On Friday, March 4, a long-awaited Bill regulating transportation network companies (TNCs) such as Uber and Lyft came out of committee. The Bill adds a new chapter to the General Laws, Chapter 159A1/2, and amends the insurance laws by adding section 228 to Chapter 175.
The Bill establishes a new “Ride For Hire” Division in the Department of Public Utilities that is charged with the “administration, implementation, and enforcement of a new chapter added to the general laws, Chapter 159A 1/2. This Division would “perform such functions as the Department [of Public Utilities] may determine in relation to the administration, implementation, and enforcement of Chapter 159A1/2.
This new Chapter to the General Laws would regulate any transportation network company. The Bill defines a transportation network company as: “[anyone] …operating in the Commonwealth that uses a digital network to connect riders to drivers for the purposes of pre-arranging and providing transportation.”
The Bill also would regulate transportation network drivers, who are defined as: “…a driver approved by a transportation network company and certified by the Division pursuant to this chapter [159A1/2],” by requiring them to obtain a transportation network driver’s certificate from the division before they could drive for transportation network companies.
Insurance provisions in the new transportation network company Bill.
An important component of the proposed Bill relates to the insurance provisions required of transportation network companies and their drivers. These provisions are contained in a specific amendment to the general insurance laws outlined in Chapter 175 §228.
Notice to insurers by applicants that they are Transportation Network Drivers
Under the proposed Bill, Transportation Network Drivers must obtain a “Transportation Network Driver Certificate,” issued by the new Ride For Hire Division. In order to obtain a certificate to operate as a driver for a Transportation Network Company, such as Uber or Lyft, the applicant will have to show that he or she:
- …has access to a vehicle that complies with all laws, rules and regulations related to transportation network vehicles, including insurance requirements, and
- has provided notice to all insurers of said vehicle that the applicant intends to use the vehicle to provide transportation network services; … (Emphasis added).
Proof of coverage for all Transportation Network Drivers
Transportation Network Companies must carry adequate insurance as set forth in the new Section 228 of Chapter 175 for each vehicle being used to provide transportation network services.
Likewise, the Bill requires that each transportation network driver also carry adequate insurance as required by the Bill for each vehicle being used to provide transportation network services.
The transportation network driver must carry proof of coverage to show that he or she has the required insurance when driving for a transportation network company.
Required insurance coverages under section 228 have two separate limits
Under the Bill, the required coverage and limits that satisfy the financial responsibility requirements for a vehicle operating as a transportation network company vehicle, taxicab, or livery vehicle depends upon the status of the vehicle in the network.
If a driver affiliated with a transportation network company is logged onto the transportation network company’s digital network and is available to receive transportation requests, but does not have an assignment, the required automobile insurance is “per occurrence, per vehicle coverage amounting to at least:
- $50,000 of coverage per individual for bodily injury
- $100,000 of total coverage for bodily injury
- $30,000 of coverage for property damage
- uninsured motorist coverage to extent required by section 113L of chapter 175, and
- personal injury protection to the extent required by section 34A of chapter 90;
However, if the driver is actually engaged in a prearranged ride through the transportation network company’s system, the driver must have a “ride for hire policy” that provides at least:
- $1,000,000 in per occurrence, per vehicle coverage for death, bodily injury, and property damage
- uninsured motorist coverage to extent required by section 113L of chapter 175, and
- personal injury protection to the extent required by section 34A of chapter 90;
Transportation network companies guarantee drivers’ coverage and cannot provide contingent coverage
Under the proposed statute, the required insurance, “may be held by the ride for hire driver, the ride for hire company, or some combination thereof.”[pullquote]“What Will “Gap” Coverage Do For Uber’s 45,000 Mass. Drivers and their Agents?” [/pullquote]
However, the proposed Law also provides that if the insurance supposedly maintained by the driver, “has lapsed, failed to provide the required coverage, denied a claim for the required coverage, or otherwise ceased to exist,” then the ride for hire company is responsible. That company must provide the coverage required by section 228, from the first dollar of a claim as well as to discharge the duty to investigate and defend such claim.
Agency Checklists’ November 15, 2015 article, “What Will “Gap” Coverage Do For Uber’s 45,000 Mass. Drivers and their Agents?” noted that the gap coverage Uber provided its drivers was contingent coverage. The Uber policy only paid, “if the personal auto insurance completely declines or pays zero.”
Section 228, as proposed, bans this type of contingent coverage for transportation network companies. Instead, the proposed Bill states that:
coverage under any automobile insurance policy maintained by the ride for hire company shall not be dependent on a personal automobile insurer first denying a claim nor shall a personal automobile insurer be required to first deny a claim.”
This change will essentially make the insurance maintained by the transport network company primary. The open question that remains, though, is whether or not the compulsory liability coverage on the personal automobile insurer of the driver must apply first.
Transportation network drivers still must maintain personal automobile insurance on the vehicles used in transportation network company systems
The proposed section 228 states that a transportation network driver satisfying the insurance requirements specified in that section satisfies the financial responsibility requirement for a motor vehicle under the compulsory insurance laws found in chapter 90, section 34A and section 113L of chapter 175.
However, that provision has a specific caveat. It states that the driver only satisfies those insurance requirements for a motor vehicle with respect to the provision of ride for hire services in a vehicle, operated by a ride for hire driver.
The driver or owner still must comply with Massachusetts’ compulsory automobile insurance laws and maintain insurance coverage for the vehicle used for ride for hire during those periods of time when the vehicle is being operated but is not providing ride for hire services.
Insurance disclosures to drivers by transportation network companies
The Bill also would require that a transportation network company disclose in writing to transportation network drivers, the following insurance information, before the drivers start providing rides for hire through the transportation network company’s digital network. The mandatory information must include:
- the insurance coverage, including the types of coverage and the limits for each coverage, that the transportation network company provides while the transportation network driver uses his or her vehicle to provide transportation network services; and
- disclosure that the transportation network driver’s own automobile insurance policy may not provide coverage while the driver is providing transportation network services, depending on that policy’s terms.
Existing ridesharing endorsement still applies but now insurers may exclude personal injury protection benefits
The notice to the transportation network drivers that their own insurance policy may not apply, follows from the endorsement that most Massachusetts insurers attach to their personal automobile insurance policies. That endorsement states:
We will not pay any claim for injury or property damage under the policy, while your auto is being used in a personal vehicle sharing program. Such programs or the use of your auto by a person other than you or a household member under an agreement and with payment to you. This exclusion does not apply to personal injury protection.”
The new proposed Law does not affect this existing endorsement. The Bill specifically states that its terms shall not invalidate any existing endorsement that “excludes coverage for vehicles used to carry persons or property for a charge or available for hire by the public.”
Of note, though, is that the Act also states that insurers may:
…exclude any and all coverage afforded under the policy … for any loss or injury that occurs while a driver is providing transportation network services or while a driver provides a prearranged ride.”
This additional language allows insurers to restrict coverages beyond what the present ridesharing endorsement allows because the Bill states that the right to exclude coverage includes:
- Liability coverage for bodily injury and property damage;
- Personal injury protection coverage as defined in chapter 90, section 34A;
- Uninsured and underinsured motorist coverage;
- Medical payments coverage;
- Comprehensive physical damage coverage; and
- Collision physical damage coverage.
The exclusion of personal injury protection benefits is an extension of the existing exclusion.
The Bill’s provisions also specifically provide that if an insurer has excluded the coverage described in this section that it “shall have no duty to defend or indemnify any claim expressly excluded thereunder.”
Finally, as currently proposed, the Law specifically allows insurers to provide the coverage required of a transportation network company’s driver’s vehicle by contract or endorsement stating:
Nothing shall be deemed to preclude an insurer from providing coverage for the transportation network company driver’s vehicle, if it so chooses to do so by contract or endorsement.”
Surplus lines carriers authorized for first time to write Massachusetts automobile insurance
Pursuant to statute in Massachusetts, surplus lines insurance carriers may not write automobile insurance policies. The proposed Bill, however, modifies that prohibition by stating:
Insurance required by this section must be placed with an insurer authorized to do business in the state or, if such coverage is not available, at a reasonable rate from any admitted carrier, then with a surplus lines insurer eligible under section 168 of chapter 175.”
Whether surplus lines automobile carriers may offer coverage to transportation network drivers depends on whether admitted carriers offer reasonably priced endorsements for transportation network drivers in Massachusetts. The transportation network companies apparently already use surplus lines carriers for their contingent gap coverage for their drivers.
Commissioner to report annually on coverage minimums for transportation network companies
The proposed law would also require the Commissioner of Insurance “in consultation with the ride for hire division” to issue an annual report. The report would document the coverage minimums required for transportation network company vehicles, during the period of time when the driver is logged onto the digital network, but is not engaged in a prearranged ride. The annual report must include at a minimum:
(1) an examination, based on actuarial data, of whether the existing coverage requirements provide adequate protection for passengers, drivers, and the general public;
(2) whether it is presently feasible for a transportation network company to obtain an insurance policy providing coverage of $1,000,000 per occurrence, per vehicle during the relevant time period;
(3) if such a policy is available, whether the coverage minimums should be raised so that all transportation network company vehicles carry $1,000,000 of coverage per occurrence, per vehicle, at all times while operating as a transportation network company;
(4) whether any strategy can be developed to raise the coverage requirements during this period through the use of admitted motor vehicle insurance carriers in the commonwealth, the surplus lines market and technological innovations in the insurance industry, such as the use of telematics to improve risk assessment; and
(5) any recommended action by the Division of Insurance, ride for hire department, the legislature, or any other government entity that would encourage the insurance market to provide policies with higher insurance rates while transportation network companies are not engaged in a pre-arranged ride.
The Commissioner’s report, including the Commissioner’s recommendations and actuarial analysis is to be filed not later than February 15 of each year, with the clerks of the House and Senate, the chairs of the house and senate committees on ways and means and the chairs of the joint committee on public service.
A transportation network company bill should pass this legislative session but interested parties expect to offer amendments to the present Bill
The Bill, in its current state, revises legislative proposals filed last year by Governor Baker. This new Bill has the support of House Speaker Robert DeLeo as well as apparently Governor Baker.
Upon the Bill’s release from committee, Governor Baker, through a spokesperson, stated that he “is grateful for the [house] committees’ work, and believes this bill represents an important first step in protecting public safety while allowing for continued economic growth. The Governor looks forward to continuing to work with the Legislature to accomplish these goals.”
Both the transportation network companies and the coalition of taxi and limousine companies, known as Ride Safe Massachusetts have expressed reservations and disappointment over the Bill.
As it moves through the House for approval, and then the Senate, both sides are expected to continue the debate over specific provisions of the Bill and to lobby lawmakers for amendments favoring their viewpoints.
A final version of Bill is expected to be passed and sent to the Governor’s desk by the end of the present legislative session in July.
Additional provisions in the Bill not relating to insurance
The new Bill, of course, has a number of provisions relating to transportation network companies, transportation network drivers, and other ride for hire vehicles that include taxicabs and livery vehicle besides and transportation network vehicles.
Some of these provisions are
- Background checks for transportation network drivers. The proposed Bill provides for background checks first by the transportation network companies and then by the new Ride For Hire division to be established in the Department of Public Utilities.
- No requirement of fingerprinting for transportation network drivers. Taxi companies and livery companies had urged the Legislature to require fingerprinting. Transportation network companies, such as Uber and Lyft opposed fingerprinting apparently because they believe that a number of their drivers would not wish to be fingerprinted.
- All vehicles used by a transportation network driver will need to be 10 years old or younger and must have a separate annual inspection different from the normal vehicle inspection.
- Transportation network drivers who are not registered as livery drivers may not operate at Logan Airport or the Boston Convention and Exhibition Center.
- The Massachusetts Growth Capital Corporation is to aid taxi companies as small businesses by, among other methods, providing junior or subordinated loans for financing taxicab medallions.
- Transportation network drivers must put identifying decals on the front and back of the car while driving for transportation network companies.
- The new ride for hire Division will regulate surge pricing by transportation network companies. Uber’s yield pricing for increased demand has resulted in claims of price gouging. The new Division has a charge to “ensure that transportation network companies and drivers do not use excessive minimum rates or base rates.”
