California ride-share apps say their future could ride on what happens this week. The California Senate will likely vote on two bills that would make it more costly to be in the ride-share business, and the California Public Utilities Commission is also looking at increasing insurance requirements for the companies' drivers.
The app firms have fought back with online petitions—you might have seen one on Facebook—that argue the insurance requirements are free-market killers that could put them out of business. That's a dramatic claim, one they likely don't air when asking venture capitalists for millions of dollars in investment cash.
Of particular ire to the apps is a bill by Assemblywoman Susan Bonilla that would require that $750,000 in commercial liability insurance kicks in when a driver fires up an app and starts hunting for fares:
It would also require $1 million in coverage when a rider gets picked up.
Steve DelBianco, executive director of tech trade association NetChoice, notes that the latter coverage is more than three times what's required for taxi drivers, which in L.A. is $300,000 for medical liability that must be in effect 24/7.
"A Lyft or UberX driver picking up dry cleaning, maybe they'll leave the app on in case someone is looking for a lift in the area," he told us. "It's ridiculous to expect that just because the app is turned on you're in a commercial activity. More and more people will have the apps on all the time in case an opportunity arises to use excess capacity in their car."
In other words, ride-share drivers would have to pay more just to go fishing for customers.
DelBianco points to the state trial lawyers' lobby as a key supporter of this legislation, which he says would be a gift for sue-happy attorneys:
"The trial attorneys in California are a very powerful lobby, and they are salivating because this would change your average fender-bender into a million-dollar payday," he said.
Uber spokeswoman Eva Behrend agrees, saying that ...
... AB2293 is a gift to trial attorneys, big taxi, and insurers that will kill ride-sharing as we know it by creating insurance mandates that are 30 times more than the state mandates for taxis and any car on the road. Over 65,000 people have already signed our petition against AB2293 and we urge lawmakers to listen to Californians instead of special interests.
Critics, however, say that the ride-share apps have skirted the law since day one. In Los Angeles they were temporarily declared to be outlaws by the city last year because they don't adhere to strict rules established for taxis.
As things stand today, the apps rely on drivers' personal coverage: They often require that drivers make a claim on their own insurance before even trying to use supplemental coverage that currently kicks in when a rider steps into the car. And that commercial coverage is the same $1 million figure in Bonilla's bill.
(Uber and Lyft have more recently instituted limited gap coverage that can be used if something goes wrong before a fare is picked up.)
Many insurance companies, including State Farm, will not honor personal policies if accidents happen involving drivers who are participating in even part-time commercial activity, so the loophole the ride-share companies are trying to drive through will probably end up hitting them back one way or another.
In fact, the inspiration for the move to require seven-figure commercial policies for app drivers is the case of a 6-year-old girl who was fatally struck by an Uber driver last New Year's Eve in San Francisco. Her family has sued.
DelBianco of the tech trade group says he believes that insurance companies will see a viable market and eventually step up to offer coverage products that everyone can live with. "I am confident they will come around and figure out a way," he said.
But, in a way, that stance seems to acknowledge that the current insurance scheme isn't really working.
Meanwhile, the apps will also have to contend with the California Public Utilities Commission, which is considering requiring $300,000 in injury coverage from the moment a driver activates a ride-share app to hunt for customers.
The PUC will meet Thursday regarding its own regulation, and a spokesman says it doesn't need the legislature's permission to enact its own rules. However, if Bonilla's bill passes, it would take precedence once it goes into effect, he said.
If you like this story, consider signing up for our email newsletters.
SHOW ME HOW
You have successfully signed up for your selected newsletter(s) - please keep an eye on your mailbox, we're movin' in!
Another bill, this one by Assemblyman Adrin Nazarian of Van Nuys, would require app drivers to submit to background checks, drug tests and driving-record monitoring.
A spokesman for lawmaker Bonilla told us that she's not trying to pass a business-killer here; she's trying to protect consumers. Bonilla says her bill would protect drivers' wallets:
[It] affords companies such as Uber and Lyft the ability to provide higher quality services to their consumers. My bill also protects drivers from the risk of losing their personal assets, such as their homes and life savings, because of inadequate insurance coverage.