opposition
Lyft
The Internet Association
Uber Technologies, Inc. (Uber)
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083