Rides-For-Donation Services Under Scrutiny

by Zusha Elinson, The Bay Citizen

Tired of waiting for taxis, thousands of San Franciscans have begun paying to hop into complete strangers’ cars to get around town. Two startups, Lyft and Sidecar, launched this summer with mobile apps that let passengers use their phones to hitch a ride.

Lyft drivers pull up with a giant pink mustache on their front bumper and offer passengers a fist bump when they get in. The mustaches, according to founder John Zimmer, are supposed to make people smile.

For both Lyft and Sidecar, drivers use their own cars and suggested donations replace set fares. The companies take a 20 percent cut.

They are part of the new “sharing economy” – companies that help people make money by sharing their possessions. Airbnb, a popular website where people rent out their apartments, is now used all over the world.

“It’s really cool to see us come back to this borrowing sugar from your neighbor and also make a little money from it,” said Jay Sublett, marketing manager for Sidecar.

Not everyone is feeling warm and fuzzy. Lawyers and insurance experts say that the companies’ insurance requirements at Lyft and Sidecar won’t adequately protect drivers and passengers in the event of a car wreck. San Francisco taxi drivers consider them illegal taxi services and want the city to shut them down.

The San Francisco Municipal Transportation Agency, which regulates taxis, is considering whether to take action. The California Public Utilities Commission, which regulates limos, is reviewing the operations of the two companies, according to spokesman Chris Chow. The PUC has also been looking into Uber, a slightly older company that lets people hail private car service through an app.

Lyft, which reports that it has 100 drivers, and Sidecar, which says it has given more than 10,000 rides, say drivers must have their own personal car insurance. But the state minimum coverage for auto insurance – $15,000 for injury or death of one person, $30,000 for more than one person and $5,000 for property damage – is a small fraction of what taxis and limos must carry.

In San Francisco, taxis are required to have $1 million in coverage. The California Public Utilities Commission requires that limo drivers with vehicles that carry fewer than seven people have $750,000.

“It’s very troubling that you have vehicles that are doing the amount of roadwork that taxis are but not having the minimum level insurance that is required by the PUC,” said Khaldoun Baghdadi, a partner at Walkup, Melodia, Kelly & Schoenberger, a well-known San Francisco personal injury law firm. “They’re getting a lot of the benefit without a lot of the burden.”

On top of that, insurers are unlikely to cover accidents if drivers with regular policies use their cars to make money, said Pete Moraga, a spokesman for the Insurance Information Network of California, a nonprofit trade association. Even though Lyft and Sidecar call the payments donations, he said insurers won’t see it that way.

“You’re opening yourself up to a lot of risk if there’s an accident,” Moraga said.

Zimmer, the co-founder of Zimride, which launched the Lyft app, said that “each driver is recommended to check with their insurer about their coverage.”

Drivers are screened to make sure they have clean criminal and driving records, Zimmer said, and they receive two hours of training. Riders and drivers also rate each other on the app after the ride, which he maintains increases safety.

Lyft and Sidecar representatives argue that because rides are prearranged and paid for with a donation, they don’t have to be regulated like taxi or limo companies. They also say that they’re just providing technology to connect drivers and riders. In terms of service that users agree to before using the app, Lyft says it is “NOT A TRANSPORTATION CARRIER.”

The city’s taxi drivers – who must have city-issued permits, commercial insurance, and either own or use a taxi medallion that goes for $300,000 – beg to differ.

“They’re hustlers,” said Ed Healey, a veteran cab driver. “It’s kind of a neo capitalist thing: They’re not paying anybody any benefits, but they’re going out of their way to have no responsibility whatsoever.”

Hansu Kim, president of DeSoto Cab, said the city should take action.

“These are illegal operations the city needs to enforce and shut these down,” Kim said. “Picking up the public requires proper licensing and insurance. If they don’t have that, everyone suffers in the end.”

Paul Rose, a spokesman for the SFMTA, which regulates cabs, said the city is still figuring out what to do. Rose said the newfangled companies are “not explicitly covered in the taxi code.”

The rise of these new ride services has been driven in part by dysfunction in the city’s licensed taxi industry. Anyone who has tried to hail a cab in San Francisco knows that it’s no easy task because of the paucity of cabs. The lack of a centralized dispatch or a widely recognized way to snag a cab with a smartphone compounds the problem.

Rose acknowledged that the city hasn’t issued enough taxi medallions. He said the city is working toward adding to the 1,500 existing medallions. To that end, the SFMTA board will discuss today issuing 150 to 200 temporary medallions to taxi companies.

This story was produced by The Bay Citizen, a project of the Center for Investigative Reporting. Learn more at www.baycitizen.org.