Ride-hailing service Uber says pending state and local rules may force it out of Kansas City

App-based ride-hailing services in the Kansas City market ran into double roadblocks Thursday.

In Topeka, Kansas lawmakers passed new regulations requiring broader insurance on the vehicles used by drivers — amid threats from Uber that it would be forced to leave the state.

Meanwhile in Missouri, a Kansas City Council committee unanimously endorsed new vehicle-for-hire regulations and fees opposed by the industry. Uber said those rules could price it out of Kansas City.

The Kansas House and Senate passed a bill imposing new standards for insurance coverage and requiring background checks of drivers. It still needs Gov. Sam Brownback’s signature to become law.

Uber issued a statement urging Brownback to veto the bill, which it said “will destroy thousands of Kansas jobs by making it impossible for Uber to continue operations in the state.”

The legislation would make Kansas the sixth state to regulate ride-hailing services that use a mobile Internet application to connect drivers with riders.

Legislation directed at the new industry is pending in 35 states. Among them are bills in the Missouri General Assembly prohibiting municipalities such as Kansas City from regulating the services.

The Kansas bill aims to clarify murky areas such as when drivers are covered by insurance if they’re using personal vehicles for commercial activity.

It’s a national issue that gained renewed attention this week when the National Association of Insurance Commissioners reported gaps in coverage for ride-hailing services operating in hundreds of cities nationwide.

A sticky area, the insurance group report says, is the time between when drivers turn on a ride-hailing app and when they pick up passengers.

“These are very big companies … that came to market in a very quick way and in a very expansive way without making sure that coverage gaps were addressed,” said California Insurance Commissioner Dave Jones. His state was among the first to regulate outfits such as Uber and Lyft.

Last year, California started requiring ride-hailing services to provide insurance for their drivers from the moment they turn on their app. The requirement was imposed following a 2013 crash where an Uber driver was accused of striking and killing a 6-year-old girl crossing a street in San Francisco.

The Kansas bill requires insurance coverage from the time drivers make themselves available to potential riders, not just at the moment they pick up a fare.

Uber, which has about 500 drivers in Kansas working out of Wichita and Kansas City, was sharply critical of the law.

The company opposed the measure for requiring drivers with liens on their cars to pay for collision and comprehensive coverage. Company officials argued that would pose a burdensome expense to drivers.

“These requirements go well above and beyond the use of a private vehicle for business purposes,” said Will McCollum, general manager of Uber in Kansas.

The provision was added at the urging of bankers who feared their collateral — cars with outstanding loans — wouldn’t be covered by a driver’s personal auto policy when the car was used commercially.

Uber angered lawmakers, flooding them with thousands of emails opposing the Kansas bill and crashing the statehouse computer server. The Uber email described the amendment pushed by the bankers as a “poison pill” that would make it impossible for the ride-hailing service to operate in Kansas.

Rep. Scott Schwab pointed out that while Uber argued against being overregulated, it pushed legislation that would have cut smaller players out of the industry — including a small startup in Lawrence that uses an Internet application linking hitchhikers with drivers.

“That’s insidious,” Schwab said.

Some lawmakers thought the bill would hurt a fledgling industry providing a service in suburban areas that might not be served well by cabs.

“We are moving too fast and stifling something we don’t fully understand,” said Rep. Travis Couture-Lovelady, a Republican from north central Kansas.

The Kansas City Council’s transportation committee on Thursday unanimously endorsed new vehicle-for-hire regulations designed to accommodate both public safety concerns and new-technology transportation services.

The measure, debated for months, goes to the full council April 9.

“We want (the services). We think this is the wave of the future,” committee member Cindy Circo said of the new-technology companies. “But there is a level of regulation that does have to happen.”

The latest proposal reduced the driver fee from an earlier version. But Andy Hung, Uber’s general manager in Kansas City, said the $100 yearly fee is still too high. And he said that if the council passes the regulations without further revisions, Uber might leave Kansas City.

“We’re still optimistic we can work something out,” Hung said after the committee vote. But he said the fee and other requirements remain too onerous for part-time drivers who make up most of Uber’s workforce.

A Lyft representative at Thursday’s meeting declined to comment on whether that company can live with the measure. Lyft suspended operations in Kansas City last October but has said it wants to start up again soon.

In addition to drivers’ fees, the parent company would have to pay a $40,000 annual fee. City officials said they can’t drop the fee much lower because the Regulated Industries Division, responsible for monitoring taxi and transportation companies, is fee-supported rather than taxpayer-supported.

Hung said Kansas City’s actual costs to drivers would be higher than $100 because the city also requires a chauffeur’s license, business license and medical check, along with other paperwork. He said that’s far more onerous than in many other cities.

But committee chairman Russ Johnson noted that Missouri requires a commercial driver’s license for people delivering pizzas.

“Why would we put less protection on the delivering of people?” he said.

Circo included language in the latest version that requires the city to evaluate in a year how this system is working and how it should be adjusted if improvements are needed.

This story was originally published April 2, 2015 at 1:04 PM with the headline "Ride-hailing service Uber says pending state and local rules may force it out of Kansas City."