When the ride-sharing companies Uber and Lyft showed up in South Florida last year, defiantly waving a pirate flag at the highly regulated taxi industry, local governments threatened to bury them under a blizzard of traffic tickets and car impoundments.
But 15 months later, they seem to have turned their tenuous toehold into a permanent place in the local transportation grid.
Broward and Palm Beach counties, reeling under a wave of consumer protests about their attempts to clamp tough controls on the ride-sharing companies, are drafting new ordinances that will make it easier for them to operate. And Miami-Dade may be about to do the same.
Miami-Dade Mayor Carlos Gimenez said he expects to unveil a proposed regulatory framework in the “near future.” He didn't specify a date, but it's expected to arrive around November.
The likely scenario: a combination of some new rules for Uber to operate legally in Miami-Dade, combined with a loosening of the regulations governing traditional taxis.
“I’ve got to bring the taxi drivers into the 21st century,” Gimenez said. “I’m not going to bring Uber back to the 20th century. That’s the plan.”
The ride-sharing companies (“transportation network companies” or TNCs, as they’re known in political and legal jargon) have coupled new technology and an insouciant disregard for government regulation to offer a radical alternative business model to taxi-cab customers — though in some ways they also resemble the illegal gypsy cabs that have always operated on the fringes of the taxi business.
Like the gypsies, TNC drivers are freelancers, using their private vehicles and working as much or as little as they please. What makes them different is their use of cellphone technology that enables prospective passengers to shop for a driver with a good rating from previous customers, see exactly how far away the vehicle is, and pay with a credit card rather than cash.
They’ve also been working completely outside the law. The TNCs set up in South Florida without jumping through any of the regulatory hoops that taxis must navigate, including government background checks on drivers, business permits and strict limits on the numbers of vehicles that can be on the road. The TNCs also ignore the one-size-fits-all taxi fares dictated by regulators, charging more than cabs at peak hours, and less the rest of the time.
But what started out as open warfare between governments and the TNCs has cooled into peace talks and the distinct possibility of a truce across South Florida. The companies say they’re willing to join a regulatory framework that fits their business model. And governments have stopped trying to kill the TNCs outright.
Broward and Palm Beach counties passed new transportation laws earlier this year that the TNCs considered so onerous that they threatened to stop doing business. (In Broward, it wasn’t just a threat: Uber and Lyft ceased operations last month and have yet to return.) Both counties backed down, pledging new laws that would be more TNC-friendly.
“We had a major sea-change on our approach here in Broward, probably because of the public outcry of support for Uber and Lyft,” said Broward County Commissioner Chip LaMarca. “When 2,000 or 4,000 emails arrive telling you’ve made a mistake, that gets a commissioner’s attention.” Agreed Palm Beach County’s deputy administrator Verdenia Baker: “The commission changed course because it heard from so many people supporting Uber.”
The popularity of ride-sharing not only gave the TNCs unexpected political clout but rendered government enforcement efforts useless. Uber has 10,000 drivers working in Miami-Dade, overwhelming the attempts of undercover county inspectors to lure them into sting operations.
“Once they know that this credit card’s attached to an inspector, you’re no longer being picked up,” Gimenez said. “So, OK, all right, we catch one person.”
Working out an accommodation between the TNCs and regulators, though, hasn’t been easy, and there are still significant issues to resolve. Part of the problem is that much of the law on taxis was written shortly after World War II, when cities first began tight regulation of the industry. They were designed for an economy where most people worked full time at a single job, and in which cellphones and the Internet did not exist.
“In most of the jurisdictions where we’re trying to work out agreements, these regulations have been in place for decades and nobody has really looked at them in decades, either,” Uber spokesman Bill Gibbons said. “And there haven’t really been any major innovations in the industry in decades, either.”
Some critics of the taxi industry say the regulations actively discouraged innovations because they were written to protect not the public but the profits of taxi companies. In particular, limiting the number of permits kept the supply of taxis low, the fares high, and gave cab drivers little incentive for clean vehicles or friendly service.
They also turned the permits — which an owner could resell — into pure gold. A permit (or medallion, as it’s known in Miami Dade) goes for about $1,400 in Broward and $5,000 in Miami-Dade, when available directly from the government, but $100,000 in Broward and over $300,000 in Miami-Dade when purchased from another owner.
“Limiting the number of taxis doesn’t have anything with the well-being of taxpayers,” LaMarca said. “It’s simple economics — if there were more cabs on the road, there would be a market-driven price to take them, which would almost certainly be lower than it is now....
“These taxi companies had a big hand in making laws that were maybe beneficial to their business. Now the public wants a different type of business, and the cab companies are telling us that’s not fair. But it’s hard for me to believe we’re being unfair in trying to alter a market that’s been unfair for decades.”
The cab companies nonetheless argue that changing the law to impose one set of requirements on them and another on the TNCs is unfair.
“The TNCs say ‘this is a free-market economy,’ but that’s a misplaced term in this situation,” said attorney Mark Stempler, whose firm Becker & Poliakoff represents the separate Yellow Cab companies in Broward and Palm Beach. “A free-market economy doesn’t mean allowing one company to operate without rules while a similar company is governed by strict regulation. We need a level playing field for everybody.”
The most contentious issues have been background checks and insurance for drivers. Though it’s a relatively recent requirement that only began this spring, Broward and Palm Beach counties specify that taxi drivers undergo what are known as Level II background checks. In a Level II check, a police agency — usually the Florida Department of Law Enforcement — uses the driver’s fingerprints to search various law-enforcement data bases for criminal records and traffic offenses. (Miami-Dade requires only a less extensive Level I check that doesn’t include fingerprints.)
Uber, however, conducts its own searches using Social Security numbers rather than fingerprints, and has bitterly resisted attempts to impose the Level II checks.
Whether its checks are as effective as the government’s is a matter of controversy. In California, prosecutors have sued Uber, accusing it of “systematic failures” in the checking process that has allowed sex offenders, identity thieves, a kidnapper and a murderer to work as drivers. Uber counters that more than 600 licensed California taxi drivers who applied to drive for Uber were bounced when the company’s investigators turned up offenses from rape to drunken driving.
And because the driver’s application for a government-created background check becomes a public record, it makes it easy for competitors to raid Uber’s work force, as well as creating privacy issues, the company says. “A school teacher who does this just on weekends might not like it that a reporter can look through her records,” Gibbons said.
Broward and Palm Beach passed laws earlier this year requiring Level II checks, but backed down in the face of TNC threats to leave the counties. Both counties have promised new ordinances allowing TNCs to run their own investigations. Nonetheless, in at least two major markets — Columbus, Ohio, and Houston — Uber has agreed to the Level II checks in return for government approval. “If they can do it there, why can’t they do it here?” Stempler said.
Insurance requirements are also complicated. Taxis must be insured round-the-clock. The TNCs have insurance policies covering their drivers — but that raises a question, Stempler says: “When is an Uber driver an Uber driver? Is it when he gets in the car? Is it when he turns on his Uber app? Is it when he agrees to pick up a passenger? Is it when the passenger gets in the car? ... There are a lot of gray areas in there.”
Uber’s $1 million insurance policy covering its drivers kicks in as soon as they agree to pick up a particular passenger and stays in effect until the trip is over. But Bob Passmore, an assistant vice president with the Property Casualty Insurers Association of America, said that leaves “a gap”: the period of time when an Uber driver has his app turned on, but has not yet linked up with a customer who wants a ride.
Uber says the driver is covered during this period through “contingency” coverage that kicks in if the driver’s personal coverage rejects a claim. Passmore said the driver’s personal coverage is almost certain to reject a claim in this circumstance, as personal policies contain an exclusion for any taxi-like services. Passmore said a person whose car is hit by an Uber driver in this time period will end up in limbo: waiting for the driver’s own insurance to reject the claim, and then waiting for Uber to step in and pay up.
“It means that people that are injured or people that have their cars damaged are waiting until that happens,” Passmore said, adding that insurance companies will have to pay their staff to investigate — and ultimately reject — Uber driver claims. That company cost gets passed on to all consumers, he said.
Passmore said that Uber and the insurance industry have agreed to compromise legal language that closes the coverage gaps. Twenty states have passed laws adopting that language, he said, but Florida is not one of them.
Insurance has been an issue in several lawsuits involving Uber. In San Francisco, when an Uber driver struck a family crossing the street, killing a 6-year-old girl, the company denied responsibility even though the driver said his app was turned on. The family sued and the claim was settled out of court.
Closer to home, 20-year-old Jupiter student Brendan Walsh filed suit against the company in March after his motorcycle collided with a van in which an Uber driver was carrying four passengers. The driver’s personal insurance company at first agreed to pay the claim but changed its mind after concluded he was on Uber business. The lawsuit also hints that there was a criminal charge in the driver’s background that Uber’s investigation failed to uncover.
In its reply to the suit, Uber raises the defense — among others — that the driver was an independent contractor, although other attorneys say such a defense is often part of a boilerplate response automatically filed on every claim for damages. Uber officials declined to discuss the Jupiter case in detail but say Walsh never filed a claim with their insurance company, instead going directly to court.