Uber, Lyft, Sidecar Fight To Block New Regulations

Aug. 14, 2014
Lawmakers negotiating last-minute tweaks to rules on insurance, background checks, drug testing and more that could affect how available and how cheap these services will be in the future

Aug. 13--When you use a smartphone app like Uber, Sidecar or Lyft, you're probably thinking about the convenience of summoning a quick ride to get you where you're going, not about who'll be behind the wheel or what kind of insurance they have.

But these companies, lobbyists and lawmakers this week have been negotiating last-minute tweaks to rules on insurance, background checks, drug testing and more that could drastically affect how available and how cheap these services will be in the future.

Assemblywoman Susan Bonilla, D-Concord, said state Senate leaders want her AB2293, which would set strict new insurance requirements, and another bill to advance out of the Appropriations Committee on Thursday -- the last opportunity in this legislative session to move the bills to the Senate floor.

"We're cutting it pretty close," she acknowledged this week. "It'll probably come right down to the wire, and the chair of Appropriations and the Pro Tem will make a call on what they feel comfortable with having in the bill."

The battle grew nastier in recent weeks as Uber sent mailers to voters in a state Senate district where Bonilla is expected to run next year, accusing her of caving in to the insurance industry at consumers' expense. Uber also aired radio ads featuring former Golden State Warriors star Baron Davis urging lawmakers to nix the bill.

"It's never been the intention of my bill to stifle technology or innovation -- I think these are good companies. My family uses these companies," Bonilla said. "Having consumer protection in place is not a mutually exclusive goal with having a technology-based company."

But Sidecar CEO Sunil Paul said the two bills represent "a divide between those trying to depend on the past and those looking out for innovation."

"This is an important moment for California, and people who have experienced the ride-share revolution need to speak up and let their representatives know that they support these innovations," he said.

The other bill up for a vote Thursday -- AB612 by Assemblyman Adrin Nazarian, D-Van Nuys -- would require deeper background checks, participation in a DMV program that lets employers monitor workers' driving records, and drug and alcohol testing of these companies' drivers. It would bar the companies from using drivers with past convictions for crimes including forgery and credit-card fraud.

It's "a burdensome approach that is backed by the taxicab lobby, really, to try and shut us down," Paul said. "If it passes, it is a disaster -- it would literally spell the end of the ride-share industry."

Nazarian's office didn't return emails or calls seeking comment.

"Ride-sharing" companies like Uber, Sidecar and Lyft connect passengers and drivers through smartphone apps, but it's not sharing in the casual carpool sense: The passengers pay the drivers, who are considered independent contractors.

The California Public Utilities Commission in September created a new business category called "transportation network companies" to cover on-demand ride services and set some rules and regulations. It since has proposed tougher insurance requirements and warred with the companies over their operations at major airports without permits.

The companies typically provided drivers with $1 million in insurance coverage, but that kicked in only after a passenger got in the car and applied only if the drivers' personal insurance policies didn't cover an accident. Then an Uber driver struck and killed a 6-year-old girl in San Francisco while on his way to pick up a passenger on New Year's Eve; because no passenger was in the car yet, Uber denied responsibility.

Amid an outcry, Uber and Lyft earlier this year started providing some coverage for the time before passengers are picked up, but the PUC and lawmakers have moved forward with stiffer requirements anyway.

At last report, Bonilla's bill requires $750,000 in commercial liability insurance from the moment drivers turn on the app, and $1 million from when they agree to pick up a passenger until the passenger gets out of the car. That's a lot more than what's required of taxi and livery services, though those more traditional services must carry round-the-clock insurance. "There's no other industry that can turn its insurance on and off, that's unique ... and that was a major compromise," Bonilla said.

The companies say the need for commercial insurance shouldn't kick in until the driver is matched to a passenger and heads for the rendezvous point. Paul said Bonilla's bill in its current form would mean "a higher cost to us, and we'd have to think about raising rates."

Uber spokeswoman Eva Behrend said Bonilla's bill would require more insurance for her company's drivers than for any other cars on the road, including taxis, during a period when they're not even doing any business yet. The bill, she said, is "an example of what happens when special interest groups distract lawmakers from the best interests of consumers and small businesses."

But Steven Suchil, regional assistant vice president of the American Insurance Association and a co-sponsor of Bonilla's bill, said commercial activity starts when a driver signals his or her availability, and personal auto policies won't cover that. "This is not someone commuting to work or going to the grocery store or stopping to pick their children up from school," he said.

Behrend said lawmakers must take new approaches to regulating new technologies. "We hope that state leaders recognize our unique model and embrace innovation and consumer choice over the entrenched special interests," she said.

Josh Richman covers politics. Contact him at 510-208-6428. Follow him at Twitter.com/josh_richman. Read the Political Blotter at IBAbuzz.com/politics.

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