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Innovation in the Crosshairs as California Again Targets Ride-Sharing

Imagine if the Florida legislature spent the past 18 months cracking down on orange growers, or if Vermont imposed tough restrictions on maple syrup makers. If those scenarios seem strangely self-destructive, then you have a good sense of how ridiculous California’s growing hostility towards the Internet innovation economy seems to us.

If we didn’t know better, we’d have to assume that California lawmakers want to extinguish the innovative industry that makes the state the envy of the world in the Internet era. How else to explain proposed regulations aimed at restricting, regulating, and weakening the dynamic business models that are the life blood of the innovation economy?[pullquote]The $1 million mandate is three times the coverage that Los Angeles requires of its taxi drivers.[/pullquote]

The latest target of California’s regulatory Russian roulette are the ride sharing industry leaders Uber and Lyft, which could see their emerging potential shackled by a bill championed by the powerful trial lawyers lobby.

AB 2293 would mandate that ride sharing companies pay for a staggering $1 million in liability insurance whenever a driver merely turns-on their ride-sharing app.   It’s one thing to mandate million-dollar coverage when a driver has accepted a ride request or is transporting a passenger.  But it’s ridiculous to require coverage when a driver is picking-up their dry cleaning and happens to have the app turned-on in case a nearby rider is looking for a lift.

To provide some perspective here, the $1 million mandate is three times the coverage that Los Angeles requires of its taxi drivers.  Why so much more coverage, you wonder?  You’d have to ask the trial lawyers behind the bill, who want to turn ordinary traffic accidents into million-dollar bonanzas.

Uber and Lyft are sufficiently established to pay these outrageous insurance premiums and pass much of the cost along to drivers and riders.  But consider what this would mean for new companies we haven’t even heard about.  When a new innovator comes along with a fresh new approach to the ride sharing concept, the insurance mandate would present a formidable barrier to entry.

Moreover, massive insurance mandates will constrain growth of new services where the app might be active for much of a drive – before picking up a rider.  Envision a future where ridesharing is a ubiquitous experience, when driving around in an empty car is like tossing an aluminum can in the garbage.  It could become second nature to signal to others that you’ve got capacity in your car while driving about town. Requiring a million in insurance just because you’ve signaled that you have room in your car will virtually guarantee this vision won’t be realized.

If California lawmakers believe the trial lawyers’ tale that we need million-dollar coverage when we merely turn-on an app in our cars, what’s next on their legislative target list?

Is California going to require that provide $1 million in liability coverage whenever its users have the app turned-on to monitor traffic?   Will Starbucks have to provide $1 million liability coverage whenever users activate the Starbucks app to locate the closest caffeine fix?

Think that sounds ridiculous?   That’s precisely what the trial lawyers want: get lawmakers to mandate a million-dollar payday whenever an accident happens to a driver whose mobile phone was turned on.

Californians need to sound the alarm in Sacramento before this bad idea becomes an awful law and a self-destructive precedent for the state’s innovation economy.