Rideshare Firm Lyft to Pay $300K in Settlement With New York

By | June 19, 2015

New York officials announced Thursday that rideshare firm Lyft has agreed to pay $300,000 in penalties as part of a settlement with state Attorney General Eric Schneiderman and the New York State Department of Financial Services.

The $300,000 penalties represent “one of the largest penalties enacted against a ‘sharing economy’ company to date,” according to an announcement by the New York attorney general’s office.

Additionally, as part of the consent order, Lyft drivers will be required to have auto insurance issued by New York-authorized insurers. The insurance must cover drivers while they have the Lyft app turned on to receive requests to pick up passengers, through the end of any rides they provide. The consent order also prohibits Lyft from offering, selling or providing insurance policies that do not comply with the New York insurance law.

The consent order also requires Lyft to comply with all other state and municipal laws applicable to vehicles-for-hire. Officials said Lyft must also inform New York’s superintendent of financial services, the state attorney general, and the counsel of any municipality or other jurisdiction in the state where it intends to launch its service at least three weeks before such a launch.

Last July, Schneiderman and then-superintendent of financial services Benjamin Lawsky sued Lyft in New York State Supreme Court for running a for-hire livery service in alleged violation of New York state and municipal law. The complaint alleged that Lyft violated the law by failing to require its drivers to hold commercial licenses, carry adequate insurance, or comply with local for-hire licensing rules.

Lyft had begun operating in Buffalo and Rochester in April 2014 without obtaining the necessary approvals or notifying those cities of their operation, according to the announcement by the New York attorney general’s office. The attorney general and the financial services superintendent had also learned that Lyft was about to launch its service in Brooklyn and Queens on July 11, 2014 a few days before the launch.

When Lyft refused to delay its New York City launch, the attorney general and the superintendent of financial services sued the rideshare firm, seeking to block it from launching in New York City and from continuing to operate in Buffalo and Rochester.

After several days of hearings at the New York State Supreme Court, the parties agreed to stay the lawsuit in order to allow the parties to try to resolve it. Lyft ultimately worked out an agreement which cleared the way for the firm to operate in New York City with commercial drivers only and to operate in a manner consistent with existing laws and regulations. The firm also suspended its operations in Buffalo and Rochester as part of the agreement last year.

Schneiderman said this week’s agreement enables Lyft to “grow and prosper within the bounds of state and local regulations,” while the penalties imposed send the message that companies that attempt to skirt the law will be held accountable.

“I have always been committed to fostering an innovative and competitive environment in which both new and existing companies can flourish in our great state. However, it’s critical that the laws put in place to protect consumers and ensure fair competition are not violated in the process,” said Schneiderman. “I want to thank former Superintendent Lawsky and the Department of Financial Services for their continued partnership in making New York’s marketplace one where all entrepreneurs can thrive under the same set of rules.”

“The mutually agreed upon settlement does not require any changes to existing Lyft service in New York,” a Lyft spokesperson said regarding this week’s settlement. “The settlement is part of our continued efforts to return true, peer to peer ride sharing to New York State at large, an effort supported by leaders and consumers across the state.”

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