Utah TNC bill makes optional coverages mandatory
The bill preempted Salt Lake City’s onerous TNC regulations and introduced certainty about TNC insurance requirements. That certainty recently led to the introduction of a new “hybrid” insurance policy by Farmers Insurance, which allows TNC drivers to maintain enhanced insurance coverage from the moment they turn on their TNC application.
Alas, that law was then preempted by a different bill, H.B. 24, sponsored by state Rep. James Dunnigan, R-Taylorsville. Included within this latter measure’s insurance regulatory framework are requirements for TNCs to maintain comprehensive and collision coverages in the event that there is a lien on a vehicle used for ridesharing.
In other words, all vehicles that are leased or financed must maintain the usually voluntary coverage for comp and collision. Since most TNC vehicles are relatively new, virtually all of them will be required to carry those coverages.
Unlike liability coverage, which covers the damage and injuries sustained by other drivers, comp and collision coverages cover damage to the insured’s vehicle. In the majority of states, only liability insurance is required on personal policies. This is done to ensure broad access to insurance.
By requiring TNCs to carry comp and collision, Utah has created an interesting discontinuity within its law. Neither personal vehicles, nor taxis or limousines, are required to maintain those coverages. What’s more, vehicles with liens against them are typically subject to comp and collision requirements as part of their lease or financing agreements, so the additional requirement seems somewhat redundant.
So why are TNCs required to provide comp and collision? The argument goes that lenders want to be secure in their investment and that the TNCs should shoulder the onus of providing that coverage.
But that misses the larger point that, as a matter of public policy in Utah, comp and collision are optional in both the personal and commercial contexts. The state should not be getting involved in what boils down to a market dispute between private actors.
To date, Utah has been fortunate that TNCs have not opted to leave the state. If Utah does not change course on its requirement, it could suffer the same fate that befell Kansas. In May, Kansas included a similar provision in its TNC legislation. Though Gov. Sam Brownback vetoed the bill, the Legislature overrode his veto. As a result, Uber, the largest of the TNCs, withdrew from Kansas. Only after that requirement was changed by a subsequent bill did Uber return.
The Kansas solution is not ideal, but it is workable. Instead of requiring TNCs to provide comp and collision coverage on vehicles with liens, it requires TNCs to notify drivers that those coverages must be in place. The onus for the coverage is, thus, placed on the driver.
While comp and collision should be optional, if the state Legislature feels compelled to require them, it should at least follow Kansas’ lead and place the responsibility on the driver: the party who ultimately stands to benefit.