After hours of testimony, a House committee on Wednesday evening laid over a measure that would place ride-sharing services like Lyft and UberX under light regulation, leaving the final destination of the bill uncertain.
Senate Bill 125 did not come to a screeching halt — the Transportation and Energy Committee has scheduled the bill for a vote next Wednesday. The hearing this week served to simply take witness testimony.
But what could come to a dead stop are the ride-sharing services themselves if the legislature is unable to advance SB 125. The measure passed the Senate by a vote of 29-6, however it faces a more turbulent ride in the House.
Doug Dean, director of the Public Utilities Commission, has threatened to shut so-called “Transportation Networking Companies” down if a regulatory model is not developed.
Rep. Dan Pabon, D-Denver, said the mandate is clear that the legislature must act quickly to regulate the industry.
“This is an exciting time to be in the legislature and an exciting time to hear SB 125 because what we are doing in many ways hasn’t been done anywhere else,” explained Pabon, who co-sponsors the bipartisan legislation.
“Few have gone down the road that we’re going today. We’re pioneers,” added Pabon. “They say that necessity is the mother of invention. That’s why we are here today.”
His co-sponsor, Assistant House Minority Leader Libby Szabo, R-Arvada, said the ride-sharing services help several segments of the population, including drivers looking for extra work by setting their own hours and consumers who are looking for an easy alternative to traditional taxi services.
“We as a legislature need to embrace all types of innovation to make sure we create a stable economy and good jobs and many opportunities for all those in the state who wish to work,” Szabo said while presenting the bill to the committee.
TNCs work by connecting consumers with rides through mobile applications. Unlike traditional taxi companies, TNCs allow drivers to simply sign up and use their own vehicles to transport passengers.
The companies point out that they are not a motor carrier but instead a TNC, utilizing an online platform that doesn’t fall under the state’s existing regulations. The PUC has been at a loss as to how to regulate the services, and questions have been raised over safety and liability.
Those questions were asked ad nauseam during the more than seven-hour committee meeting on Wednesday. Lawmakers worry that even with the bill, there could be too many uncertainties over insurance coverage.
“How certain are you that the primary insurance of the TNC driver will provide coverage?” asked Rep. Pete Lee, D-Colorado Springs.
Rep. Tracy Kraft-Tharp, D-Arvada, said she called GEICO auto insurance to ask if she would be covered as a TNC driver, and GEICO told her that she would need to carry commercial insurance.
“Will the driver be responsible for purchasing that commercial insurance policy for themselves?” asked Kraft-Tharp.
Pabon attempted to deflate concerns by pointing out that if a driver had an accident on the way to a rider and filed an insurance claim that was denied, then the driver could present the claim to the TNC, which carries contingent insurance.
Szabo also tried to alleviate concerns by pointing out that there would be three insurance levels after a driver picks up a passenger, including the driver’s primary insurance, the TNC’s contingent coverage and then the TNC’s commercial coverage.
When the app is running but there is no passenger, then there would be two levels of insurance, the driver’s primary plan and the TNC’s contingent coverage.
Szabo, however, acknowledged the uncertainty from the insurance and financial worlds, adding, “The insurance companies have not given me any assurances on anything. This is a new technology and we’re not sure.”
In addition to the insurance requirements, the legislation would also mandate criminal background checks on drivers and prohibit employment of drivers who have been convicted of certain crimes. It would also prohibit drivers from operating more than eight hours in any 24-hour period. And it would require screening driving history of employees, as well as conducting a thorough vehicle inspection.
Concerns grow louder
But critics who testified on Wednesday said the legislation does not go far enough. Some are calling for a requirement to carry $1.5 million in liability coverage, and others believe that the legislation should be amended to state that commercial driving begins when the driver logs into the application.
Even Gov. John Hickenlooper’s office weighed in, calling the bill important, but suggesting that it needs a lot of work. Jack Finlaw, chief legal counsel for the governor, said the legislature should leave insurance regulation to a rulemaking process by the Public Utilities Commission and the Division of Insurance.
“This is a new industry… if we can have a passage of time and see how the insurance actually works, even if it’s just a few more months… there would be an opportunity to gather new evidence about how these various insurance regimes are working,” explained Finlaw.
The governor’s office appears supportive of the concept if the measure is amended to the administration’s liking. Without the amendments, it’s unclear whether Hickenlooper would sign the bill or veto it.
“This is one of the most important bills to hopefully come out of the General Assembly this year,” opined Finlaw. “We hope it will authorize an important new transportation opportunity for the citizens of Colorado.”
The Division of Insurance also has its concerns, suggesting that the current proposal leaves too much confusion as to when coverage applies.
“There are so many gray areas…” testified Bobbie Baca, supervisor of consumer affairs for the Division of Insurance. “You are going to have this cycle of coverage, no coverage, coverage. This roller coaster of coverage is going to add to complexities.”
She suggested that as a result, insurance rates would spike. But when pushed for evidence, Baca acknowledged that much of the worry is speculation.
“We have no way of knowing how much the rates will go up, but we do believe they will go up,” Baca testified.
Dean, a former House speaker, said the PUC does not want to have to shut the TNCs down, so he is calling for the amendments suggested by Hickenlooper’s office, including rulemaking authority.
“The insurance gap is a real issue,” explained Dean. “What the commission would like to see at the end of this process is certainty. Very bright lines where the drivers are protected.”
Opposition from the insurance industry only exacerbated concerns. Bob Passmore, the senior director of personal lines policy at the Property Casualty Insurers Association of America, said the bill would raise the personal auto insurance policies of all Colorado drivers to cover the commercial risk of TNC drivers.
“We don’t intend to obstruct a business model or be an impediment to innovation, however TNCs present some serious insurance issues that we believe need to be addressed without shifting the cost of doing business to all of Colorado’s drivers,” testified Passmore.
For Kyle Brown, the general manager of Metro Taxi, the issue is about having a level playing field. He believes ride sharing is no different than traditional taxi services, and therefore should be regulated the same.
“Why should they get to skirt the regulations?” he asked. “If it looks like a duck, quacks like a duck and walks like a duck, it’s a duck.”
Opportunities for drivers and embracing the future>/strong>
TNC drivers keep 80 percent of the fare and don’t have to pay expensive lease fees. Taxi drivers, however, are slapped with costly lease fees.
Brown pointed out that taxi drivers keep 100 percent of the fare, but he acknowledged that on average drivers pay $672 per week to lease the car, which makes ride-sharing a more attractive option to many drivers than traditional cab companies.
Several legislators on the committee seemed stunned by what they called “exorbitant” lease fees and asked what the incentive is to work for a traditional cab company.
Brown responded, “It’s not the cost of the lease, it’s what you can make.”
But throngs of drivers and riders showed up to counter the opposition, wearing T-shirts in solidarity and testifying in support of the bill. Executives with UberX and Lyft pointed to their supporters and suggested that ride sharing is the future of the public transportation industry.
David Estrada, vice president of government relations for Lyft and the former Google X legal director, said the insurance industry’s concerns are overblown.
“The policy is in place the moment the ride is accepted. There is no doubt about this,” said Estrada. “It does not matter if insurers are going to turn down my personal liability policy… There is no gap… There have been zero instances where we have been aware where a personal line was denied coverage.”
Will McCollum, general manager for Uber Denver, echoed Estrada’s points, suggesting, “The insurance law is working exactly as it is supposed to… I’m confident that if you try the service you will find a comfortable ride with an enthusiastic driver.
“SB 125 is about that chance; it’s absolutely about making sure that riders are safe and insured… let’s not lose sight of the potential here…” he added.
“We’re in the business of connecting rides…” McCollum continued. “That is in our best interest, that’s in the best interest of the riding public and that’s in the best interest of drivers.”