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Mary Beth O’Hara Osborne, Esq.

Director of Regulatory Affairs

Pennsylvania Public Utility Commission

TNCs: Why It’s Uber Important You Understand

What They Are

PAMIC Claims SummitApril 8, 2015

Tom CapperAttorney, Office of Special Assistants

Pennsylvania Public Utility Commission

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DISCLAIMER:Today’s presentation

represents the comments of Mary Beth Osborne and Tom

Capper; not of the Pennsylvania Public Utility

Commission

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UberX, or UberEx?

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The Sharing Economy• Airbnb• People rent out their homes to travelers

• RelayRides• People rent out their cars

• EatWith• People cook, charge others to dine at

their home

• Net metering• Consumers generate electricity with

solar or other renewable system, sell excess back to electric grid

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What is Uber?uber- * in Pennsylvania, known as Rasier-PA

ˈo<obər/combining formprefix: uber-; prefix: über-

1. denoting an outstanding or supreme example of a particular kind ofperson or thing.

2. being a superlative example of its kind or class;

3. to an extreme or excessive degree;

4. better, larger, or greater than.

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What is Lyft?

liftlift/verb

1. to raise from a lower to a higher position2. to elevate3. to raise in rank or condition

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• Not transportation companies – technology companies (according to them)

• Uber and Lyft are most well-known

• Mindset: ask forgiveness rather than permission

Transportation Network Companies (TNCs)

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• Current battle in CA

• Lawsuits against Lyft and Uber in U.S. District Court in San Francisco – drivers claim they should be classified as employees

• Would entitle them to benefits and protections not provided as independent contractors

• Judges believe matter too unclear – jury should decide

TNC Drivers: Employees or Independent Contractors?

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Transportation Progression

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Industry Impacts• Number of Uber cars now outnumbers taxi

cabs in NYC• 14,088 to13,587 (NYC Taxi and Limousine

Commission)

• But taxis trump TNCs for number of rides given • about 440,000 cab rides a day and 20,000 to

30,000 Uber rides• TNCs: one driver per car, fewer than 40

hours/week

• Value of taxi medallion decreasing in Philly• As much as $545,000 in early 2014• No bidders in late November for $475,000• Lowered to $350,000

• “Uber 9-1-1” for faster emergency response?

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Industry Impacts• Ratings and complaints

• Uber’s 5-star rating system – passengers sincere or influenced?

• PUC regulation offers concrete complaint mechanism, follow-through

• Added complaint tracking system to PUC website; consumers can view complaint history of all regulated entities

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TNCs & Innovation• Fitting innovation into regulations

is difficult

• Not just the technology that is innovative; unprecedented business practices as well

• “I don’t think government is supposed to be in the job of negotiating with businesses.” – Liz Krueger, New York State Senator

• Or… are they unprecedented?

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Travis Kalanick & Cornelius Vanderbilt

• Harvard Business Review compared their non-traditional approach to forging empires

• “Law, rank, the traditional social bonds – these things meant nothing to him. Only power earned his respect.” – Vanderbilt biographer

• Sound familiar?

TNCs & Innovation

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TNC Enforcement• Personal cars, generally

unmarked

• Eventually regulators catch wind• Driver ads• Word of mouth• News articles

• Sting operations

• We are the protectors of public safety in the passenger-carrier setting• If not us, then who?

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Commission Structure

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PUC Multi-Bureau Engagement on TNCs• Administrative regulatory agency with quasi-judicial

functions

• Bureau of Technical Utility Services (TUS) assists in approving compliance plans, collaborates with Law Bureau on legal issues

• Bureau of Investigation and Enforcement (I&E), prosecutory arm – involved when TNCs violated conditions of temporary authority, operated through cease-and-desist order

• Office of Administrative Law Judge (OALJ) involved with:1. Filing of protested applications2. Filing of formal complaint/enforcement action

by I&E3. Filing of formal complaints by others

• Office of Special Assistants (OSA) – draft recommended Orders on application cases

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TNCs in PA: A TimelineFeb

ruary

2014

Uber & Lyft launch

in Pittsburgh

July

24,

2014

Commission grants

60-day ETA for Uber &

Lyft

Ap

ril 3,

2014

Ap

ril 14,

2014

Lyft applies for Experimental

Authority

Au

g.

28,

2014

PUC holds en banc

transportation hearing

July

1,

2014

July

2,

2014

July

16,

2014

Uber applies for 60-day

ETA (Allegheny

County)

Lyft applies for 60-day

ETA(Allegheny

County)

ALJs order

Uber & Lyft to cease and

desist

Dec.

5,

2014

Commission approves

conditional Experimental Authority for

Uber

Dec.

18,

2014

Commission approves

conditional Experimental Authority

for Lyft

Jan

. 29,

2015

Commission approves

Uber compliance plan, grants

2-year certificate

Feb

. 12,

2015

Commission approves

Lyft compliance plan, grants

2-year certificate

Jun

e 6

, 2014

I&E files Formal

Complaints against Uber

& Lyft

Uber applies

for Experime

ntal Authority

Since Jan. 29, Uber has launched in Harrisburg, Lancaster, York, Reading, State College, Wilkes-Barre/Scranton (in

addition to Pittsburgh – and Philadelphia)

Marc

h 1

4,

2014

YellowX applies

for Experime

ntal Authority

July

31,

2014

Commission approves YellowX compliance plan,

grants 2-year certificate

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PUC Position• Never challenged benefit to consumers

• Priority always was safe, reliable rides for consumers, while supporting competition and financial opportunity for drivers

• It is our obligation to enforce the laws as they currently exist

• We support innovation and TNCs…

• …as long as we can ensure that both drivers and the public are safe

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TNC Compliance Requirements

• Commission has stressed need for insurance protections, driver background checks and vehicle safety

• Standards at least in line with taxi regulations

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TNC Compliance Requirements

• YellowX certificated for two-year experimental service in Allegheny County July 31, 2014

• As of Jan. 29 and Feb. 12, Uber and Lyft certificated under two-year, experimental licenses in majority of PA, respectively

• Required companies to comply with explicit standards before issuing certification

• Insurance protections• Driver integrity• Vehicle safety

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TNC Compliance Requirements

• Requirements mainly bring TNC regs in line with taxis• But we require more insurance coverage for

TNCs• Cover different “stages” of a ride

• Grey area for liability when an accident occurs (personal vehicles)

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TNC Compliance Requirements

• Uber driver hit and killed 6-year-old girl in San Francisco

• Driver didn’t have a passenger at the time• Who is liable? Driver or

Uber?

• PUC requires insurance coverage on ALL stages of ride – from turning on the app to dropping off a passenger

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Need for legislation• PUC hopes legislation

introduced before two years expire

• Have been creative with Orders to welcome TNCs

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Senate Bill 447Senator Wayne Fontana (D-Allegheny)

• Only bill formally introduced – others being floated

• Working with General Assembly on bill to address safety and liability issues

• We’re not insurance experts

• Insurance companies should follow legislation and provide comments

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So, how did we craft ourCommission Orders?

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Experimental Service• 52 Pa. Code § 29.352

• “In order to advance and promote the public necessity, safety and convenience, the Commission may, upon application, grant a new certificate … in order to allow to be provided a new, innovative or experimental type or class of common carrier service.”

• Additional regulations and requirements, waiver of some requirements

• Two-year term or until Commission enacts amendments

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Experimental Service• What makes TNCs “experimental?”

• “Digital platform” to connect passengers to drivers

• Drivers use personal vehicles – not commercially licensed

• Mobile app to generate leads

• TNC does not own vehicles, employ drivers or transport passengers

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Protests

• Taxi companies

• Limo companies

• Insurance Federation of Pennsylvania• Inadequate coverage• Inadequate insurance education/training• Fails to protect public

• Commission ALJs reject applications

• Commission Orders include conditions

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Driver Integrity Conditions

• Criminal background checks exceed regulatory requirements

• Driver history check

• Compliance conditions• Conduct criminal and driver history

checks at time of driver sign-up and annually thereafter

• Continue zero-tolerance policy for driver drug/alcohol use while driving

• Three-year recordkeeping requirement

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Vehicle Safety Conditions• Base-level framework including

annual PennDOT inspections and customer feedback

• Compliance conditions• Ensure vehicles used in TNC service

successfully passed PennDOT inspections each year (three-year recordkeeping requirement)

• Ensure vehicles remain in continuous compliance with Commission regulations

• Vehicles will be subject to periodic inspections

• Eight-year model limit• Placard requirement

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Insurance Requirements• Stage 0: Driver is driving for personal reasons and

app is closed• TNCs must require proof of drivers’ valid/current liability

insurance

• Stage 1: Driver opens the app and is logged into system• $35,000 in liability insurance

• Stage 2: Driver receives and accepts a ride request, travels to pick up passenger• $1 million of third-party liability insurance; $1 million in

uninsured/underinsured coverage – exceeds regulatory requirements

• Stage 3: Driver picks up passenger, drives to destination, passenger exits the vehicle• $1 million of third-party liability insurance; $1 million in

uninsured/underinsured coverage – exceeds regulatory requirements

• Stages 1, 2, 3: TNC coverage primary – not contingent on driver’s personal liability insurance

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Insurance Requirements• Drivers must notify insurers of intent to

operate TNC service – TNCs must enforce

• Additional notifications:• TNC shall direct drivers to contact personal

auto policy insurer regarding any policy impacts

• Drivers shall verify that they agree to contact their personal insurer

• TNCs shall clearly inform drivers in writing of:• Insurance coverage provided during Stages

1, 2 and 3 • Whether TNCs are providing comprehensive

and collision coverage during service• Instructions in case of an accident

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Insurance Requirements• TNCs must provide evidence of insurance to

PUC• Form E• By filing Form E, “the insurer certifies to the

Commission that it is providing coverage in accordance with the law, notwithstanding any potentially contrary terms contained in an individual policy of insurance.” - Insurance Corporation of New York v. Antrom, Pa. Superior Court

• Orders required filing compliance plans with PUC, demonstrating required insurance coverage

• In early March, protestants filed two appeals (Petitions for Review) with the Commonwealth Court in the Rasier-PA (Uber) statewide application matter

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New Insurance Products• Hybrid TNC policies • Geico• Progressive• Erie

• Can hybrid TNC driver policycoverage be primary?

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What’s next?