Accidents happen when taxi drivers are prowling for customers — even more than when they're dispatched to pick up passengers or taking them to their destinations.
But when Portland City Commissioner Steve Novick recently submitted a new taxi deregulation code to the City Council, he proposed lower insurance requirements for Uber and Lyft drivers when they're on the hunt for passengers.
Critics say Novick's proposal — the industry standard supported by Uber and Lyft — will leave injured pedestrians and other accident victims with inadequate insurance coverage. City Commissioner Amanda Fritz, whose husband died in an auto accident on Interstate 5 last year, called it "ridiculously low" in an August hearing.
The dispute has emerged as the final sticking point before the City Council gives a green light to grant Uber and Lyft permanent entry into the Portland taxi market, possibly next Wednesday, Dec. 2.
Earlier this year, Uber and Lyft negotiated what Uber insurance counsel Dennis Stefanitsis termed a "national insurance model," in a compromise deal with State Farm, Allstate and other insurers. The plan calls for coverage of $1 million per accident and $2 million for total claims for incidents occurring in what they call phases two and three — from the time a customer "hails" an Uber or Lyft driver on their smartphone to when they are dropped off at their destination. But for phase one, when an Uber or Lyft driver has their smartphone app turned on seeking customers, coverage was set at $50,000 per person for death or injury and $100,000 per incident, plus $25,000 for property damage.
"A few days in the hospital, you're going to be exceeding that limit of $50,000," says Dan DeGrange, a sales executive with Propel Insurance, which insures all of Portland's traditional taxi companies.
Uber has quickly become the city's dominant player in the taxi market just seven months into the city's pilot project to deregulate the industry. One reason Wall Street values the company at more than $50 billion is because it keeps its costs low.
Uber declined to make its local general manager available for an interview for this story. Novick, who is the city's transportation commissioner in charge of the taxi industry, didn't return phone calls requesting comments.
Divided City Council
Fritz and Commissioner Nick Fish, who have been more sympathetic to taxi companies, have called for bumping up the insurance requirement for phase one to match phases two and three.
But aides to Novick and Mayor Charlie Hales have worked closely with Uber and Lyft lobbyists to accommodate their entry into the market, with the support of Commissioner Dan Saltzman.
And Uber and Lyft have fought tenaciously to make their model the industry standard. When the city of Eugene proposed higher insurance requirements, Uber abruptly left the Eugene market last spring. Now it's mobilizing its smartphone-wielding supporters to sign an electronic petition calling on the Eugene City Council to back down.
Lyft withdrew from the Columbus, Ohio market when it enacted higher insurance requirements, company lobbyist Anabel Chang told the Portland City Council earlier this month. But then the Ohio Legislature, under pressure from Uber and Lyft, voted to bar Ohio cities from requiring higher insurance levels. Chang said Wisconsin and Arkansas passed similar bills.
Stephen Kafoury, lobbyist for Broadway Cab, told the City Council that cities and states usually fall in line when Uber and Lyft use their apps to mobilize customers to pressure elected officials. But Kafoury says that tactic wasn't available when the Port of Portland insisted that Lyft and Uber have a minimum $1 million insurance for phase one if they want to wait for customers at Portland International Airport. That's because the port commissioners are appointed, not elected, Kafoury says.
More dangerous phase
DeGrange says more than 60 percent of taxi accidents occur before the driver gets dispatched, and he doesn't think Uber and Lyft drivers operate much differently from traditional taxi drivers. "The number ranges from 50 to 75 percent of all claims that occur during this period of time," he says, and often those are the most catastrophic claims. "The reason is they're trying to get to the fare."
Uber and Lyft are able to offer such speedy response times because they have huge fleets of drivers cruising the streets at busy times, says Steve Entler, general manager of Radio Cab in Portland.
They're not usually sitting at home, he says. "Normally, when the app is one, they're getting into the hunt" to compete with taxis, Entler says.
"I think we have noticed probably 80 percent to 90 percent of our accidents happen with no passenger in the car," Entler says. Drivers don't need to rush so much once they get a passenger in the car, he says, and they want to take care of their customers. "But once you get them out of the car, you're jockeying for position to get back in the queue."
One reason there's more accidents in phase one is that drivers spend more of their time in that situation, says DeGrange, who says he's seen as a national expert in the field. "If you look at the time they're on the road before they're dispatched, that total amount of time is actually greater than the time they spend to pick up that client and drop them off."
Task force supports Uber, Lyft
A taxi deregulation task force hand-picked by Novick also endorsed the insurance limits proposed by Uber and Lyft.
However, the task force was told by Uber and Lyft that there's no commercial insurance available to provide equal coverage during phase one, recalls Mike Greenfield, task force chairman and a retired state insurance commissioner. The task force actually supported "parity," or equalizing insurance coverage for all three phases, once such insurance becomes available, he says.
"The task force said we think that's a good idea," Greenfield says. "So once it's available, make 'em buy it."
DeGrange says Propel and other companies could provide such insurance.
"For them to say that they can't provide insurance that will provide $1 million coverage for periods one, two and three is absolutely false," DeGrange says. "In fact I could provide that to them tomorrow."
Even Mayor Hales, who has been siding with Uber and Lyft, grew exasperated by the two companies' evasive answers to insurance questions at a recent City Council hearing. He and others wonderered why, if Uber and Lyft pay the higher level insurance at the airport, they can't provide it for the rest of the city.
"I'm really getting tired of talking around the issue," Hales said to the Uber and Lyft lobbyists. "It seems to me a relatively modest burden financially, given the scale of these enterprises."
But bumping up the insurance requirement for phase one won't come cheap, DeGrange says. precisely because of the higher risk.
"I could see the price doubling, maybe even two and a half times" higher, he says.
In an Aug. 26 City Council meeting, Fritz turned to her council colleagues and remarked that it appeared a majority of them supported bumping up the insurance for phase one to $1 million. Even Novick said he "was inclined to support" a higher insurance mandate.
But when Novick introduced his rewrite of city taxi regulations to the Council in early November, the proposal was back to the insurance amounts endorsed by Uber and Lyft.
"Didn't we decide this already?" Fritz asked.
Steve Law can be reached at 503-546-5139 or email@example.com, or Twitter at https://twitter.com/SteveLawTrib