Any day now, Colorado Gov. John Hickenlooper (D) is expected to do something no other governor has done before: sign into law a bill regulating ridesharing services uberX and Lyft.
In doing so, he would put to rest an existential concern for the companies, which use technology to connect drivers in their own cars with paying passengers. As their young industry’s first representatives in Colorado, they had faced the prospect of being shut down due to a lack of regulations. The bill, sent to Hickenlooper on Thursday, would not only provide some certainty but it could, in the process, light the path for other states trying to resolve the same concern.
The services are so new — uberX, Lyft and competitor Sidecar all launched in 2012 — that there’s still inconsistency on what to call them. In Colorado, they would be called Transportation Network Companies. A Georgia bill refers to them as Transportation Referral Service Providers. Under a failed Arizona measure, they would have been Ride-Sharing Networks. There aren’t many models for how to regulate the new industry, either.
“There’s not a ton of information out there,” says state Rep. Libby Szabo, one of the Colorado bill’s co-sponsors and assistant Republican leader in the General Assembly. Szabo was introduced to the services by her daughter and has used both. (“I love it,” she says.) The bill awaiting Hickenlooper’s signature is among the biggest she’s sponsored, she says.
California was technically the first state to regulate the industry, but its rules were born in the bureaucracy — created by a utilities commission. Colorado’s rules would be the first crafted and enacted by elected state representatives. Both share some basic characteristics, requiring rideshare services to obtain permits to operate, driver background checks, vehicle inspections and minimum $1 million in insurance coverage during pre-arranged rides.
In California, the rules proved controversial. About a month after their September adoption, both Uber — which offers commercial rides as well — and the Taxicab Paratransit Association of California, a trade association, requested a rehearing.
Uber argued that its uberX service was merely a technology — not a transportation company — connecting drivers looking to make extra cash with passengers willing to pay for a cheap ride. TPAC argued the opposite: Ride-sharing companies were providing “nearly identical” services as taxi companies, it argued. (The services allow users to digitally hail cars to their location through a smartphone app.) But not everyone disliked the rules. Sidecar, an uberX competitor, responded to the decision by tweeting a thanks to its followers:
It’s official! Rideshare is a new, official transportation category in CA! Thank you all for your support, we couldn’t have done it w/o you!
— Sidecar (@Sidecar) September 19, 2013
The back and forth between Uber and the taxi association was characteristic of debates across the country. The ride-sharing industry has argued for fewer or no regulations, while the heavily regulated taxi industry has routinely called for stricter, equal rules.
“There are people who are fans of the taxis and the way they work and thought these types of things should be regulated as much as a taxi,” Szabo said.
The insurance industry has also weighed in on efforts to regulate rideshare services, with calls for clearer guidance on which insurance policies — individual or commercial — cover accidents. That need for clarity was underscored by a recent tragic accident. A young girl was killed in San Francisco at the start of the year by an uberX driver who says he was logged into the service’s application but not yet transporting or en route to pick up a passenger. The accident — and subsequent lawsuits — highlighted an insurance coverage gap, a gray area in which it was unclear whether the driver or service should be held liable.
The Colorado law closes that gap, requiring that the services provide insurance once the driver is logged in—even if he has no passenger and isn’t yet on his way to retrieve one. Uber in mid-March announced that it would voluntarily provide backup coverage in such cases, but that would only kick in if a driver’s personal insurance policy doesn’t cover the accident. The Colorado law requires ridesharing services make such coverage “primary” by January, meaning it would kick in regardless of a driver’s policy. Without that requirement, personal auto insurers had warned that rates could have risen.
Representatives for both Uber and Lyft described the outcome in Colorado as fair.
“What we wanted to do is give the regulators the tools to make sure that these safety measures are in place and that the state’s comfortable with uberX ridesharing while keeping intact the innovation. And that’s what I think that we’ve gotten to,” says Will McCollum, Uber’s general manager for Denver. The company had some “real champions” in the legislature, he said.
Colorado is expected to become the first state to pass regulations through its legislature, but it’s not the first to try. Policymakers in Virginia and Maryland are considering regulating the industry. In late April, Arizona Gov. Jan Brewer vetoed a bill that passed that state’s legislature. (The bill’s insurance coverage requirements fell short, she said, and the lack of a drug-testing requirement was a fundamental flaw, she explained in a veto letter.) Similar measures have also popped up — to varying success — in Georgia, Illinois, Maryland, Oklahoma and some municipalities. In March, Seattle became the first city to cap the number of rideshare drivers. And, as in many municipalities, D.C.’s Taxicab Commission is pressuring regulators for stricter ridesharing rules.
(Disclosure: Washington Post owner Jeff Bezos is an Uber investor.)