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California Passes Law Mandating Insurance Requirements Ride Sharing Companies

California recently enacted legislation to regulate transportation network companies (TNC) like Uber and Lyft. Starting next July, these ridesharing providers will be required to comply with minimum insurance requirements.

As previously discussed on this San Diego Injury Blog, TNCs use smart phone apps to connect drivers using their personal vehicles with passengers who need a ride. While the service is convenient and cost-effective, it is not subject to the same regulations as a traditional taxi or limousine.

One of the primary concerns with ride-sharing companies is who’s responsible if an auto accident occurs, particularly if an uninsured or underinsured driver causes the crash. To close the insurance gap between when the TNC’s commercial insurance is effective and when the driver’s personal insurance kicks in, Gov. Jerry Brown recently signed AB 2293 into law.

Under the new law, a personal automobile insurer does not have the duty to defend or indemnify claims arising out of ridesharing, unless the policy expressly provides such coverage. Instead, it mandates that TNCs must maintain primary liability insurance at certain levels.

From the moment a driver logs on to the application until the driver accepts a ride request, TNCs must maintain coverage of $100,000 per person and $300,000 per occurrence for death and personal injury, and $50,000 for property damage. The coverage increases to $1 million for personal injury and property damage from the moment a ride request is accepted until the passenger exits the vehicle. The policies must include a duty to defend.

The new law also mandates that TNCs carry excess insurance during the “app-on” to “match” period of at least $200,000. AB 2293 will take effect July 1, 2015.