The California Public Utilities Commission wants the insurance industry to get off its duff and start creating some products to offer ridesharing drivers.

A proposal issued by CPUC on Tuesday further defines ridesharing or transportation network companies (TNC) and activities and requires a $1 million commercial liability policy to be in place whenever a TNC driver has a smartphone app turned on to accept rides.

CPUC last year issued regulations defining TNCs, but it didn’t address a gap in insurance coverage between when a TNC’s commercial insurance is in play and when drivers would be relying on their personal auto policies for coverage. That gap—when a ridesharing driver has an app on but isn’t on the way to get a ride or doesn’t have a ride—has caused consternation for the insurance industry.

Several insurance industry associations have gone to battle in states across the country to call attention to this gap and ask for laws and regulations requiring TNCs to have commercial auto insurance in place at all times a driver’s ridesharing app is on.

Tuesday’s proposal comes from the assigned commissioner on the TNC matter, Michael R. Peevey. The proposal may get reviewed as early as an upcoming July 10 meeting. It can also be modified before that time, or another CPUC commissioner may introduce an alternate proposal.

The first of two key changes suggested in the proposal splits TNC operations into three periods:

  1. App on and waiting for a match.
  2. Match accepted, but no passenger yet.
  3. Passenger in the car through the time when the passenger safely exits the car.

The second key change is requiring a $1 million commercial policy to be in place during all three periods.

“All those three periods have to have commercial insurance,” said Marzia Zafar, director of CPUC’s policy and planning division. “In our previous decision we didn’t clarify this and there was some ambiguity, so that’s why we are being as explicit as we can.”

Zafar said the commercial insurance requirements can be met by TNCs like Uber, Lyft and Sidecar, “or what we’re hoping for is that the insurance industry will step up and provide a TNC-specific policy that doesn’t require a commercial license.”

Uber has indicated that it may be working to develop a policy for TNC drivers with its insurance carrier, James River. Uber in March also announced it has new insurance to cover a gap between personal and commercial policies when drivers are using the app-based ridesharing service. In May, Lyft announced it has partnered with MetLife Auto & Home with a goal of developing “insurance solutions that further protect Lyft’s drivers and passengers when utilizing this new sharing economy platform.”

No company has yet announced a product tailored for TNC drivers or an endorsement on personal auto policies to cover drivers when they are acting in a ridesharing capacity.

Uber in a statement late Wednesday vowed to battle the decision.

“This proposed decision protects trial lawyers, insurance companies and big taxi—ignoring the needs of hardworking Californians. Uber will vigorously defend the rights of California riders and drivers to enjoy the competition, choice, reliability and safety that ridesharing affords the Golden State. At a time when California desperately needs job creation initiatives rather than industry destroying bureaucracy, we look to the leaders of our state to ensure that the innovation economy doesn’t crumble at the hands of special interests.”

The CPUC proposal appears to follow recommendations made by California Insurance Commissioner Dave Jones in April that TNCs should be required to bear the insurance burden whenever a driver has a ridesharing app on.

The proposal also comes down firmly on the side of arguments the insurance industry has been making since the popularity of TNCs began to explode last year. TNCs have gained increasing notoriety since a New Year’s Eve tragedy involving an Uber driver that resulted in the death of a young girl in a crosswalk cast a spotlight on the emerging TNC industry.

“I think that it’s a positive step in the right direction,” said Nicole Mahrt Ganley, a spokeswoman for the Association of California Insurance Companies.

Ganley said that addressing gaps in insurance and ensuring that drivers’ personal insurance isn’t left on the hook if an accident occurs during TNC operations is ACIC’s priority.

ACIC and other insurer groups have also argued that personal auto insurance rates could rise for all drivers due to the increased risk of TNC activities if ridesharing drivers aren’t covered under commercial insurance.

“These regulations will prevent California drivers from having to subsidize TNC operations,” Ganley said.

Insurer groups are also backing a bill in the state legislature that’s similar to the proposed regulation.

Assembly Bill 2293, being carried by Assemblywoman Susan Bonilla, D-Concord, would: require TNCs to disclose to drivers that their personal insurance may not apply when engaging in commercial TNC activities; define that TNC activities begin once the app is turned on and end when the app is turned off; clarify that TNC insurance is primary coverage; require a TNC’s liability insurance to defend and indemnify their drivers when they have a claim or accident.

The bill is set to be heard in the Senate Energy, Utilities and Communications Committee on June 17.

Although Uber did issue the statement, spokespersons for the company did not respond to requests for comment, nor did Lyft spokespersons. Margaret Ryan, spokeswoman for another TNC, Sidecar, said the company is reviewing the proposal and plans to issue a statement.

Zafar said CPUC staffers who helped draft the proposal and the commissioner are hopeful the insurance industry will become proactive and respond to the demand that’s being created by the proposed regulation.

“It seems that the insurance industry is slower than the government, so we’re hoping to push the insurance industry to create new products,” Zafar said.