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The pink mustache on the grille is the sign of a Lyft vehicle in service.

Colin Covert, Star Tribune

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“The department urges all individuals interested in driving passengers for income through new ride-share ventures in Minnesota to contact their insurance agent or broker prior to hitting the road. Finding out later about gaps in coverage after an accident can be financially devastating. … Individuals interested in driving passengers for income need to protect themselves and their passengers by having the appropriate coverage, which in fact may require the need to purchase a commercial policy.”

Statement from the MINNESOTA DEPARTMENT OF COMMERCE

With oversight, ride-sharing can work in Minneapolis

  • Article by: Editorial Board
  • Star Tribune
  • March 12, 2014 - 1:24 PM

When University of Minnesota senior Natalie Cecchini needed a ride home after a recent evening class, she used an app on her smartphone to hail a new ride service called Lyft instead of a traditional taxi. In fewer than five minutes, one of the California-based company’s independent contractors — a guy named Tim, who, like other Lyft drivers, uses his personal vehicle — pulled up with the signature magenta Lyft mustache affixed to his Honda’s grille.

Cecchini was so pleased with the experience that she started an online petition that essentially urges the city of Minneapolis to welcome so-called “ride sharing” companies like Lyft with open arms. So far, more than 2,400 have signed on.

City of Minneapolis leaders, however, deserve praise for taking a more cautious view and asking hard questions about how Lyft and services like it should be regulated. Clearly, they provide healthy competition to traditional cab companies, but unequal regulations and costs shouldn’t unfairly tilt the playing field.

City officials also have to ensure that the services deliver rides without compromising public safety — a concern for those who catch a lift from Lyft, those who drive for the company and the rest of us who share the road with the mustachioed vehicles.

Cab companies, drivers and vehicles in Minneapolis have long been licensed (the annual fee is $475), and the vehicles are subject to inspection for safety reasons. The companies also carry costly commercial insurance.

Lyft’s business model, in contrast, relies not only on lower-cost self-regulation, but on shifting financial risk to independent drivers who are not Lyft employees and may not carry adequate car insurance.

A company spokeswoman emphasized this week that Lyft does its own driver background checks and vehicle inspections. But she also said the for-profit firm has evolved beyond dated taxi regulations, with a key though dubious reason being that it is a “ride share” service since fees are considered “donations.”

The company, which takes a cut of the “donations,” hasn’t applied for taxi licensing in Minneapolis, and it doesn’t sound like it intends to. (Lyft and another service called UberX are operating legally in St. Paul.)

The lengthy Lyft user agreement makes it clear that a driver’s personal car insurance policy is the primary avenue to recover costs from accidents and injuries. But “most standard personal auto policies contain exclusions for livery — which essentially means driving for hire,’’ according to the California Department of Insurance, which has issued a warning about coverage gaps in Lyft drivers’ personal insurance.

Minnesota Department of Commerce officials said Tuesday that the “livery” exception in personal policies is standard operating procedure across the nation, meaning the same gaps may exist for Minnesota Lyft drivers. Consumer protection measures specific to Minnesota may make it easier to recover costs associated with an accident, however.

Lyft recently announced that it is supplementing drivers’ coverage; it also carries a $1 million excess liability policy for drivers. But a fatal accident involving an Uber driver who hit a young girl in a San Francisco crosswalk raises questions about when this coverage kicks in. Is it only when a passenger is in the car? Or when the driver is heading to a pickup or after a drop-off?

Currently, the city and Lyft are in what both sides politely call a “dialogue” about regulation. The city has said Lyft’s operations would violate city taxi ordinances, which is why the city has threatened to ticket and impound drivers’ vehicles if the service starts to collect money for rides. To get around this, Lyft is temporarily providing rides for free in the city. And a city ordinance has been proposed that would create a legal framework for companies like Lyft.

As Cecchini’s petition attests, Lyft and companies like it enjoy growing popularity. Upsides that may come with their arrival in the market include lower prices, improved service and reduced traffic as the city grows.

Minneapolis officials deserve credit for also thinking through the potential downsides. Other localities have grappled unsatisfyingly with oversight, for example, by banning ride shares or carving out a special niche for them. Minneapolis has a chance to come up with a new regulatory model by taking a more global approach and updating its regulations for both ride shares and taxi services at the same time to fairly encourage competition and to ensure public safety in a new, tech-savvy age.

© 2014 Star Tribune