Ride-Sharing App Lyft Gets Cease and Desist Order From State

By Paul DeBenedetto on July 10, 2014 1:52pm 

 Uber competitor Lyft was hit with a cease and desist letter from the state.
Uber competitor Lyft was hit with a cease and desist letter from the state.
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Lyft

NEW YORK CITY — Ride-sharing app Lyft has hit another snag in its plan to begin operating in Brooklyn and Queens on Friday.

New York State's Department of Financial Services sent a cease-and-desist letter to the Uber competitor, calling its planned livery and insurance activities a violation of state law, the agency said on Thursday.

"Lyft's ongoing law violations will not be tolerated and must hault," read the letter from Financial Services Superintendent Benjamin M. Lawsky.

"In addition to Lyft's flagrant non-compliance with New York's Insurance and Financial Services Laws, its operations expose New York Drivers and the New York private passenger automobile insurance market to intolerable risk, cost and uncertainty."

The state's letter, which was sent on Tuesday, was first reported Thursday by Crain's New York Business.

Lawsky said the company lied to the state in a June 5 meeting, in which Lyft representatives from allegedly told the agency they had no plans to launch in New York City.

But as early as June 30, the company had begun outreach to community groups across the city, as DNAinfo New York first reported.

Lyft already operates in upstate New York, as well as in northern New Jersey and about 60 other cities across the country.

Lyft works on a volunteer and donation basis. Users use an app to hail a "volunteer" driver and, once transported, pay a "donation" rather than a fare.

The company says it also performs background checks on each of its drivers and supplements each one with additional insurance, including up to $1,000,000 in excess liability.

But Lawsky took exception to the claim that the rider's fare was a "donation," calling it "an effort to evade state and municipal law."

The superintendent also claimed that Lyft's insurance policy would increase prices in the private insurance market. Although the company provides excess coverage, it also instructs drivers to first make a claim with their private insurance carrier, Lawsky said.

"In so doing, Lyft is foisting risk that properly belongs in the commercial insurance market onto the private market, likely making private automobile insurance more expensive for all New Yorkers," Lawsky's letter reads.

The state isn't the only agency cracking down on Lyft. On Wednesday, the city's Taxi and Limousine Commission warned would-be Lyft passengers and drivers that using the service was illegal and that they would fine them. The commission also threatened to confiscate vehicles.

A spokeswoman for Lyft said they are working with the state to address Lawsky's complaints.

"We're having productive conversations with the DFS and believe we can resolve every issue outlined in the letter," spokeswoman Paige Thelen said.

Lyft Letter

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