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Around the U.S., Taxis, Regulators, Insurers Having Fits Over Uber and Lyft

| June 19, 2014
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Local regulators have been unsuccessful in gaining access to TNCs excess liability insurance policies. (Adam Fagen/Flickr)

Uber car. (Adam Fagen/Flickr)

Uber has been so successful in supplanting taxis that fear and loathing of the San Francisco-based company united cab drivers across Europe last week — even amid the nationalistic fervor of the World Cup. Tens of thousands of drivers in London, Paris and Berlin, among other cities, snarled traffic in some of the densest thoroughfares on the continent, all in protest of the  company that in varying degrees has eaten their dejeuner, almuerzo and lunch in the 128 cities around the world in which it has set up shop.

And what a feast it’s been. On June 6, Uber announced it had raised an additional $1.2 billion in investment capital to up its valuation to $18.2 billion.

“You’re worth more than Whole Foods, you’re worth more than Tiffany and company,” a CNBC anchor breathlessly informed Uber CEO Travis Kalanick during an interview after the announcement. Kalanick replied that Uber is actually undervalued. (Others, meanwhile, think the $18.2 billion number is way too big.)

Locally, Uber has become a major employer in San Francisco. The company says it has 500 people working at its headquarters in the city. That’s in addition to all the drivers now earning a living by connecting with passengers through Uber’s app. One group not seeing the benefits of this expansion: taxi companies and the drivers who have yet to switch over to Uber or Lyft, a smaller yet growing rival also based in San Francisco. The city’s taxi business is off so much that the owner of DeSoto Cab Co., Hansu Kim, said this month that the industry’s survival is threatened.

“When I say the taxi industry may not survive 18 months or so, I’m seeing a situation where those who drove a taxicab in the past are now taking their personal cars and acting like a cab on their own,” he told KPIX.

Yet for all the rapid success of Uber and Lyft, which the state of California calls transportation network companies, or TNCs, there is also a growing resistance to their operations by regulators and insurers across the country.

Both the California Department of Insurance and Public Utilities Commission, which regulates TNCs, have sided with the insurance industry’s assessment that current cheaper excess coverage the companies offer to protect drivers and passengers is based on a fictional belief that a driver’s personal insurer will tolerate paying claims for individuals who drive commercially.

“Every other business in California has to have insurance to cover their activities,” said Mark Sektnan, president of the Association of California Insurance Companies. “Why is this business any different?”

Both the utilities commission and the state Legislature are now considering proposals to toughen TNC insurance requirements.

As you’ll see in our roundup below, California is far from the only state where Uber and Lyft are coming under regulatory, legislative or legal pressure. The novelty of a business model that has encouraged thousands of everyday drivers to hit the road in their own vehicles in quest of paying passengers has taken the system of transportation oversight, developed over decades, by almost complete surprise.

This has resulted in a fair amount of confusion and conflict, including lawsuits, protests, fines and threats. What is also notable is the willingness by Uber and Lyft to openly defy local authorities who have determined the companies are operating illegally.

How it all shakes out will determine just how large this innovative industry becomes.

“Regulatory overhang is obviously something investors and (Uber) need to be mindful of,” said Anand Sanwal, CEO of CB Insights, which tracks high-growth private companies. “It seems, at least to date, they’ve figured out ways to operate in markets they’ve wanted to in compliance with these issues, or they’re paying fines with the view that this legislation will be overturned or public outcry will make it go away. Obviously, investors feel that way too. But Uber does have regulatory risks.”

Here are what various media are reporting about the road wars around the U.S.

Albuquerque

PRC Keeps Meter Running on Ridesharing Hearing (Albuquerque Business First): The New Mexico Public Regulation Commission on Wednesday decided not to immediately hear a case relating to letting the ridesharing service Uber operate in New Mexico. At the PRC hearing, the commission also heard testimony about the similar service, Lyft, said Commissioner Valerie Espinoza. Both services started operating in Albuquerque in late April. The two services contend that they’re not taxi cab services, and as such shouldn’t have to abide by the same laws as taxi cabs. But, the services are similar enough that the PRC has launched investigations into both. Some have questions about the services’ legality, said Commissioner Karen Montoya on Wednesday. The issues will be put on next Wednesday’s PRC agenda.

Ann Arbor

Taxicab Board Considers Rates, Drivers (Ann Arbor Chronicle): Two topics addressed by the board at its April 23, 2014 meeting received additional conversation this month. First, the board discussed the possibility of deregulating taxicab fares, or setting them at a much higher maximum. The board also continued discussing whether to recommend that the city council enact an ordinance to regulate all drivers for hire – taxicab drivers, limo drivers, as well as those who drive for Uber and Lyft.

Austin

Uber stakes Its Austin Claim (Austin Chronicle): … Both Lyft and Uber have indicated repeatedly that they’re excited to be working with the city on bringing TNCs to Austin, but the two companies’ arrivals run in direct contrast to requests from the City Coun­cil, which has essentially asked for a bit more time – perhaps even seven months – to figure the whole TNC system out, during which time TNCs are not allowed to take payment for rides. The city, meanwhile, has received informal accusations of entrapment from Lyft, which claims that city staffers have engaged in sting operations to nab violators. In one case, Lyft alleges, a staffer “purposely left cash behind.”

Baltimore

Uber appeals Public Service Commission Ruling (Technical.ly): Uber has appealed an April Maryland Public Service Commission ruling that classified it as a common carrier, company officials announced Monday. In the appeal, filed Friday, Uber officials claim that Uber is not a public service company and the commission does not have the authority to regulate it. It contends that Uber owns no vehicles used to transport passengers and does not itself transport passengers for money. … Uber, which launched service in Annapolis in May, entered the Baltimore market last year. A bill that would have exempted Uber and competitor Lyft from common carrier regulations failed to pass in the 2014 General Assembly session.

Uber launched a PR push following its appeal.

Boston

Boston Taxi Drivers Hold Rally to Shut Down Uber (Boston.com): The Boston Taxi Driver’s Association held a “rolling rally” at Uber’s Boston headquarters this afternoon in order to compel city officials to shut down the app until its drivers can be regulated. The demonstration took place at 186 South Street in Boston’s Leather District from 2 to 3 p.m. The organization represents more than 1,400 cab drivers and is arguing that an unregulated taxi service like Uber poses a serious public safety threat because drivers are not vetted by the city before they are allowed to pick up fares.

Cambridge

Cambridge Licensing Board Signals Willingness to Work With Uber (Boston.com): Uber users, as well as some opponents of the popular ride-calling service, showed up in droves in Cambridge Tuesday night to clash over proposed regulations that Uber said would cause it to cease operations in the city. But by the time the meeting started, some of the tension between the city and the company that had built early this week appeared to have simmered. The proposed regulations would have required companies offering services like Uber’s, and drivers for those companies, to become licensed with the city. It also would have not allowed technology not approved by the city — like Uber’s and its competitor Lyft’s — to be used in any livery service, would have set a minimum price for any ride at $50, and would have banned other elements of Uber’s business model. The commission did not vote on the proposed regulations. It had said there would not be a vote at the meeting earlier in the day. During the meeting, License Commission chair Andrea Spears Jackson said those proposed rules “would not be passed,” and predicted that multiple additional hearings would follow.

Chicago

New ridesharing rules OK’d; taxi industry upset by Emanuel’s plan (Chicago Sun-Times): A divided City Council on Wednesday approved Mayor Rahm Emanuel’s plan to fill the regulatory vacuum that has allowed ridesharing companies to siphon business from taxicabs amid warnings that it’s so weak as to render costly taxi medallions “worthless.” The ridesharing industry, whose investors include the mayor’s brother, was pleased with the ordinance approved by a 34-10 vote. The taxicab industry, its City Council allies and a union representing cabdrivers was not.

A local municipal workers union says Emanuel’s plan costs the average cab driver $7,500.

Connecticut

Uber, Lyft Accused of Racketeering in Connecticut Suit (Bloomberg): Ride-sharing services Uber Technologies Inc. and Lyft Inc. were accused of racketeering in a lawsuit by Connecticut taxi and livery firms, which said the companies “prey parasitically” on established services. The services, operating without proper licenses, “cut corners illegally” and undermine “critical safety provisions of Connecticut taxi and livery laws,” the taxi companies said in a complaint filed yesterday in New Haven federal court.

Denver

Colorado first to authorize Lyft and Uber’s ridesharing services (Denver Post): Gov. John Hickenlooper on Thursday signed into law a bill that officially authorizes ride-sharing services, making Colorado the first state to legislatively embrace disruptive transportation offerings from upstarts such as Uber Technologies and Lyft. … He called for Colorado regulators to review rules placed on taxis and limos, questioning whether they’re still appropriate or necessary with the advent of so-called transportation network companies like Lyft and Uber. Throughout the legislative process, taxi officials had argued ride-sharing companies have unfair advantages because they don’t face similar regulations as cabbies, such as rate, coverage area and insurance requirements.

Hampton Roads, Va.

Uber says it will operate despite DMV’s ‘cease and desist’ order (Hampton Roads Daily Press): The car ride services Uber Technologies Inc. and Lyft Inc. said Friday that they plan to operate as usual in the state, despite cease-and-desist letters from the Virginia Department of Motor Vehicles. The DMV on Thursday ordered Uber and Lyft, taxilike service companies, to stop operating in Virginia in violation of state law and said unauthorized drivers could face penalties.

Houston

Uber and Lyft still in limbo in Houston (Houston Business Journal): The Houston City Council delayed a vote until July 30 on regulations for the vehicles-for-hire industry, keeping UberTechnologies Inc. and Lyft Inc.’s legal status in Houston in limbo. Council member Mike Laster proposed an initial delay of 60 days, saying, “I believe this cake is not fully baked.” The delay was then reduced to 45 days. … The vote is now scheduled for July 30, or until a consensus is met by all the stakeholders involved in negotiations. Several council members, including C.O. “Brad” Bradford, didn’t feel the delay was necessary and asked for the vote to take place sooner rather than later.

Kansas City

James: Uber is now legal in Kansas City (Kansas City Business Journal): Uber Technologies Inc. is now operating inside the law in Kansas City. Late on Saturday night, Mayor Sly James tweeted that the San Francisco-based ride-sharing company is now operating “legally and in compliance” in the city. Joni Wickham, a spokeswoman for the mayor’s office, said the Mayor’s tweet was in reference to the fact that Uber is not charging for their services. Until they charge for their services, they are legally operating. She said that Uber is working with city staff to to go through the process to get a permit.

Las Vegas

Nevada officials warn about insurance in ride sharing programs (Las Vegas Review Journal):
The state’s Division of Insurance is warning the public that it could be at risk when accepting a ride with a ride-sharing company. The Nevada Division of Insurance issued a release suggesting that people confirm that a driver has commercial car insurance before accepting a ride with companies such as Uber, Lyft and Sidecar. San Francisco-based Uber is looking to enter the Las Vegas market and has advertised for drivers.

The announcement came less than two weeks after managers of Southern Nevada’s largest taxi group posted a memorandum to employees, warning them of the consequences of going to work for a mobile application rideshare company, according to the Review Journal.

Los Angeles

Councilmembers, Taxi Drivers Protest Ridesharing Apps At City Hall (CBS Los Angeles): Hundreds of taxicab drivers descended on the steps of City Hall Tuesday morning to protest popular ridesharing apps. The drivers were joined by councilmembers Paul Koretz and Gil Cedillo to protest unregulated and unrestricted taxi apps such as Uber, Lyft and Sidecar. Demonstrators said drivers of so-called “bandit cabs” do not have to pass background checks using fingerprints or have their vehicles inspected for safety.

Milwaukee

Milwaukee Common Council panel backs taxi proposal (Milwaukee Journal Sentinel): By a 3-0 vote, members of the city’s Public Works Committee on Wednesday sent to the Common Council a proposed ordinance that revamps the way taxis operate in Milwaukee. In addition to doing away with a cap on the number of taxicab permits, the proposal also makes room for new technology-based smartphone apps such as Uber and Lyft in which riders are matched with drivers. Those new services have been operating for months in the city, though council members say they are currently operating in violation of current ordinances …. After (Uber and Lyft) began offering rides, some council members…pivoted and began to push for an unfettered free enterprise system for public passenger vehicles. They have since been joined by the Metropolitan Milwaukee Association of Commerce. Steve Baas, MMAC’s vice president for governmental affairs, said the pro-business group favored wider transportation options.

Miami

Authorities clamp down on ride-sharing services in Miami (Reuters): Miami-Dade County officials have refused to license drivers for Lyft and Uber, a similar service, arguing the driver-owned vehicles should comply with the same regulations as taxi companies. Lyft and Uber, however, argue they are different, describing themselves as technology companies that provide mobile applications connecting private drivers with passenger. … Lyft and Uber launched in Miami last month despite the risk of heavy fines and after an unsuccessful two-year lobbying effort to persuade Miami lawmakers to change the regulations. Since then, the county has impounded three cars and fined eight drivers as much as $2,000, according to Raul Gonzalez, an official with Miami-Dade County’s regulatory and economic resources department. Police in Miami have posed as riders and then issued fines to the drivers.

Minneapolis

Despite Commerce Department warning, Jacob Frey says Uber/Lyft ordinance still on its way (Minneapolis City Pages): A few weeks ago, the Minnesota Commerce Department issued a warning to folks considering using so-called “transportation network companies” like Lyft or Uber. “The Commerce Department wants Minnesotans to know that there may be gaps in auto insurance coverage for both the drivers and passengers using TNCs,” the department said in a statement. “There may not be coverage for an accident because most personal auto insurance policies contain exclusions when drivers use their personal cars for a commercial (business) purpose. For example, if you participate in a regular, non-business car pool, you would be covered. If you charge passengers a fee, you may not be covered if you get into an accident. … But Jacob Frey, the Minneapolis City Council member who is taking the lead in drawing up an ordinance to regulate currently unregulated TNC companies doesn’t think the Commerce Department’s warning is a big deal.

Nashville

Ridesharing Services Like Lyft and Uber Will Face New Regulations By End of Summer (Nashville Public Radio): Popular ridesharing services like Lyft and Uber may soon be coming under new regulations. Billy Fields, who leads the city’s Transportation and Licensing Commission, said companies like Lyft and Uber are considered “drivers for hire,” not taxis. And under that title, they need to have a permit and be working for a licensed company. Under Nashville’s current law, Lyft and Uber are technically illegal. … Metro Police could not say how many tickets have been issued to drivers. By the end of the summer, Fields said he will go in front of Metro Council to ask that a new law be written. It’ll require that rideshare companies have special licenses, inspections and the same insurance taxi drivers are required to have.

New Jersey

Uber a risky ride for passengers, states warn (CNBC): Uber is under siege. It’s not from a rival company, such as Lyft or Sidecar, because they may be in the same boat. It’s from states that are warning passengers they may not be covered by insurance if the driver has an accident. New Jersey last week became the 14th state along with the District of Columbia to issue warnings about the risks of using ride-shares such as Uber, Lyft or Sidecar.

New Orleans 

Could Uber be headed toward New Orleans?: (WVUE): Ryan Kelly, a writer for New Orleans CityBusiness, explains, “UberBLACK is a luxury black car sedan service that has a little bit higher fares than a taxi and that’s what they’re trying to bring in right now.” With the tap of a finger, users can order an Uber car to take them wherever they please. Just last week, the New Orleans City Council introduced an ordinance that would govern how the system worked, if brought here. Riders would pay a minimum of $25 for sedans and $35 for SUV’s. But Uber cars don’t have meters and don’t really have any cap on how much they can charge riders. In many other places, the company also has UberX which is more comparable to a taxi service. “Uber has a history of introducing the UberBLACK service in cities and then eventually following with UberX,” said Kelly.

New York

While Uber Thrives in New York, Its Competitors Lobby Regulators (BusinessWeek): Lyft would love to operate in New York City, but city regulations prohibit the startup’s version of a taxi service, in which nonprofessionals use private vehicles to shuttle passengers….While Lyft tries to figure out a way in, Uber is gaining significant traction with New Yorkers. Lyft has a tougher time because its service is considerably different from the activity the TLC is used to regulating. For all the hype, Uber in New York is basically a black-car service with a tech twist. Lyft, on the other hand, wants looser regulations for its drivers. 

Orlando

Uber will talk taxi rules with Orlando City Hall (Orlando Sentinel): Orlando Mayor Buddy Dyer is taking a diplomatic approach with Uber, the next-gen taxi service the city says is breaking its cars-for-hire laws. The San Francisco-based company has requested a meeting with the mayor, two weeks after it launched in Orlando with no advance notice to City Hall. The planned meeting heads off — at least for now — the city’s plan to begin enforcing its taxi regulations against Uber drivers. “Uber reached out to us, which I see as a positive thing,” Dyer said Wednesday. “We’re an aggressively technology-centric city, and Uber is the new thing right now, with a new way of doing things.”

Pittsburgh

Lyft, Uber have no plans to leave state despite enforcement (Pittsburgh Post-Gazette): Pittsburgh Mayor Bill Peduto reiterated his support for Lyft and Uber on Tuesday, even as the state scheduled hearings to decide whether to issue cease-and-desist orders against the ride-sharing companies. Mr. Peduto sent a letter to the leadership of the Pennsylvania Public Utility Commission to express his “disappointment” with the agency’s actions against the San Francisco ride-share companies. The PUC’s enforcement bureau is seeking to prevent both companies from​ operating in Pennsylvania. … Although PUC chairman Robert Powelson has expressed his support for Lyft and Uber in the past, the PUC’s investigation and enforcement​ arm issued citations to 23 ride-share drivers in March and April, and has proposed additional daily fines of $1,000 per day against each company.

San Antonio

Ride-Sharing Company Offering Free Rides Amid Controversy (FOX 29): The ride sharing company “Uber” is trying to win over fans, but the San Antonio Police Department is warning drivers to beware. Uber is teaming up with Crown Royal to offer free rides to people 21 or older Wednesday during the Spurs celebration who download the Uber app and enter the promo code: ReignOn. “We know people are going to be out enjoying the festivities and parades, and we want people to have a safe and free ride and a designated driver,” said Will Zinsmeister with Uber San Antonio. … However, that’s not necessarily how the City of San Antonio sees it. Uber is operating in violation of the city’s taxi cab ordinance, which states drivers must be licensed and regulated by the city in order for money to be exchanged for services. … Yellow cab, along with other taxi companies, filed a lawsuit against Uber and ride-sharing company “Lyft” saying they are operating illegally in San Antonio.

Santa Barbara

Cabbies Take Uber Drivers to Task (Santa Barbara Independent): Disgruntled taxi drivers gathered outside City Hall last Friday afternoon to argue companies like Uber and Lyft are violating Santa Barbara law. Congregating on the sidewalk and holding signs above their heads, several cabbies contended the drivers hailed by taxi apps get an unfair advantage because they are not bound by the same regulations that the 68 taxi companies here must adhere to. Murmurs from frustrated taxi drivers have circulated since Uber landed in town last fall — Lyft launched a couple of months ago — but Friday marked the first coordinated protest, as cab drivers claimed their revenue has since dropped by 60 percent.

Seattle

Seattle mayor reaches deal to legalize Uber, Lyft and Sidecar, without driver limits (GeekWire): After more than one year of City Council meetings, protests and debate, Seattle Mayor Ed Murray today announced an agreement between the major industry players, the taxi industry and city officials that will let app-based transportation services such as Lyft, Sidecar and UberX keep operating without any limit on the number of drivers that can be on the street at any given time. That’s a big change from the original ordinance that was approved by the City Council in March, which set a maximum of 150 active drivers per company — a decision that left the ride-sharing companies unhappy. … The agreement still needs to be approved by the Seattle City Council.

St. Louis

Lyft still can’t do business in St. Louis, judge rules (St. Louis Business Journal): The temporary restraining order against Lyft in St. Louis has been extended, meaning the peer-to-peer ride sharing app won’t be able to do business until a St. Louis circuit court judge makes an official ruling at a later date. … Lyft opened for business in St. Louis in mid-April. Just a few days later, it was handed a temporary restraining order prohibiting it from doing business in the city or county. The Metropolitan Taxicab Commission maintains Lyft should fall under its regulations. Lyft says its business model excludes it from those regulations.

Tampa

Regulatory agency seeks help in crackdown against Uber, Lyft (Tampa Bay Times): In its crackdown on the increasingly popular but unregulated Uber and Lyft ride-sharing programs, the Hillsborough County Public Transportation Commission agreed Wednesday to ask other law enforcement agencies for help. The two outfits have operated in Tampa for several months now, causing friction with the transportation commission and the taxi and limousine industries, which say the companies are in violation of state laws and local regulations. Uber and Lyft don’t carry the proper insurance and aren’t certified, they say. … So far, PTC inspectors have fined 12 drivers and issued 44 tickets that come with fines ranging from $100 to $500.

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  • pitbullstew

    sounds more like a death by a thousand cuts no?