Kansas moved to regulate the emerging sharing economy on Thursday when lawmakers passed new rules on ride-hailing services amid threats Uber would leave Wichita, Kansas City and the state.
A bill imposing new standards for insurance coverage and requiring background checks of drivers easily cleared the Legislature on Thursday. It now goes to Republican Gov. Sam Brownback’s desk.
The bill would make Kansas just the sixth state to regulate ride-fetching services using a mobile Internet application to connect drivers with riders. Other states with laws on the books include California, Illinois and Virginia.
Ride-share legislation is pending in 35 states.
The Kansas bill aims to clarify murky areas surrounding when drivers are covered by insurance if they’re using personal vehicles for commercial activity.
It’s a national issue that gained attention this week when the National Association of Insurance Commissioners reported gaps in coverage for ride-hailing services operating in hundreds of cities nationwide.
A sticky area, the insurance group report says, includes the time between when drivers turn on the ride-sharing app but before they pick up passengers.
“These are very big companies … that came to market in a very quick way and in a very expansive way without making sure that coverage gaps were addressed,” said California Insurance Commissioner Dave Jones, whose state was among the first to regulate outfits such as Uber and Lyft.
“While this may be a good technology, while this may be a good service, we’ve got to make sure everybody is protected,” Jones said,
Last year, California started requiring ride-hailing services to provide insurance for their drivers from the moment they turn on the app. The requirement was imposed after an Uber driver was accused of striking and killing a 6-year-old girl crossing a street in San Francisco in 2013.
A major element in the Kansas bill would tackle the same issue highlighted in the national insurance group’s report. It requires insurance coverage from the time drivers make themselves available to potential riders, not just at the moment they pick up a fare.
Uber, which has about 500 drivers in Kansas working out of Wichita and Kansas City, was sharply critical of the law.
The company opposed the measure for requiring drivers with liens on their cars to pay for collision and comprehensive coverage. Company officials said that would pose an added and burdensome expense to drivers.
“These are unprecedented changes,” said Will McCollum, general manager of Uber in Kansas. “These requirements go well above and beyond the use of a private vehicle for business purposes.”
The provision was added at the urging of the bankers because they feared their collateral – cars with outstanding loans – wouldn’t be covered by a driver’s personal auto policy when the car was used commercially.
Presenting the bill on the floor Thursday, Rep. Scott Schwab, R-Olathe, likened the gap in insurance coverage to the risky mortgage ventures that led to the 2008 recession.
“We could end up literally having a microcosm of that in the car industry,” he said
Utah is the only other state where industry observers have seen such a requirement.
“Lenders have a legitimate concern here,” said Jones, the California official.
Uber angered lawmakers, flooding them with thousands of e-mails opposing the Kansas bill.
The Uber e-mail described the amendment pushed by the bankers as a “poison pill” that would make it impossible for the ride-locating service to operate in Kansas.
Uber supporters sent so much e-mail that it crashed the statehouse computer server. Lawmakers joked that if Uber was threatening to leave the state, it might as well start packing now.
Schwab, chairman of the insurance committee, apologized to lawmakers for how they were treated while the bill was debated in the Legislature.
He said the legislation headed to the governor’s office is less burdensome to the Uber and Lyft than earlier proposals.
For example, lawmakers struck from the bill a provision that would have required ride-sharing companies to pay a $5,000 fee to the Kansas Corporation Commission.
Schwab pointed out that while Uber argued against being over-regulated, it was pushing legislation that would have cut smaller players out of the industry, namely a small start-up in Lawrence that uses an Internet application to link hitch-hikers with drivers.
“That’s insidious,” Schwab said. “This is not the first time some of us have stood up to a big business and said, ‘We don’t do that.’”
The bill bothered some lawmakers who thought it would hurt a fledgling industry providing a transportation service in suburban areas that might not be served well by cabs.
“We are moving too fast and stifling something we don’t fully understand,” said state Rep. Travis Couture-Lovelady, a Republican from north-central Kansas. “There are a lot of folks here who don’t even understand how Uber works.”
Contributing: Dion Lefler of The Eagle
How they voted
Here’s how south-central Kansas lawmakers voted on SB 117, adopting new rules for ride-hailing services like Uber.
All area representatives voted yes to accept the final version of the bill except Will Carpenter, R-El Dorado, and Kasha Kelley, R-Arkansas City, who voted no.
All area senators voted yes except for Michael O’Donnell, R-Wichita, who did not vote.