Battle to Regulate Uber, Lyft Moves From City Halls to State Capitols

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setting insurance requirements for the company and driver, requiring criminal and driving background checks for drivers, implementing standards and timelines for vehicle safety inspections, and alerting riders to estimated fares, among other stipulations.

In Virginia, for example, the companies must pay $100,000 for an operating license; drivers must be vetted to see if they’ve been convicted of any felonies or are listed in the sex offender and crimes against minors registries; and either the company or the driver must carry insurance that covers up to $1 million in accident damage, the Washington Post reported.

In some cases, state requirements mirror policies the companies already have in place. The insurance rules for California and Washington state, for example, track closely with Uber’s policy. The company provides commercial insurance with $1 million of liability coverage and $1 million of uninsured/underinsured motorist bodily injury coverage per accident, which is applicable from the time a driver accepts a trip request to the completion of the ride. During the period when a driver has the app on but hasn’t yet accepted a ride request, Uber backs up a driver’s personal insurance policy with liability coverage of up to $50,000 per person per accident (with a total of $100,000 in injury coverage per accident) and up to $25,000 per accident for property damage.

And some states have actually approved insurance rules that are less stringent than company policy. For example, Arizona’s liability insurance requirement while a passenger is in the vehicle is only $250,000.

But it hasn’t been smooth sailing for some of the state bills. A few have stalled or been killed off this year, including in Texas, Florida, New Mexico, and Mississippi. In some cases, stronger insurance requirements have been a sticking point between legislators and ridesharing companies, among other issues.

Uber recently threatened to abandon states like New Jersey and Oregon because of proposed regulations that the company says would make it too difficult to do business there. It might not be bluffing: Uber exited Kansas this month after the state passed a bill that the company sees as overly restrictive. Lyft also has ceased operations in some cities, including Houston and Tacoma, WA, in response to regulations it opposed.

Some state laws have also drawn objections from municipal leaders. The cities of Madison and Milwaukee opposed passage of the Wisconsin law, in part because some city officials preferred local control of the industry. Another result of state oversight: cities lose out on revenue from permitting fees.

Madison Mayor Paul Soglin has said he doesn’t think the state law is strong enough. He told the Wisconsin State Journal that the law should have limited the companies’ ability to hike up prices during high-demand times, a practice called surge pricing, and that it should have required driver background checks conducted by police.

Uber and Lyft hire private third-party services to perform driver background checks. They defend the thoroughness of their vetting processes, but questions have arisen after incidents where Uber drivers were accused of rape, assault, and misdemeanor vehicular manslaughter. In at least one of those cases, the driver was convicted of a prior offense that should have barred him from driving for Uber, the New York Times reported.

“There are concerns about some of these things, and that’s probably why a lot of states still haven’t passed bills,” Shinkle says.

There’s another wrinkle that Liss-Riordan, the attorney, thinks states are overlooking as they move quickly to pass ridesharing regulations. “I feel like state governments are losing out on massive tax revenues from Uber misclassifying its drivers as independent contractors,” she says.

That includes revenues from unemployment contributions, workers’ compensation funds, and payroll taxes that would go to state coffers if ridesharing companies paid drivers as employees, instead of contract workers, she says. (Defining the drivers’ proper employment status is one of the key questions at stake in the lawsuits Liss-Riordan is involved with against Uber and Lyft.)

The current ridesharing regulations aren’t perfect, but they’re also not set in stone, Shinkle points out. Indeed, California is already considering adding more rules for ridesharing companies regarding driver background checks and guarding passenger data.

“I would not be surprised with states over the next couple of years continuing to go back, as new information comes to light, and refine their laws and make changes based on what they learn,” Shinkle says. “I think they just want to get a foundation in place.”

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