Late Sunday night, a six-person conference committee of the House and Senate successfully agreed on a compromise transportation network company bill just before this years legislative session ended at midnight. The bill quickly passed and was laid on the governor’s desk for signature. The governor has not stated publicly whether he will sign the bill.
New chapter added to the General Laws for transportation network companies
The law adds a new chapter to the General Laws, Chapter 159A1/2, and amends the insurance laws by adding § 228 to Chapter 175.
This statute establishes a new 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 will “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 regulates any transportation network company that the law defines as: “[anyone] …that uses a digital network to connect riders to drivers to pre-arrange and provide transportation.”
The law also would regulate transportation network drivers, who are defined as: “…a driver certified by a transportation network company.”
An important component of the proposed law relates to the insurance provisions required of transportation network companies and their drivers. These provisions are contained in a specific amendment to the insurance laws designated as Chapter 175 §228.
Notice to insurers by applicants that they are Transportation Network Drivers
Under the law, Transportation Network Drivers must obtain a “Transportation Network Driver Certificate.” This certificate is “an authorization to provide transportation network services issued by the transportation network company” such as Uber or Lyft to the driver. The division will require that a transportation network company only issue a transportation network driver
certificate to a driver who among other conditions:
- …complies with insurance requirements established in this chapter or in section 228 of chapter 175;, and
- provides notice to all insurers of the vehicle that the applicant intends to use the vehicle to provide transportation network services; … (Emphasis added).
Required coverage for all Transportation Network Drivers
Transportation Network Companies must carry adequate insurance as set forth in the new § 228 of Chapter 175 for each vehicle being used to provide transportation network services.
Likewise, the law requires that each transportation network driver also carry adequate insurance as required by the insurance section for each vehicle being used to provide transportation network services.
The required insurance coverages under § 228 have two separate limits
Under the new § 228, 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 § 113L of chapter 175, and
- personal injury protection to the extent required by § 34A of chapter 90;
This insurance “may be held by the transportation network driver, the transportation network company or a combination thereof.”
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 § 113L of chapter 175, and
- personal injury protection to the extent required by § 34A of chapter 90;
This insurance also “may be held by the transportation network driver, the transportation network company or a combination thereof.”
Transportation network companies guarantee drivers’ coverage and cannot provide contingent coverage
The 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 § 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, of G.L. c. 175, will ban this type of contingent coverage for transportation network companies. Instead, § 228 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
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, § 34A and § 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 transportation network services in a vehicle operated by a transportation network driver.”
The driver or owner still must comply with Massachusetts’ compulsory automobile insurance laws and maintain insurance coverage for the vehicle “during those periods of time when the vehicle is being operated, but is not providing transportation network 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 before certifying the driver to provide 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
- a statement 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 law does not affect this existing endorsement. The law specifically states that:
Insurers that write automobile insurance may exclude any and all coverage afforded under the policy issued to an owner or operator of a vehicle for any loss or injury that occurs while a driver is providing transportation network services or while a driver provides a pre-arranged 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, § 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 law’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.”
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 shall be placed with an insurer authorized to do business in the commonwealth or, if such coverage is not available, from any admitted carrier, then with a surplus lines insurer eligible pursuant to section 168.
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, the [new Public Utilities] division, 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.
Some additional provisions in the law not relating to insurance
The new law, 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 law provides for background checks first by the transportation network companies and then by the new division in the Department of Public Utilities.
- 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 are not prohibited from picking up riders e at Logan Airport or the Boston Convention and Exhibition Center after these entities establish rules for transportation network companies.
- Transportation network drivers must put identifying decals on the front and back of the car while driving for transportation network companies.
