State Slaps Tougher Insurance Requirements on Uber, Lyft

The California Public Utilities Commission (CPUC) today strengthened its insurance requirements for Transportation Network Companies (TNCs) and implemented Assembly Bill 2293, which the Governor signed into law on September 17, 2014.

TNCs such as Lyft, SideCar, and UberX use an online-enabled platform to connect passengers with drivers who use their personal, non-commercial vehicles. In September 2013, the CPUC took action to ensure that public safety is not compromised by the operation of TNCs by establishing 28 rules and regulations, including requiring a minimum of $1 million per-incident coverage for incidents involving TNC vehicles and drivers in transit to or during a TNC trip. Today’s decision clarifies the CPUC’s existing TNC rules as follows:

• Defines TNC services as having three periods:
  • Period One: App open – waiting for a match
  • Period Two: Match accepted – but passenger not yet picked up (i.e., driver is on his/her way to pick up the passenger)
  • Period Three: Passenger in the vehicle and until the passenger safely exits the vehicle
• Requires a minimum of at least $1 million primary commercial insurance for Periods 2 & 3
• Requires a minimum of at least $100,000 for one person, $300,000 for more than one person, and $50,000 for property damage of excess commercial insurance for Period 1, consistent with the City of Los Angeles’ insurance amount that is required for all taxicabs. TNCs can satisfy the insurance requirements by one of two ways: 1) maintaining such insurance on its own or 2) maintaining such insurance on its own in combination with a policy maintained by the TNC driver that is specifically written for the purpose of covering TNC services, or portion thereof.

In the event a driver-maintained policy is used to partially fulfill the insurance requirements, a TNC’s insurance must provide sole excess coverage to the driver’s policy that is specifically written for the purpose of covering TNC services, or a portion thereof. In the event that a driver-maintained policy ceases to exist due to a coverage lapse, denial of claims, or policy cancellation, the TNC’s insurance must provide exclusive coverage and assume all liability and the sole duty to defend, at dollar one.

“After the CPUC stepped in to provide a safety net in this nascent industry, our insurance requirements have been interpreted in different ways,” said CPUC President Michael R. Peevey, the Commissioner assigned to this proceeding. “Today’s decision provides clarity to issues around insurance so that Californians are better protected and continue to have greater choice within the transportation industry.”

These clarifying rules join those adopted in September, which include that TNCs must:

• Obtain a license from the CPUC to operate in California;
• Require each driver to undergo a criminal background check;
• Establish a driver training program;
• Implement a zero-tolerance policy on drugs and alcohol;
• Conduct a 19-point car inspection; and,
• Obtain authorization from airports before conducting any operations on airport property or into any airport.

--Information from CPUC