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Rideshare services could have a bumpy road ahead

By Aaron Blevins, 6/12/2014

Additional regulations may impact Lyft, Uber


Los Angeles City Councilman Paul Koretz, 5th District, on Tuesday introduced a resolution in support of AB 612, a bill by Assemblyman Adrin Nazarian (D-Sherman Oaks) that aims to further regulate rideshare companies, such as Lyft and Uber.

State and city legislators would like to see rideshare services regulated more like taxi cab companies. (photo by Aaron Blevins)

According to the resolution, Nazarian amended the bill on May 29 to require the California Public Utilities Commission to develop a standard disclosure agreement with rideshare drivers, while also mandating that drivers demonstrate they are “reasonably fit and financially responsible.”

Koretz said he would like to take the regulations a bit further, but city officials can only do so much, as the commission has jurisdiction over the issue.

“This is a sign step in the right direction,” he said.

The bill would require rideshare drivers to participate in the California Department of Motor Vehicles Employer Pull Notice Program, undergo a U.S. Department of Justice background check, and complete mandatory drug and alcohol tests. Furthermore, it calls for rideshare companies to display a decal on their drivers’ vehicles, and provide primary commercial auto liability insurance.

Koretz said rideshare companies would have to pay a “little more” for proper insurance, background checks, drug testing and other consumer protections, but the additional cost would be worth it. He said doesn’t want to ban the services — just make them safer.

“I have no objection to them except they skirt all the regulations and best practices,” Koretz said, adding that the companies’ usage of smartphone apps would allow them to remain rather successful, even if they are regulated more like taxi cabs. “I don’t see what leg they have to stand on to say they won’t do it.”

He said he has worked to regulate taxi cab companies since 1988, when he served on the West Hollywood City Council. Koretz said “it hasn’t always been pretty” and taxi cabs aren’t perfect, but the regulations have alleviated a lot of problems.

“It’s kind of night and day,” he said of the mandates for taxis and rideshare companies.

The councilman referenced several circumstances involving rideshare drivers in California, such as an incident in which a driver struck and killed a 6-year-old girl in San Francisco. Koretz said Uber tried to disavow responsibility.

He also mentioned a recent incident in West Hollywood, where an inebriated female was taken to a low-rent motel in Panorama City without her consent. The Uber driver, Frederick Dencer, faced charges of kidnapping for the purpose of sexual assault, but the Los Angeles County District Attorney’s Office declined to file charges.

According to the district attorney’s office, the victim could not be reached after the incident, which led to the dropped charges. However, the victim has since contacted police, and the case has been referred to the Los Angeles City Attorney’s Office, which did not provide additional information by deadline.

“That’s probably the highest profile [rideshare incident] I’ve heard in Los Angeles,” Koretz said.

Lastly, the councilman spoke of another incident in San Francisco in which an Uber driver allegedly assaulted a passenger. Koretz said that particular driver had a history of drug-related arrests, and that Uber claimed their background checks only go back seven years. However, some arrests occurred within that time frame, he said.

“They have to do background checks but they don’t do very good background checks — if they do them at all,” Koretz added. “There are a lot of things missing that are state of the art.”

He said the California Public Utilities Commission has created a “regulatory fig leaf” for rideshare companies. The commission’s enforcement is weak because it does not have any resources, Koretz said.

In the future, he would like to see local governmental entities have more control over the companies, which he referred to as “bandit cabs with apps.” Koretz said the city has limited the companies’ ability to provide rides to the Los Angeles International Airport, and drivers have been arrested for violating those conditions. In some cases, officers have found felonies on drivers’ criminal history records, he said.

“Our ability to regulate is very limited. I would like to see that change,” Koretz added.

According to information provided by Uber, the company “works hard” to ensure that drivers have undergone “rigorous screening and background checks.” Some drivers are subject to an independent screening by Hirease, a national provider of background checks.

Hirease uses the Multi-State Criminal Database, but some counties do not report to the database. Therefore, it may miss records that only exist in the federal database, but Uber is working to expand its background checks, according to the company.

As for insurance, the company provides $1 million of liability coverage per incident, $1 million of uninsured/underinsured motorist coverage, $50,000 of contingent comprehensive and collision insurance and between $25,000 and $100,000 of contingent coverage between trips. More expensive forms of the service are covered by commercial insurance policies, according to Uber. Lyft has similar coverage.

In a statement, Uber spokeswoman Eva Behrend said the proposal for additional regulation on rideshare companies is backed by insurance corporations, lawyers and “mega-taxicab companies” that are determined to “do anything they can to resist change and pass laws that will only benefit the status quo” at the expense of drivers and passengers.

“Uber is a homegrown California company and the safest ride on the road,” she said. “We encourage our state Legislature to reject the special interests that are pushing for laws to protect their own interests at the expense of consumers and innovation. Two pending bills in the California State Senate — AB 612 (Nazarian) and AB 2293 (Bonilla) — are backed by insurance companies, trial lawyers and cab companies and do nothing to improve safety. They are simply thinly veiled attempts to end ridesharing in the state, and will only limit consumer choice and result in less income opportunity for drivers throughout the state.”

According to information provided by Lyft, drivers must have no more than two moving violations in the past three years, no major violation in the past three years, no DUIs or drug-related offenses, no more than one severe infraction in their lifetime driving history, no extreme infractions and no arrests involving violence, sexual offenses, theft, property damage, felonies or drugs.

Lyft representatives did not provide additional comment by deadline.

Nazarian, the author of AB 612, believes the companies can do more. He said rideshare services have forced the state to take many steps back when it comes to regulating similar services, such as taxis.

“This is an issue that is going to become a bigger and bigger concern as time goes on, especially in urban settings,” Nazarian said.

He said the intention of the bill is not to “stifle or hinder an industry,” but to create a level playing field for all involved. Nazarian said passengers are currently putting themselves in a potentially risky situation when using rideshare services.

“Public safety is a major concern,” he added.

Nazarian proposed a similar bill last year, but said it was not heard in the Assembly’s Committee on Insurance because of committee deadlines.

“We’re going to go through the process and hopefully keep it in tact,” he said.



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4 Responses to “Rideshare services could have a bumpy road ahead”

  1. John says:

    I requested a copy of the insurance and the only thing provided was this. Right now it appears the poor drivers are not properly covered. Anytime you collect money driving its “commercial” and your own insurance specifically does not cover. If uber and LYFT want to be transparent publish the entire policy and interestingly the policy in effect months ago. They are a software company who gets 20-30% off the fare charged and the drivers car is not covered and these drivers pay for insurance and gas and maintenance and uber and LYFT just connect thru software. These drivers are not rich and they have no idea how unprotected their vehicles are. Uber and LYFT should pay for commercial insurance. The following is a review by an Insurance genius to whom I provided a copy the the certificate of insurance.

    “A pure excess liability policy strictly provides additional limits above the primary policy; it does not provide additional coverage. If the primary policy provides coverage for a particular claim, so does the excess liability policy. If it is not covered under the primary policy, it is not covered under the excess liability policy. An example would be an excess fiduciary liability policy. It provides additional liability limits to cover fiduciary liability claims that exceed the primary policy. It is important to distinguish between additional limits and additional coverage.

    In some instances, a particular insurance company may agree to provide coverage for a vehicle or ownership situation that is not described in the normal symbols. When this occurs, a special symbol, such as 10 for liability or 7 for physical damage coverage, is used and added to the policy by an endorsement. The endorsement must contain a complete explanation/description of what the symbol means. Then, that number must appear next to the applicable coverage(s). LYFT and Uber are symbol 10
    the policy does not appear to provide PHYSICAL DAMAGE to the vehicle, which would be excluded by the drivers primary insurance policy.

    My other concern is that the liability appears to be on an EXCESS basis over the primary coverage, which means they typically impose a “Minimum Underlying Limit” for the primary policy prior to the excess policy kicking into place (Usually $300,000 or $500,000). Since the underlying primary auto policy wouldn’t provide coverage while being used for commercial purposes, I believe there would likely be a large liability gap that would have to be paid out of pocket by the vehicle owner.”

  2. Ken Neuhoff says:

    So far Lyft and Über have about three times the assaults, kidnapping, murder and rape of the industry average. They constantly overload little foreign tin-can cars that are driven twice as many miles as taxis. They are not larger Crown Victorias mini vans in obtruse colors with taxi lights. The fatalities will pile up, and they won’t look do smart!!!

  3. steve says:

    I would only get in a cab if I had to, such as Vegas,New York, etc. You never know when they will arrive, just an approximate.
    I like to drink when out with friends but would never call a regular cab. With Uber I love the convenience and know exactly where they are so when I walk out I get right in. Cab companies had their chance to keep up with the times but never felt threatened until now.
    I NO longer drink and drive. I enjoy how Uber drivers take pride in their service to the customer unlike the feel of the back seat of a police car in regular taxis.
    If Uber is regulated out of existence, drunk driving will increase.
    I hope those pushing the bill fall flat on their face and let those who innovate flourish.
    From one happy Uber customer.

  4. kathy says:

    John, I guess your insurance genius friend failed to advise that California taxi cabs have to get insurance from the CA Assigned Risk Pool because they are such a risk to insure. Therefore, any policy will be at the State Minimum Limit level, which is 15/30.

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