OUR VIEW

Our View: Uber needs to act like a grown-up, or at least like it’s worth $18 billion

June 14, 2014 

In a capital city that recently had to pass an ordinance just to get cabbies to clean up and speak English, no one should be surprised by the exploding popularity of Uber, Lyft and other ride-sharing apps.

Low prices, friendly drivers, clean cars, super-fast service – it’s no wonder that customers are raving all over the planet. But now that these young companies have demonstrated a serious business model, treating them like a serious, grown-up industry also makes sense.

In the past few weeks, this has been happening – and then some.

In a battle that is fast becoming a full-employment act for Capitol lobbyists, lawmakers and regulatory authorities have been taking a hard look at whether Web-based ride-sharing companies need to insure their drivers more thoroughly.

Like Airbnb and other “sharing economy” endeavors, Uber and Lyft introduce commerce into traditionally personal spaces. Using smartphones to crowd-source availability, calculate rates and manage payments, they match prospective riders with drivers who ferry customers from point to point in their own cars or limos.

But because personal auto-insurance policies typically don’t cover accidents when a car is being used for commerce, the business model has run into liability issues. Last year, the California Public Utilities Commission tried to address that with a requirement that these “transportation networking companies” back up drivers’ insurance with commercial policies that provide up to $1 million in liability coverage.

Companies interpreted the PUC’s broad rule to mean that commercial coverage was required when the drivers had a fare in the car or were en route to an arranged pickup. Then, on New Year’s Eve, an Uber driver who was logged on but had no request struck and killed a 6-year-old girl in a San Francisco crosswalk.

Spurred by the tragedy, the Assembly last month passed Assembly Bill 2293, which would require the high-dollar commercial coverage any time the app was turned on. The Public Utilities Commission is scheduled to hear the “app-on/app-off” issue next month.

The Assembly bill, which is backed by insurers, heads to the Senate Energy, Utilities and Communications Committee next week, as does a taxi industry-backed bill, AB 612, which would require the ride-sharers to carry commercial insurance 24/7, like taxis.

That’s some serious legislating for a fairly marginal insurance question. But when a startup is valued at $18.2 billion, as Uber has been, investors aren’t the only ones who tend to see dollar signs.

Obviously, consumers need these drivers to have commercial insurance while they’re working. And in the “sharing economy,” you punch the clock by turning on the app.

Uber and Lyft, supported by influential Silicon Valley trade groups, say the broadened insurance requirements are unfair. They claim the beneficiaries are obnoxious insurance companies and trial lawyers, and that the requirements invite fraud, jack up costs and solve a non-problem, since the companies already insure their drivers for the period between “app-on” and assignment, albeit at much lower coverage limits.

But an injured pedestrian hit by an on-duty cab isn’t going to be any less expensively injured just because the passenger seat is empty.

And PUC research indicates that the companies’ premiums will increase about 30 percent under the proposed rules – not nothing, but surely not enough to break the bank.

These are innovative companies. Surely they can remind off-duty drivers to turn their apps off. And if a driver has more than one ride-sharing app on at a time when an accident happens, courts can apportion the blame.

A young industry has hit the big time, and that’s cause for celebration. But when people start to suggest a few rules after a relatively long period of relatively lax regulation, no one – at least no grown-up – should be surprised.

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