Insurance Groups Criticize Massachusetts Rideshare Regulations

January 20, 2015 by Young Ha

Insurance industry associations say Massachusetts’ newly developed rideshare regulations are vague and woefully deficient in addressing the insurance concerns.

The regulations, crafted by Massachusetts Department of Transportation (MassDOT), were published in the Massachusetts Register on Jan. 16, according to the Office of the Secretary of the Commonwealth of Massachusetts. A MassDOT spokesperson said this is “one step in what we expect to be a robust process.” The state’s Department of Public Utilities (DPU) has to complete its own regulations and file and have legislation passed, according to MassDOT.

“The regulations that were proposed were rushed through at the last minute by the outgoing administration of Gov. Deval Patrick, and they were highly controversial,” said Frank O’Brien, vice president of state government affairs for the Property Casualty Insurers Association of America. “They were subject to a ruckus public hearing that was held on Dec. 31. And not withstanding considerable opposition, they were still put on the docket for promulgation.”

“From an insurance point of view, the regulations are extremely vague, and deficient,” he said. “The only thing that the regulations essentially require is that a Transportation Network Company (TNC) driver have proof of insurance. In order to drive and have a vehicle in Massachusetts, you have to have proof of insurance to begin with. So that’s not really a requirement.”

“Then it goes on to state that the TNC drivers and the TNCs are both required to have so-called adequate insurance, and there is no definition of what constitutes adequate. So you have a regulation that was put together without a lot of input,” said O’Brien. “And on top of it, statutory authority for this regulation is highly suspect to begin with.”

O’Brien noted that for Massachusetts personal auto insurance, because of livery exclusions and in some cases specific policy provisions, there is no coverage for commercial activities such as driving for TNCs. “So at the very least there are very significant questions about whether there is insurance coverage at all,” he said.

“In addition,” he said, “while Uber and Lyft do have a so-called million dollar policy that they have touted, there is a specific Massachusetts statute which prevents surplus lines companies from offering this type of compulsory auto coverages that are required to have a vehicle on the road in Massachusetts.”

O’Brien said there are several TNC-related bills that have been filed in the state legislature. “We expect the legislature will have a robust debate concerning this issue over the coming months,” he said.

O’Brien said an insurance industry consensus calls for more specific rules. “We believe that there needs to be changes in law. We believe California legislation serves as a good basis for that,” he said.

California’s new law AB 2293, which is scheduled to go into effect in July, provides that TNCs and/or their drivers must maintain $1 million primary insurance coverage from the time the driver accepts the match to the time the passenger exits the car, according to the California Department of Insurance. The law also mandates a minimum of $50,000 for injury to one person, $100,000 for injury to multiple persons, and $30,000 for property damage for the pre-match period.

The California Department of Insurance said in November it is ready to accept insurer filings to create new commercial coverage or endorsements to personal auto policies that will provide coverage for TNC drivers in California.

The Massachusetts Association of Insurance Agents (MAIA) also criticized the insurance portion of the MassDOT regulations as woefully deficient. MAIA’s Vice President of Communications and Registry Liaison Donna McKenna said the regulatory language requires that TNCs and TNC drivers “shall maintain appropriate liability insurance,” but she noted there is no indication of what the DPU — the proposed regulatory agency for TNCs — would consider “appropriate liability insurance.”

“We know the Massachusetts personal auto insurance policy is not appropriate liability insurance for a TNC driver since it’s clearly spelled out that the policy will not respond when the vehicle is being used as a public or livery conveyance,” she said. “What we don’t know is what the DPU or MassDOT definition of ‘appropriate’ is.”

McKenna said the state’s private auto insurers establish their own underwriting criteria and are not required to write insurance for applicants who are TNC drivers. This could create coverage availability issues for TNC drivers since they would not be eligible to be placed in the Massachusetts Automobile Insurance Plan, the state’s personal auto assigned risk plan.

McKenna noted that TNC vehicles are also not eligible for commercial auto coverage through the state’s commercial residual market, Commonwealth Automobile Reinsurers (CAR). They would, however, be eligible for a special program available through CAR designed for taxicabs, limousine services and car services.

“In our opinion the regulation must be more specific regarding the insurance requirements for TNCs and TNC drivers,” said McKenna.

“Requiring TNCs to ‘maintain appropriate liability insurance’ and TNC drivers to ‘possess proof of personal motor vehicle insurance as required under M.G.L. ch. 90 for the Personal Transportation Network Vehicle being used’, when it is known that there is no coverage available for the TNC exposure under the personal motor vehicle policy is, in our opinion, a breach of a state regulatory agency’s responsibility to protect the public,” said McKenna.

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