Transportation officials Monday threatened to suspend the permits for 65% of San Diego's taxi fleet unless the owners obtain adequate insurance coverage by Feb. 24.
The staff of the Metropolitan Transit Development Board, which initiated the action, had been working for more than six months with the owners, most of them independent, in an attempt to come up with an acceptable solution. Officials said 578 of the city's 888 registered cabs are affected by the move. However, industry sources said the figure is closer to 615.
One MTDB member said the cabs are, in effect, operating without coverage for the first $35,000 in damages for which their owners are liable.
The problem arose when board officials refused to sanction an insurance alternative offered by an umbrella group representing about 200 of the independent owners. MTDB officials said the group, known as San Diego Transit Management Inc., persuaded the owners to switch to a plan that calls for each owner to be self-insured for the first $35,000 in damages.
Industry sources said the group is headed by Parvis Ibrahimi, owner of Coast Cab. Coast is the largest independently owned cab company in San Diego.
Ibrahimi could not be reached for comment Monday, but Benjamin Hueso, whose family owns USA Cab, said his company has been working with Ibrahimi and Coast "on a self-insurance plan to present to MTDB."
MTDB regulations require a taxi owner to have an insurance policy that pays all of a claim, with the insurance company responsible for recovering the deductible from the insured. Under the umbrella group's plan, each owner is essentially covered by a policy that includes a $35,000 deductible.
The $35,000 is theoretically covered by a pool set up by individual owners, but wary MTDB officials said they doubt whether it is large enough to cover more than a couple of accidents.
San Diego City Councilman Tom Behr, who is also an MTDB member, said the size of the pool is unclear.
"The numbers discussed at the last meeting were from $40,000 to $75,000. Our counsel said the pool should be a minimum of $400,000, but realistically much larger," Behr said.
Yellow Cab, the largest taxi company in San Diego, with 292 cabs, is self-insured, said Vice President and General Manager Anthony Palmeri. He said state law requires a cab company to have at least $525,000 in assets before it can be self-insured.
A local taxi industry official familiar with the insurance issue said that in practical terms, San Diego Transit Management's insurance plan means there are about 615 cabs driving around the city with no liability coverage for the first $35,000 in damages.
Behr, a leader in the MTDB fight with the independent owners, agreed with the taxi industry official, who asked to remain anonymous.
"But for whatever pool they may have put together, which is by all measures inadequate, that's essentially correct," Behr said. "If they (owners) don't get the insurance, it will be a substantial problem. I won't vote to let these cabbies go bare for the first $35,000."
Behr said the owners' lack of coverage is significant, because "most claims against cab companies are for under $25,000." He said the MTDB does not have any figures to show how many claims are paid every year by local cab companies.
In a written statement, MTDB paratransit administrator Barbara Lupro said Monday that the independent owners' self-insurance plan "does not guarantee that funds are available to pay any and all claims under $35,000."
Furthermore, the statement said, owners "have not demonstrated their ability to pay multiple claims under the $35,000 limit."
Lupro threatened to pull operating permits for 578 cabs by Feb. 24 "unless this matter is resolved quickly."
Behr said owners covered by the umbrella group's insurance plan "changed policies without the prior approval of MTDB." The board's tough line against the independent owners is prompted by a concern over protecting the public and cabbies, he said.
"Obviously, public protection is our first concern. But I'm also worried for the cabbies," Behr said. "If they have to pay the first $35,000 of a claim, they will also probably be required to pay additional money for a lawyer. I'm worried that one accident could wipe out a cabby. That's why most of us have insurance for our cars. It's the insurance company's obligation to represent us."
In addition, Behr said San Diego's tourist and taxi industries "could be affected if word gets out, rightly or wrongly, that our cabs aren't insured."
Independent owners were hesitant to discuss the issue Monday. But Tony Hueso said his family's role in it is prompted by a concern over mounting insurance premiums. According to Hueso, USA Cab pays about $3,200 annually in insurance for each of its 42 cabs.
"It's basically cost concerns. We want to minimize our costs," he said.