(Updates with Uber’s comment in the ninth paragraph.)
April 9 (Bloomberg) -- Car-booking services run by Uber Technologies Inc., Lyft Inc. and Side.Cr LLC are creating “serious” gaps in coverage for drivers, passengers and pedestrians, California’s insurance regulator said.
Commissioner Dave Jones recommended that the startups provide $1 million in commercial liability insurance starting from when a driver switches on one of their mobile apps, which connect vehicle owners with strangers looking for a ride, according to a statement today. He also urged the California Public Utilities Commission to adopt additional regulations of the industry after a recent investigative hearing.
The inquiry “revealed serious insurance gaps in the current business model of transportation network companies such as Uber, Lyft and Sidecar,” Jones said in the statement. Such services are “encouraging non-professional drivers to use their personal vehicles to drive passengers for a profit, a risk which personal automobile insurance simply does not cover.”
Scrutiny of the booking services has increased as they become popular with the urban set from San Francisco to Boston. Uber, which was valued at $3.5 billion in a funding round last year, has faced criticism for using drivers who don’t have taxi or limousine licenses. In January, the company was sued for wrongful death by the parents of a six-year-old girl killed in an car accident in San Francisco’s Tenderloin neighborhood.
Uber said Jan. 1 that the driver wasn’t providing services on its system during the time of the crash.
Seattle Mayor Ed Murray joined the chorus of critics this year, saying that Uber and similar services might be shut down in his city if they don’t carry more insurance.
“They have to start accepting a certain level of regulation,” he said in a February interview. “The situation that happened in San Francisco with the little girl, I don’t want to see replicated in the city of Seattle.”
Jones’s department also recommended that the car-booking services provide $1 million in uninsured and underinsured coverage. The networks should disclose to their drivers that their personal insurance may not apply when they’re taking fares, the commissioner said.
Uber already provides a $1 million commercial policy during trips and $1 million of coverage for uninsured and underinsured motorists, Nairi Hourdajian, a spokeswoman for the San Francisco-based company, said in an e-mailed statement.
“Uber’s ride-sharing insurance policies lead the industry and ensure safety and coverage for riders and drivers,” she wrote. “We are proud to be a standard-bearer on this issue.”
The company’s backers include Google Inc.’s venture-capital arm and private-equity firm TPG Capital.
Erin Simpson, a spokeswoman for Lyft, didn’t immediately respond to messages seeking comment. Sidecar didn’t reply to an e-mail sent to an address set up for general press inquiries.
--With assistance from Peter Robison in Seattle.