The debate between the City of Madison and the state legislature regarding regulation of transportation network companies (TNC’s) was largely resolved on May 1, 2015, when Governor Walker signed Assembly Bill 143 into law. The new law provides additional access to affordable transportation options throughout the state, while imposing standards to ensure safety and appropriate levels of insurance. The bill was opposed by the City of Madison, but had bipartisan support at the state level.
TNC’s, including the San Francisco based “Uber”, have become ubiquitous in large cities, including Madison and Milwaukee. These companies provide mobile-based rideshare programs, allowing an individual to request a ride using their smartphone with the click of a button. Unlike traditional cab companies, a TNC user is able to track the location and the identity of the driver through the maps program on their mobile device, allowing a level of convenience and predictability not available with traditional cab companies. These companies are experiencing exponential growth and all signs suggest that trend will continue.
Despite their apparent convenience, TNC’s have created considerable controversy in many cities, including Madison, where police and local leaders have opposed the companies due to concerns over licensing, safety, and insurance coverage. Traditional cab companies contend that allowing these companies and their drivers to operate without a license creates an unequal playing field. Madison police have also raised safety concerns amidst recent allegations of sexual misconduct by certain Uber drivers directed toward young female passengers.
In addition, the quasi “independent-contractor” nature of TNC’s operations raises significant concerns regarding insurance coverage. Companies like Uber may provide sufficient liability insurance; however, that coverage is only applicable when there is a passenger in the car. Issues began to arise concerning insurance coverage for the so-called “trolling period” – including the periods where a driver is attempting to connect with a new passenger or times where a driver is in route to pick up a new passenger. Many drivers assumed that their personal automobile policies would cover those periods when there is no passenger, seemingly unaware that many auto policies contain exclusions if a car is used for a commercial purpose. Thus, considerable uncertainty arose from drivers attempting to use private liability insurance for business purposes.
Even with Uber carrying $1 million in liability protection, there was little being done to address the inevitable gaps in coverage, arising during the time that drivers are logged into the mobile app attempting to match with another passenger. These insurance issues and gaps in coverage are in direct conflict with the insurance requirements of Wis. Stat. § 632.32.
Earlier this year, the state assembly began contemplating a proposed bill that would implement uniform state-wide regulation of TNC’s. Before any agreements could be reached, the City of Madison stepped in and passed an ordinance in April. The ordinance provided local regulation of TNC’s that was far more restrictive than the bill being contemplated by the state assembly.
Among the requirements imposed by the adopted ordinance, TNC’s were required to operate 24/7, cover the entire city, and carry a certain level of insurance. The Madison ordinance also abolished the practice of surge pricing (charging higher fares during periods of high demand) and took issue with the requirement that a customer use a credit or debit card synced with their mobile device, arguing that both requirements effectively limit the customers who can access the program.
On May 1, 2015, several weeks after the City of Madison passed its ordinance, Governor Walker signed Assembly Bills 143 into law, which provides statewide regulation of TNC’s and effectively preempts any attempts at local or municipal regulation.
The new law creates a licensing system for TNC’s/rideshare companies, which requires that each driver pay a $5,000 licensing fee to the state and that the TNC carry $1 million in insurance for periods when a passenger is in the vehicle. The law also requires that the TNC’s or their drivers carry additional insurance that will cover the periods when there are no passengers in the vehicle but the driver is operating the vehicle with a commercial purpose.
Some additional requirements in the bill include:
- Solicitation of passengers and payment of fares can only be done electronically though the prearranged TNC system;
- Requirement that drivers submit proof of insurance and a copy of their policy;
- Criminal background checks on drivers and a review of the driving history for each individual;
- Prohibition against disclosing a passenger’s personally identifiable information, except in limited circumstances;
- Requirement to keep trip records for at least one year after the trip takes place.
As stated, the new law requires either the TNC or the driver to provide insurance that covers the driver while the driver is logged in but does not have a passenger. The coverage requirement includes at least $50,000 for death and bodily injuries per person, $100,000 for death and bodily injury per accident, and $25,000 for property damage. The law also imposes primary uninsured motorist coverage in accordance with the requirements of Wis. Stat. § 632.32(4)(a)1.
There is nothing in the new law that will prevent an insurer providing automobile insurance from excluding coverage for any losses or injuries occurring while a driver is logged on to a TNC’s digital network or engaged in transportation services.
In lieu of this new law, insurers will enact new measures to address TNC coverage gaps. Interestingly, many insurance companies who write policies in Wisconsin endorsed Wisconsin Assembly Bill 143. It appears that legislators have accepted the changing landscape of public transportation and it will be interesting to assess how insurance carriers respond in crafting policies or endorsements that will address the coverage gap ambiguities that may still exist in lieu of the new insurance requirements.
Insurance carriers will undoubtedly have flexibility and options in crafting their existing policies or writing hybrid policies that address coverage for TNC drivers. One option would be to require a TNC driver to purchase and maintain commercial liability insurance, though this option would be rather costly on the driver. Another option, recently endorsed by the National Association of Insurance Commissioners, would be to divide the ridesharing process into three periods: period 1 when a driver is looking for a passenger; period 2 when there is a match and a driver is on his or her way; period 3 when the drive has a ride. This hybrid model would establish different methods of coverage for different periods and allocate the burden of coverage between the TNC’s policy and the driver’s policy.
Despite the current uncertainty, insurance carriers will undoubtedly respond with new and creative ways to address coverage gaps and likely begin to offer new hybrid policies or endorsements. As more states are adopting measures to provide uniform regulation of TNC’s, insurance carriers will continue to develop new policies and programs to give rideshare drivers more choices for automobile insurance quotes that will provide the necessary coverage.
 Wis. Stat. § 632.32 imposes minimum liability coverage under an automobile insurance policy for licensed drivers including:
$25,000 for injury or death of one person;
$50,000 for injury of death of two or more people; and
$10,000 for property damage.
The law also requires uninsured motorist coverage with a minimum limit of $25,000 for one person and $50,000 for two or more people for bodily injury coverage.
This news update is designed to provide general, educational information on pertinent legal topics, and the statements therein do not constitute legal advice. This news update is not intended to create an attorney-client relationship between you and Corneille Law Group, LLC. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.