Whenever I speak to people outside of the industry about For-Hire Vehicle (FHV) insurance requirements for the drivers at companies like Uber and Lyft, they find it hard to believe there is such a vast difference between the five boroughs of New York City and any other county in New York State.

As we all know, motor vehicle owners are responsible for buying insurance, whether they are driving or allowing someone else to drive their vehicle. Insurance covers the owner and operator for liability purposes, in the event of an accident.

In New York State, the average Joe Schmoe must have a minimum of $25,000/$50,000 in liability coverage – so if the vehicle’s operator causes an accident, the insurance carrier is potentially liable to pay up to $25,000 per person per accident… or a total of $50,000 per accident if more than one person is injured. In NYC, an FHV owner must procure commercial auto insurance with a minimum limit of $100,000/$300,000 in liability coverage.

For-hire transportation in New York City is also heavily regulated by the New York City Taxi & Limousine Commission (TLC).

Before Uber and Lyft, if you wanted to obtain for-hire transportation you had to call a car service whose drivers had commercial auto insurance. When Uber and Lyft came to New York City, they were subject to the same TLC regulations as all other car services. In other words, all FHV owners in NYC, whether affiliated with Uber/Lyft or some other car service – like Carmel, Dial 7 or Vital Transportation – had to procure the same specific commercial automobile insurance.

Putting aside the effect of Uber and Lyft on the FHV industry in NYC, the people who receive dispatches from Uber and/or Lyft are subject to the same insurance requirements and the same regulatory scheme as every other car service.

When Uber and Lyft started to provide their services outside of the five boroughs of NYC, many complex issues arose. Legal questions needed to be answered and an insurance solution had to be provided.

The big auto insurance carriers (State Farm, Nationwide, GEICO, Progressive, etc.) were up in arms – mainly because personal automobile policies do not cover the owner if they are using the vehicle for business purposes, such as transporting a person for compensation.

The insurance industry saw this as an opportunity to create new product offerings. The New York Trial Lawyers Association, mainly comprised of the potion of the bar that represents injured persons, wanted high insurance coverage to protect their potential clients. Local governments wanted to bring the popular service to upstate New York. Local taxi companies upstate didn’t see why Uber and Lyft should be treated any differently than them in terms of regulations and insurance requirements. So, with all this in mind, trial lawyers, labor unions, taxi companies, local governments and the nation’s largest insurers all worked the halls of the state Capitol in Albany hoping to sway the debate on ride-hailing apps in New York to fit their interests.

Uber and Lyft fought hard against being treated as common carriers for purposes of tort liability. In general, a common carrier is a person or a commercial enterprise that transports passengers or goods for a fee and establishes that their service is open to the general public.

Uber and Lyft initially fought this battle in the Courts – arguing that they are not common carriers but are instead mere “brokers” and “technology companies”– but that argument was promptly defeated.

As explained by one Court: Uber is no more a “technology company” than a Yellow Cab company, just because cab companies use CB radios to dispatch rides, and just like John Deere is not a technology company because it uses computers and robots to manufacture lawn mowers… or Domino Sugar is not a tech company because it uses modern irrigation techniques to grow its sugar cane.

Indeed, very few (if any) companies would be considered technology companies based on how they create or distribute their products. The focus should be on the substance of what the firm actually does – making it quite clear Uber and Lyft are transportation companies, albeit technologically sophisticated ones.

So, in the end, all interested parties came together and the lawmakers in Albany crafted a solution. They created Article 44-B of the Vehicle and Traffic Law. Thus, the New York State Transportation Network Company (TNC) was born. Such law mandated certain liabilities and other responsibilities on the part of TNCs, including Uber and Lyft.

Most importantly were their financial responsibilities. The law essentially mandated that TNCs procure coverage for two different periods: When a driver is logged onto the TNC’s digital network (Period 1), the insurance policy must provide at least $75,000 for bodily injury to or death of one person in any one accident; at least $150,000 for bodily injury to or death of two or more persons in any one accident (75/150 coverage). When a driver is engaged in a prearranged trip (Period 2), the insurance policy must provide at least $1,250,000 for bodily injury to or death of any person. All TNCs must perform specific background checks on their drivers and the TNC would be regulated by the Department of Motor Vehicles.

So, is this a fair resolution? Some say “no”, while others say “yes”. Those who say “no” believe it is unfair for a person who is injured while a passenger on an Uber trip to only have coverage of $100,000/$300,000 if the trip originated in New York City, whereas the coverage would have been $1,250,000 if the trip originated outside New York City. Those who say “yes” believe that making sure the TNC drivers are vetted properly and that there is some financial responsibility on the part of the TNCs is sufficient. Their main concern was that unwitting passengers are not subjected to risk when they pay for a ride with an uninsured – or underinsured – TNC.

Attorneys for people injured by Uber and Lyft drivers say individual crash victims in NYC rarely receive much more from vehicle owners for their pain and suffering than the $100,000 in TLC-mandated liability insurance, a sum that often fails to match the true cost of their injuries. The New York State Trial Lawyers Association believes there is no reason why people in the five boroughs of NYC should be afforded less protection than people outside of the five boroughs. They believe there should not be such a discrepancy like this in the law.

The system is rarely perfect for everyone. In my opinion, the TLC already has extensive regulations for Uber and Lyft (and all other car services in NYC). Far from the “ride-share” model touted by the tech firms, in which everyday car owners make money on the side by picking up the occasional fare, in NYC the TLC requires Uber and Lyft drivers to operate like any other FHV driver in NYC: take safety courses, get a TLC license, buy commercial insurance, drug testing, tri-annual inspections of the vehicle, etc. etc.

The NYC TLC’s stringent requirements have earned the regulatory agency a reputation as perhaps the most stringent industry regulator nationwide. In the end, state lawmakers didn’t want to meddle. They believed the TLC had a system that was functional for NYC. So, meddle they did not. Buried in the state law establishing minimum insurance requirements for TNCs is an exemption for cities of one million people or more. In other words: New York City.

Another important fact must be pointed out. First, most car services in NYC utilize drivers who are independent contractors that own the vehicle they utilize as a FHV. This means that car services in NYC are not liable to procure automobile insurance because they do not own the vehicle and they do not employ the driver.

While the issue of whether Uber and Lyft drivers are employees or independent contractors is a hotly debated topic throughout the nation, the fact remains that the employment issue as it pertains to Uber and Lyft is still unresolved. It would be wholly inequitable to treat the average car service in NYC the same as Uber and Lyft when the average car service exercises virtually no direction and control over the driver.

The plaintiffs’ bar and the trial lawyers are always looking for a “deep pocket,” especially when they claim the vehicle owner’s insurance policy is insufficient to cover the plaintiff’s injuries, as well as their pain and suffering. My clients, the car services companies, get dragged into many cases where they do not belong. The result is the car service companies must pay me to defend them. This may be good for me and my law firm, but is it fair to the company that has no liability to have to pay a lawyer to defend these cases? Try getting unfairly sued and paying a lawyer to defend you before you are sure of your answer.

Over the past 20 years I have personally litigated hundreds, if not thousands of cases like these. The question always remains… Is the driver an employee or an independent contractor? I am proud to say that to date, I have yet to lose a case.

The TNC law was a way for New York State lawmakers to play Solomon and split the proverbial baby. Everyone walked away from the TNC law that was passed a little bit unhappy, which is usually the sign of a good deal. In NYC, the system may not be perfect, but it works. Let’s not mess with what is not broken.