A day before its official Pittsburgh launch, ride-sharing company Lyft announced a major change in how it handles insurance coverage for its drivers -- but that may not be enough to keep the company from finding itself on the wrong side of Pennsylvania law.
San Francisco-based Lyft is planning a launch party tonight on the South Side. Because Lyft's "volunteer" drivers use their own vehicles, many had concerns about gaps in their personal insurance policies.
"We've needed to push the insurance industry to innovate quickly and create new unique solutions," Lyft said in an announcement on its website Thursday.
The new policies include expanding collision insurance for drivers whose personal policies include collision coverage and additional coverage in the event of an accident with another driver who is uninsured or underinsured.
Will Reynolds Young of Castle Shannon signed up to drive for Lyft and is enthusiastic about earning some extra money, but gray areas in the insurance coverage left him concerned.
Rosanne Placey, spokeswoman for the Pennsylvania Insurance Department, said those concerns are well-founded. "Once you start using your vehicle for business, it's considered commercial," Ms. Placey said, "so you need a commercial policy or an add-on to your personal policy."
She added that there could be exclusions in policies that may prohibit a vehicle's use as a so-called livery, but might allow carpooling or car sharing. "The safest way to handle this is to check in with your auto insurance company to find out if there is coverage should an injury occur," Ms. Placey said.
Lyft is one of a new generation of ride-sharing companies, including SideCar and Uber, that operate with drivers who use their own vehicles. All originated in San Francisco. Uber Black, a version of the Uber service that subcontracts with commercial limo companies, has been in Philadelphia since 2012. While Uber has started signing up drivers in Pittsburgh, a spokeswoman couldn't say when the service might launch here.
Ride-sharing services have faced opposition in other cities, with Uber facing a lawsuit from the family of a 6-year-old girl in San Francisco who was struck and killed on New Year's Eve by a driver who said he was working for Uber at the time.
To use Lyft, a would-be passenger downloads its smartphone app, connects via Facebook, and provides credit card information for payment purposes. Passengers and drivers connect via the app, and after a ride both rate each other with the passenger choosing how much, if anything, to pay on a donation-based payment structure
Insurance issues aren't the only bumps in the road for Lyft.
Jennifer Kocher, spokeswoman for the Pennsylvania Public Utility Commission, said Lyft has not applied for a commercial broker license, which is required of commercial operations such as limousine companies.
"If the driver is receiving compensation, they are supposed to have a commercial license," she said. And, drivers who are found operating a commercial vehicle without a commercial license could face criminal charges, she added.
Erin Simpson, Lyft's director of communications, said the company "doesn't fit the criteria" of a commercial service.
"We are not a taxi or a limo service," she said.
In addition to the drivers being volunteers and the payment system being donation-based, drivers are using their own vehicles, so they don't fall under state guidelines of limo services, Ms. Simpson said.
Jamie Campolongo, president and CEO of Pittsburgh Transportation Group, which operates Yellow Cab, disagrees. He said Lyft and companies like it are breaking the law and present safety issues, both for drivers and passengers.
"It's electronic hitchhiking," Mr. Campolongo said. "It's no different than sticking your thumb out on the side of the road."
He said while Yellow Cab could handle the competition, he thought smaller cab companies might suffer as a result.
"[Ride-share companies] all have this arrogant disregard for regulatory issues," Mr. Campolongo said. He added that he may take pictures of Lyft cars and report them to their insurance companies.
But Ms. Simpson said Lyft sees room for various transportation options in the same space.
"When people have more options to choose from, they use all of them more. They might take a taxi to go out to dinner, but call Lyft to get home," she said. "We don't see this as a zero-sum game."
Kim Lyons: email@example.com or 412-263-1241. Twitter: @SocialKimly