By: Michael K. Fortunato
In the midst of price wars and resistance from municipalities with a strong traditional taxi presence, so-called “ridesharing” companies—such as Uber and Lyft—must now navigate the initial legislative steps towards regulation in the Garden State. On December 11, 2014, the New Jersey State Assembly’s Transportation and Independent Authorities Committee combined seven proposed bills, which tackled issues ranging from insurance requirements to drug testing for drivers, in a move lawmakers believe will ultimately benefit the passenger-consumers of these ridesharing services. Though the bill still requires a vote by the full Assembly, as well as passage by the Senate and the signature of the Governor, most involved believe that some version of the legislation will eventually be enacted due to the growing calls for regulation of this burgeoning industry.
Aspects of the bill as currently drafted will reduce the complexity of future insurance litigation in the event of injuries to passengers. Currently, ridesharing companies’ insurance structure mandates that its drivers, who are independent contractors, use their personal automobile insurance as “primary insurance” in such an occurrence. Personal automobile insurance policies, however, will likely not provide coverage in a commercial setting. The inherent contradiction between company requirements that the driver’s insurance provide the first line of coverage, and those policies specifically excluding recovery, has the possibility to create endless litigation, leaving the injured passenger with the burdens caused by the coverage delay. The proposed legislation will provide clarity in such a scenario by mandating that ridesharing companies maintain a commercial insurance policy which would provide coverage from the moment a passenger is picked up until the moment they are dropped at their destination.
Of particular interest as this bill develops towards its final version is how commercial vehicles rendering services on behalf of ridesharing companies may be impacted. These drivers and companies carry commercial automobile insurance, and are able to provide the primary coverage requested by ridesharing companies. Whether some commercial drivers should re-evaluate their insurance coverage or if ridesharing companies should re-evaluate commercial vehicles place in their New Jersey business model will depend on the bill’s final language.
Consumers, independent contractors rendering services for ridesharing companies, and commercial taxi and limousine services should all monitor this legislation closely as it is debated and develops into law.
For more information regarding the Complex Business Litigation Program, please contact Kathleen Barnett Einhorn, Director of the Complex Commercial Litigation Practice Group
, at KEinhorn@genovaburns.com.