A California Senate committee moves the proposal forward as crowds rally for and against it.
[Note To Readers: This article is an update online version of one that ran in the June issue of LCT Magazine. Last updated 6:18 p.m. PT, 6/17/14].
SACRAMENTO, Calif. -- Two powerful measures that would put Transportation Network Companies such as Uber, Sidecar and Lyft on the same level as limousine services could finally deliver the long-sought solution to properly regulating TNCs.
The bills — AB612 and AB2293 — go where no state measure has before and could set a precedent for similar legislation nationwide. The bills carry the same clout as former bill AB2068, which since being reported about for the June issue of LCT Magazine, died in committee and was replaced by AB612 and AB2293.
“What these do for our industry is level the playing field for all for-hire transportation companies,” Rich Azzolino, President of the Greater California Livery Association (GCLA), said Tuesday morning. "That's all we are asking for. It would put safety in front of everything else."
The bills still face a labyrinth of committee deliberations, possible changes, and then later floor votes in both houses set to unfold during the summer months. Both bills were passed out of the Senate Energy, Communications and Utilities Commission on June 17. The measures will be heard by the Senate Insurance Committee on June 25.The earliest they could become law would be Sept. 1 when the California Legislature adjourns its sessions and the Governor then has 30 days to sign or veto the bills.
Gregg Cook of Government Affairs Consulting in Sacramento, a lobbying firm that represents the GCLA, said AB612, sponsored by Assemblyman Adrin Nazarian, D-46th District, has four key provisions. The bill is also supported by the Taxi Paratransit Association of California:
No. 1: Require all charter party carriers, including those on apps, to do Department of Justice background checks on all drivers. The GCLA agreed to that although no operators use DOJ because such checks need statutory authority. Any employee hired after Jan. 1, 2015 needs to be checked before employment. Any employee hired before Jan. 1, 2015, would have to be DOJ-checked by Jan. 1, 2016. The advantage of DOJ-background checks is they are generally cheaper, at about $40 to $50, Cook said.
No. 2: Require that TNC drivers be identified to the California Public Utilities Commission so that they can participate in DMV pull notice program. The program automatically notifies the CPUC and the employing transportation program of any driving violation by a chauffeur or driver.
No. 3: Require all TNC drivers to undergo drug and alcohol testing like chauffeurs.
No. 4: Every vehicle operating under a TNC would be in a database of the TNC and the CPUC, and every vehicle would have to bear a decal marking it as a TNC vehicle. Details of the type of decal and its position on the vehicle still need to be worked out. The GCLA had wanted TNC vehicles to bear TCP numbers, like charter-party carriers, but most committee members objected to that. The decals would help airport officials and law enforcement identify legitimate TNC vehicles, which they are unable to now, Cook said.
Sponsored by Assemblywoman Susan Bonilla, D-14th District, AB2293 has two key components. It is supported by the Personal Insurance Federation.
No. 1: A TNC is defined by the PUC; it can put whatever regulatory measures on them that it deems necessary. “Our concern is we don’t know what they are doing to do,” Cook said. “They have put interim stuff out, but nothing final. There are four significant safety things that must happen, which are the same ones as in AB612. The Legislature has to say to any charter-party carrier transportation company on a commercial basis that it must meet minimum safety requirements.”
No. 2: Insurance: A requirement for primary commercial insurance on all TNC vehicles, but with an on/off app distinction. The option allows drivers of their own cars to switch out of commercial insurance mode when using their vehicles strictly for personal reasons. Cook said the GCLA is aligned with a coalition of airports, law enforcement, taxicabs and limousine companies that support an insurance framework for TNCs that has the same requirements as the one for taxicabs and limousines.
Cook predicted the insurance provision in AB2293 will be fully fleshed out after getting further input from all interested parties. “I’m confident if we can get the insurance piece done, the Governor will sign it.
"The California Legislature, the taxi industry and the limousine industry are leading the charge nationally on how to handle TNC issues," Cook said after the committee approval Tuesday.
GCLA President Azzolino added, “On behalf of the GCLA, we worked closely with our lobbyist with numerous trips to Sacramento and held meetings to make sure the wording is of benefit to the industry and no more regulations come down on us. We are happy the way things are and need to make sure the rest of the transportation industry follows the rules.”
Meanwhile, Uber hired five lobbying firms to work the halls of the Capitol in Sacramento. The California airports have three lobbying organizations representing their interests, law enforcement agencies have two, and the state taxicab and limousine industries each have one.
“By the actions of Uber, they have demonstrated that they are for zero regulations," Azzolino said, as Uber and Lyft held a rally of supporters at the Capitol in Sacramento on Tuesday. "They don’t want any safety regulations and just want to do whatever they want when they want to do it. That’s why we are fighting as hard as we can.”
The GCLA has been instrumental in getting AB612 and AB2293 developed, especially with its March testimony before the California Department of Insurance and in earlier workshops and forums held by the California Public Utilities Commission as part of its rulemaking process. The CPUC is the agency that regulates all charter party transportation carriers in California.
Since Uber and TNCs emerged on the ground transportation scene in March 2009, the app-based, real-time transportation models have been gaining market share via flexible surge pricing and low overhead. Regulators and politicians nationwide have struggled to find the right classification and regulatory approach to TNCs because of their unique and unprecedented business model. Meanwhile, limousine and taxi operators have vigorously fought the TNCs, contending they either be regulated the same as limo and taxi services, or such services be exempt from the rules that do not apply to TNCs.
“I think it is significant legislation, and I am confident that it would become a model in other states,” Cook said. “This will say to the TNCs that you will become a charter party carrier under the Public Utilities Commission, and will comply with the same rules and regulations as charter party carriers.”
The breakthrough in the shift to commercial insurance requirements followed a March 21 presentation to the California Department of Insurance Commissioner by Azzolino and GCLA board director Lee Martinez. Azzolino and Martinez participated in an investigative hearing along with representatives from taxicab companies and TNCs. CDI Commissioner Dave Jones then sent recommendations to the CPUC supporting better commercial insurance requirements for vehicles that serve rideshare-app-based TNCs.
Azzolino and Martinez took an educational and factual approach in their presentation, helping state officials better understand how commercial fleet insurance rules and policies apply to chauffeured transportation operations versus TNCs.
“Our testimony was the basis for what came out of this,” said Azzolino, also a board director of the National Limousine Association. “It was very well taken, and I believe we made a good impression with our testimony.”
Martinez, a vendor member of the GCLA board of directors, is a lead agent for Transcap Insurance Agency (Transpo Insurance) in Las Vegas, and considered a leading industry expert on limousine vehicle insurance. “I tried to call about a year ago to the Insurance Commissioner and he wouldn’t return calls,” Martinez said. “I used connections in Nevada to get their Insurance Commissioner to call the California Insurance Commissioner and forward the information.”
The opportunity for the presentation also came about after Cook and fellow lobbyist Rob Grossglauser of Government Affairs Consulting had approached the CDI to offer explanations on how charter party carriers and TNCs operate, and the safety and insurance issues involved. Because of growing concerns about TNC safety and a high-profile traffic death of a 6-year-old struck by an Uber driver in San Francisco, the CDI decided to invite representatives from the limousine industry to the hearing on insurance requirements.
“It all came down to focusing on commercial liability and whether it is primary when the apps are turned on,” Martinez said. “Mr. Jones was very good at the hearing. He listened to anything. When he caught the TNCs misrepresenting the facts, he called them on it.”
The insurance and charter party requirements that have evolved this year build on a foundation of enforcement-related recommendations the CPUC outlined in a September 2013 decision as part of its rulemaking process. In that decision, the PUC defined a new transportation business model called Transportation Network Companies (TNCs) as an “organization whether a corporation, partnership, sole proprietor, or other form, operating in California that provides prearranged transportation services for compensation using an online-enabled application (app) or platform to connect passengers with drivers using their personal vehicles.”
In addition, the PUC specified safety and regulatory requirements for TNCs:
The decision makes clear the PUC’s safety and enforcement authority against TNCs that violate PUC regulatory or safety requirements.
Related article: Uber, Lyft Reject California Regulation Push
Related Topics: California operators, California Public Utilities Commission, fleet insurance, Greater California Livery Association, Gregg Cook, Lee Martinez, legislation, limo tradeshows, lobbying, regulatory enforcement, Rich Azzolino, Safety & Insurance, taxis, TNCs
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