California Regulators OK On-Demand Ridesharing, With Conditions

On-demand ride services got the green light from California regulators on Thursday in a move the services hope will help clarify their legal status in other jurisdictions.

The California Public Utilities Commission created a new category called a “Transportation Network Company,” or TNC, that will cover businesses such as Lyft, SideCar and UberX. Those companies allow customers to summon rides using apps, typically on their smartphones, from drivers who use their personal, non-commercial vehicles.

New rules will require the TNCs to obtain a license from the CPUC to operate in California, to require each driver to undergo a background check, to establish a driver training program, to implement a zero-tolerance policy on drugs and alcohol, to conduct a 19-point car inspection and to hold a commercial liability insurance policy with minimum coverage of $1 million per incident.

“Here we’ve got the state recognizing these innovations are great for consumers and are safe, so we think other states and other countries will see that and adopt it,” said Sunil Paul, chief executive and co-founder of Sidecar.

John Zimmer, the co-founder of Lyft, said coming under the jurisdiction of the CPUC would supersede the authority of local officials, some of whom have opposed the new services. In Los Angeles, for example, Lyft and others received a cease-and-desist orders from the Department of Transportation in June.

“It’s an exciting day,” Zimmer said.

A DOT spokesman said the department would enforce the new CPUC rules, and had no further comment.

While the services have become very popular with consumers in a number of cities around the world, existing taxi companies have complained they are cutting into their business. Taxi representatives complained the new rules were unfair.

“This is about being enamored with technology and not considering the implications,” said Paul Marron, attorney for the Taxicab Paratransit Association of California.

While taxi companies in cities like Los Angeles and San Francisco have been mandated to convert their fleets to expensive hybrid and natural gas vehicles and to accommodate elderly and infirm customers, their emerging competitors have no such demands placed on them under the new rules. That gives them lower operating costs and the ability to cherrypick the most lucrative customers, Marron said.

The Association of California Insurance Companies said PUC made the right move to regulate ride sharing.

“Once again California is the trend setter in utilizing technology to meet a consumer need,” Mark Sektnan, ACIC president. “As this trend of connecting drivers with others in need of a ride with a click of an app expands, it is important that both parties understand the insurance requirements of this arrangement. Both drivers and riders must understand that an accident in a ridesharing vehicle will not be covered under a personal auto insurance policy.”