State Regulation of Rideshare Companies
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States have been addressing the challenges presented by rideshare companies since 2013.
- After first declaring them illegal, California became the first state to legalize rideshare services in 2013 when the California Public Utilities Commission voted to pass proposed rules creating a new class of “transportation network companies.”1
- Colorado was the first state to enact legislation authorizing rideshare services in June 2014.2
- By the end of 2015, 28 states and the District of Columbia had enacted rideshare legislation.3
- New Mexico4, South Dakota5 and West Virginia6 enacted rideshare legislation in the first quarter of 2016.
- As of the end of March 2016, another five states were in the process of considering legislation.7
State rideshare legislation has sought to address a variety of major legislative issues, including:
- The legality of ridesharing;
- Requirements for public safety, including the adequacy of insurance coverage and background checks for drivers;
- Disclosure requirements for regulators and insurers;
- The rights of insurance companies to cancel or not renew insurance for rideshare drivers or deny coverage while engaged in ridesharing;
- Generation of employment opportunities;
- Conflicts with the taxi industry; and
- States’ rights vs. municipal rights.8
Issues of insurance adequacy have produced some of the most significant questions for lawmakers in rideshare legislation.
- Are rideshare drivers covered by personal auto policies, or are more costly commercial policies needed?
- Is coverage sufficient to protect the passenger, the driver and the general public?
- Do drivers, who operate as independent contractors and typically lack benefits afforded full-time employees such as workers’ compensation insurance, have sufficient protections?9
Many of the rideshare laws passed in recent months are based on a model law developed by the National Conference of Insurance Legislators. The model law was based in part on Indiana’s rideshare law
that incorporated compromise language agreed to by rideshare company Uber and insurers. It includes the following features.
- It requires primary auto liability insurance purchased by the driver and/or by the rideshare company to cover the period in which the driver is logged into the online system and is available to receive a transportation request and the period during which the driver is transporting a rider.
- It requires certain disclosures to drivers.
- It requires a rideshare company to have a permit from the state before it can operate there.
- It establishes rules regarding who can serve as a driver.
- It specifies that a rideshare company may meet its insurance requirements by purchasing coverage through an insurer that’s highly rated by a rating agency recognized by the department of insurance.10
While many of the state rideshare laws around the country are similar, some have unique features.
- Rideshare laws in three states—Arkansas, Indiana and North Carolina—require drivers for the companies to be classified as independent contractors.11
- Nevada’s legislation includes a 3 percent excise tax on rideshare and taxi fares. At least $19 million of the $70 million generated by the tax is helping to fund a medical school at the University of Nevada-Las Vegas.12
- Maryland’s legislation requires rideshare companies to prove they have a stringent background check system in place that requires fingerprinting of all drivers.13 Under the law, Uber drivers are required to submit fingerprints but the company can ask for a waiver to the rule if it proves its background check is just as rigorous as the fingerprint-based one. The Maryland Public Service Commission is the agency charged with determining if such a waiver is granted.14 Uber has argued against fingerprinting drivers saying they turn up arrests, not convictions, and thus are unfair to populations that get arrested more frequently.15
- Georgia’s legislation requires drivers to be responsible for their own background checks.16
1 Tomio Geron. “California Becomes First State to Regulate Ridesharing Services Lyft, Sidecar, UberX.” Forbes. September 19, 2013.
2 Andy Vuong. “Colorado first to authorize Lyft and Uber’s ridesharing services.” The Denver Post. June 5, 2014.
3 Andrew Moylan and Zach Graves. “Ridescore 2015: Hired Driver Rules in U.S. Cities,” R Street Policy Study No. 48. December 2015.
4 Russell Contreras and Morgan Lee. “New Mexico Governor Signs Ridesharing Bill.” Insurance Journal. March 11, 2016.
5 “Rideshare Insurance Bill Signed by South Dakota Governor.” Insurance Journal. March 23, 2016.
6 Eric Eyre. “WV Senate Oks Uber bill.” West Virginia Gazette Mail. March 1, 2016.
7 R Street. “Map of state-level ridesharing laws.” Updated March 23, 2016.
8 Kim Staking. “Rideshare Companies: Insurance & Regulatory Issues for States—Presentation to State Legislators.” Des Moines, Iowa. February 8, 2016.
10 National Conference of Insurance Legislators. “Legislators Approve Model Law to Regulate Controversial Transportation Network Companies (TNCs),” Press Release. July 19, 2015.
11 Alison Griswold. “Three US states have already blessed Uber’s independent contractor employment model.” Quartz. December 10, 2015.
12 “Nevada lawmakers give green light to measure allowing Uber to operate.” Las Vegas Sun. May 23, 2015.
13 Maryland Senate. Senate Bill 868.
14 WBFF Fox 5 News. “The road ahead for Uber safety.” November 17, 2015.
15 Jordan Graham. “Uber: Don’t fingerprint our drivers.” Boston Herald. February 24, 2016.
16 Andy Sher. “New Tennessee ride-sharing law hailed as model for nation.” Times Free Press. June 16, 2015.
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