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Uber Tries to Steer Clear of New Rules and Regulations in Garden State

Assembly committee approves bill that would require Uber drivers to carry more insurance, satisfy police background checks

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Echoing similar fights around the country, the upstart cab-hailing service Uber is locked in a contentious battle with legislators and taxi operators. They argue that the company’s freelance drivers are dangerously unregulated and must be forced to meet standards for insurance coverage, commercial licensing, criminal background checks, and identification similar to the requirements for limousine drivers in New Jersey.

Following dueling protests by hundreds of Uber drivers and unionized cabbies outside the State House, the Assembly Transportation Committee on March 19 approved a bill (A-3765) setting minimum insurance levels that drivers for Uber and other transportation network companies (TNCs) would have to carry while they are working, starting from the moment they turn on the smartphone app that alerts them to ride requests.

The bill would require them to get permits from the Motor Vehicle Commission, undergo auto inspections and state police criminal background checks, and display insignia identifying them as commercial drivers. Uber would have to periodically check drivers’ records for legal violations and sex -offender status, and pay the state a 10-cent fee for each passenger transaction. The rules would also apply to other TNCs such as Lyft, Uber’s best-known competitor, and Sidecar.

Uber has lobbied intensely against the bill and sent mailers to voters in the home districts of the bill’s lead sponsors, Assemblymen Joseph Lagana (D-Bergen) and Troy Singleton (D-Burlington). Uber spokesman Matt Wing said the regulatory burden the bill imposes would stifle the company’s innovative car-hailing system and deprive riders of an increasingly popular new transportation option.

“If that bill passes, we will be driven out of New Jersey,” Wing said. In addition to “unfair” insurance requirements, the bill creates “a new bureaucratic system for how driver-partners have to register to become an Uber driver-partner. Drivers will stop joining our system. And if we don't have drivers, we can't provide rides to riders, and then that plus the extra costs, it makes being in the state untenable. We'll be driven out. That's the goal of this bill.”

Still, the company also says that more than 5,200 drivers have signed up with Uber in New Jersey, and it expects to add another 5,000 by the end of the year. About half the trips it provides start in Hudson County, 20 percent in Essex, 10 percent in Bergen, and the rest elsewhere. The fastest growing counties are Middlesex, Morris, and Union, the company says.

Illegal and underinsured

Lionel Leach, president of CWA Local 1039, which represents 300 taxi drivers, dismissed Uber’s complaints as empty threats. He said its drivers are operating illegally, have insufficient insurance, and for safety reasons should undergo state-police background checks and follow other rules similar to those already imposed on taxi and limo drivers.

“They're not leaving New Jersey,” he said. “They just want to use that as an excuse to not be regulated like everybody else.”

Leach said Uber wants its drivers to be able to operate with lower levels of insurance and without regulation so they can keep their overhead down and charge less than regulated taxi drivers. At Newark airport he’s already seen the impact on regular cabbies who follow the rules and waste their days waiting in line for fares that are being snatched up by Uber drivers.

“What's happening now is, they have to sit there 14 hours for two rides,” he said of the cabbies. “So what is that doing? They're putting the passengers in danger because you have drivers just trying to make a living, but in order to make a living have to work extra hours. You're putting the driver at risk, because now the driver's on the road longer hours, and it's just not good for public safety.”

Lagana, an attorney who works on insurance issues, said the main sticking point in the bill is the level of insurance coverage during the “trolling” period, after a driver turns on the Uber app but before picking up a passenger. He said the TNCs maintain drivers can rely on their personal auto insurance at that point and should not be required to carry full commercial coverage for work-related accidents.

“What happens if now they get into a car accident? The insurance companies, 99 out of 100 times, and I almost want to say 100 out of 100 times, they're going to disclaim coverage,” Lagana said. “They're going to say, you're operating for commercial purposes, we're not paying.”

“It leaves the driver without insurance. It leaves the person who either hit him, or who he or she (hit), without an insurance policy. There's no liability insurance, there's no property damage insurance, and there's no medical expense benefits. So the driver's really out of luck now. If the driver spends three or four days in the hospital, guess what: no one's paying their medical bills,” he said.

Wing said the company has found that personal insurance actually covers about half of claims originating during that period, and in case of rejected claims the company provides drivers with additional contingent liability coverage. The insurance issues affect the UberX ridesharing service and not Uber Black, which uses licensed chauffeurs.

Lagana said his bill is based on insurance requirements that became law in California, Colorado, and Washington, D.C., last year. Virginia’s governor signed a TNC insurance bill in February and another awaits the governor’s signature in Utah, according to the Property Casualty Insurers Association of America. Last month Uber, Lyft, and several insurers said they had agreed on model insurance legislation, which Lagana said is very similar to the Assembly bill.

Wing noted that Uber’s drivers carry $1.5 million in commercial coverage per incident while transporting passengers -- a level the bill would codify -- while taxi drivers are only required to carry $35,000. Lagana acknowledged the disparity, calling current statutes regarding taxis and limos “disjointed,” but said more comprehensive reforms would have be discussed at another time.

Putting safety first

In addition to the proposed insurance requirements, Uber criticizes the state licensing and background checks envisioned by the Assembly bill. Wing says Uber conducts thorough checks using private investigators, and contends that requiring drivers to go through lengthy and cumbersome state processes will keep them from joining the service.

But critics say closer supervision is urgently needed given a number of sexual assaults and other crimes allegedly committed by UberX drivers around the country. In February a woman in Philadelphia claimed that an Uber driver raped her after picking her up in Old City and then drove her around for two hours before dropping her off.

“We just want to make sure that people are safe, that the drivers are safe, and that if there's any kind of accident, that they're safe. We want to make sure that when someone's picking you up you know that their fingerprints went through a state police database, and that the person picking you up hasn't been arrested, you know, 14 times for aggravated assault,” Lagana said. “I think these are things that we as representatives have to do for our publics.”

Like Leach, the assemblyman dismissed Uber’s claim that the legislation could drive it out of the state as “ridiculous,” pointing to much tougher regulations the company accepts in New York. He said he welcomes TNCs and the jobs they create, and believes his bill will make work easier for their drivers. They would not need to obtain permits in individual towns, as taxi drivers must, could stop worrying about fines and police enforcement at airports, and would be allowed to use surge pricing, in which prices shoot much higher during periods of high demand, he said.

“Essentially, if my legislation became law, TNCs can operate in any municipality throughout the state, and local municipalities cannot force them out,” Lagana said. “We recognize the business model is not quite like taxis and limos, and they should be regulated a little bit differently. So we'd be actually opening up the market for them. Right now they can't operate in Hoboken; they would be able to operate in Hoboken at that point.”

The bill’s prospects are unclear. Republicans on the transportation committee did not support it -- three voted against and one abstained -- and Gov. Chris Christie has not yet offered an opinion. Lagana also said the bill will probably undergo more changes. It could go up for Assembly vote first, or could be held until after a vote on the Senate version (S-2742), which Lagana said slightly differs from his bill.

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