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Ridesharing companies prevail over taxis in Sacramento -- again

California Legislature drops effort to hobble ridesharing companies with excessive regulations

The pitched battle in the state Legislature between ridesharing companies and taxicabs is over, at least for now, and the smartphone-enabled services have emerged little worse for wear. The clear winner, though, was the California Public Utilities Commission.

At issue was the degree to which the Legislature would overwrite the regulations the PUC had adopted for "transportation network companies" such as Uber, Lyft and Sidecar. One proposal, AB 2293, at one point called for ridesharing drivers to have more than four times as much insurance during idle periods as the PUC had called for -- in fact, more insurance than they would have been required to carry when they had passengers. Another, AB 612, would have imposed a second set of requirements for driver background checks, drug testing and record monitoring on top of the PUC's driver-safety rules.

After weeks of negotiations, the Legislature amended AB 2293 to mandate insurance coverage similar to what the PUC had proposed. The bill also acknowledged that the PUC had regulatory authority over ridesharing companies, effectively telling local taxi regulators to stop trying to impose their own rules. Meanwhile, AB 612 died in committee.

Uber, Lyft and Sidecar dropped their opposition to AB 2293, allowing it to breeze through the Assembly and the Senate as amended. Lobbyists for the insurance industry expressed their satisfaction with the compromise, too. The taxi industry can comfort itself with the thought that the playing field is more level now, at least where insurance coverage is concerned, although not to any greater degree than the PUC would have required.

Some elements of the two bills were reasonable, even welcome. But taken as a whole, the measures (in their most extreme forms) would have made it hard for ridesharing companies to operate, particularly if they weren't already well established. Worse, some tech industry advocates feared that the Legislature would set a precedent for regulating companies in the "sharing economy" -- the ones that let people put their personal assets to limited commercial use -- as if they were no different from the old-line businesses they were disrupting.

The PUC recognized the difference, much to the chagrin of taxi companies. The latter, which are heavily regulated by local authorities, argued that public safety demands that part-time drivers using personal cars be regulated at least as stringently as full-time commercial operators, if not more so. Implicit in those efforts, though, was an attempt to raise the cost of ridesharing for drivers and their passengers, reducing the competitive threat.

Unlike the taxi companies and their allies, insurers weren't looking to hobble ridesharing companies. Instead, they were trying to protect themselves from having to pay claims involving ridesharing drivers who carried only personal insurance policies.

Per the PUC's initial order, ridesharing companies have been required to carry $1 million in liability coverage for "incidents involving vehicles and drivers while they are providing [transportation network company] services." Insurers pressed the PUC and the Legislature to go further, requiring a driver or ridesharing company to provide commercial insurance coverage whenever the driver had the ridesharing app running. This extra coverage would apply even if drivers weren't carrying passengers or en route to pick one up.

The ridesharing companies resisted this mandate, but eventually conceded to a level of coverage close to what a personal auto policy might provide. That's about where the PUC came down in June, when it proposed to require ridesharing companies to provide $300,000 worth of liability coverage for injuries caused during periods when drivers were idle, in addition to the $1 million when they were active. Significantly -- and unlike the more draconian versions of AB 2293 -- the PUC's coverage levels for idle ridesharing drivers are the same as the ones Los Angeles imposes on taxies.

The final version of AB 2293 tweaks the PUC's proposal in a way that's actually helpful to the ridesharing companies. It requires the companies to provide $200,000 in excess liability coverage for injuries, while requiring drivers (or the companies, acting on the drivers' behalf) to cover the first $100,000. The idea was to encourage insurers to develop new policies that cover drivers both when they're on personal trips and when they're running a ridesharing app.

An open question remains about how to figure out which insurance policy provides the extra $200,000 in coverage for drivers who cause accidents on personal trips while multiple ridesharing apps are running on their smartphones. The PUC acknowledged this problem, but left the ridesharing companies to work out a solution among themselves.

With the latest threat from Sacramento behind them, Uber, Lyft and company can return their focus to building their businesses around the world. That, and luring away each other's drivers.

Follow Healey's intermittent Twitter feed: @jcahealey

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