Insurance? We don’t need no stinkin’ insurance!


One of the biggest costs of operating a legal taxi or cab company is the cost of commercial “livery” insurance.  In San Francisco, authorized taxis are required to provide $1 million of liability coverage per incident, 100% of the time.  Each taxi must also provide workers compensation insurance for the driver.  This amounts to an annual cost of between $8,000 and $10,000.  This is one of the many ways these new “innovative entrepreneurs” are unfairly competing with those who follow the law.

According to California Public Utilities Code, even TCP licensed “charter party” vehicles such as for-hire limousines and Towncars must carry $750,000 liability coverage 100% of the time.  Yet for some reason the California Public Utilities Commission (CPUC) has allowed these innovative entrepreneurs to avoid taking the same responsibility.

After failing to enforce a 2 year cease and desist order on Uber, and a more recent one on Lyft, the CPUC’s head of Safety Enforcement signed secret backdoor agreements with these companies in January 2013, allowing them to operate unrestricted by regulations, in direct competition with the highly regulated taxi industry.  These agreements only required these companies to provide excess liability coverage.  In other words, they would only be liable if the driver’s personal insurance provider found out they were using their car for commercial purposes.  Since there are currently no personal insurance policies that cover vehicles used for commercial livery purposes, you could also say these agreements allowed these companies to rely primarily on insurance fraud. (See 1/28/13 insurance industry comments to CPUC Proceeding R.12-12-011)

After allowing these scofflaw companies to operate free from regulations for eight months, the CPUC issued its Decision 13-09-045 which among other things, only required “transportation network companies” (“TNCs”) to provide primary commercial liability coverage “while they are providing TNC services”.  This definition proved to be inadequate when Uber refused to accept liability for the tragic accident New Years Eve, after the Liu family was run over by a distracted UberX driver in an SUV while they were crossing the street with the green light.  Uber claimed the driver was not “providing TNC services” because he wasn’t on an Uber call at the time, even though he lived 40 miles away from SF and had already picked up an Uber call that evening.

California Insurance Commissioner Dave Jones held an informational hearing on TNC insurance March 21, 2014. The testimony included a deputy district attorney from San Francisco who testified to the numerous insurance fraud cases his office had handled over the past year that involved TNC drivers concealing their commercial activities from their personal insurance providers. Commissioner Jones concluded there were far too many insurance “gaps” and sent a letter of concern to President Peevey and the rest of the CPUC.

In light of this criticism from the Insurance Commissioner, President Peevey issued an “Order Granting Limited Rehearing” of the Commission’s Decision 13-09-045 and agreed to revisit the insurance requirements.

The latest insurance proposal by the CPUC and Assembly Bill 2293 which is currently passing through the state legislature, only require commercial liability insurance while the apps are on.  Anyone who has ever worked in the taxi or modern day limo industry knows this is not reality based.

There are many reasons a TNC driver might have their apps off while still working.  TNC drivers, just like legal taxi drivers, develop their own clientele who contact them directly via cellphone, then pay cash or charge outside the app to avoid paying 20% to the TNC.  They also solicit passengers off the street and wait in traditional taxi lines in front of clubs.  TNC drivers will turn their apps off while traveling from a non-”surge zone” to a “surge zone”, or as we prefer to call them price gouging zones.  They will also turn their apps off to induce price gouging zones.  Last weekend after the Outside Lands concert in Golden Gate Park, customers were charged hundreds of dollars to go across town.

We oppose AB 2293 because it provides TNCs and TNC drivers with yet another unjustified competitive advantage, by not requiring full-time commercial livery insurance as all taxicabs and other charter party vehicles must provide.  AB 2293 requires TNCs to provide $750,000 of liability, but only when the app is on.  This does not provide adequate protection for the public, creates unfair competition, opens the door to fraudulent claims and will cause everyone’s personal insurance costs to go up.

Ironically, the TNCs also oppose AB 2293 because they’re worried about drivers committing insurance fraud the other way around by turning the apps on after they get in a bad wreck.  AB 2293 would also require TNCs to provide more liability coverage than they do now.

The latest proposal by the CPUC would require $1 million primary commercial insurance when the TNC driver has a passenger or is on their way to a pick up a passenger, but only $100,000 for one person, $300,000 for more than one person, and $50,000 for property damage of “excess” commercial insurance if the app is on but there is no order.  This period is arguably the most dangerous time because this is when drivers race to get to price gouging zones and are more likely to take chances in traffic because there’s no passenger to criticize their driving.  The TNC would provide no coverage while the app is off and the driver’s personal insurance would cover the bill.

We urge lawmakers to require the same full-time livery insurance for all who transport passengers commercially.


Categories: Illegal Taxis, Legal Actions, Opinion - Editorial

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