A ride-sharing service that matches drivers and passengers in Buffalo and Rochester says it will continue to operate despite a state order to stop.
Calling Lyft’s practices illegal, the state Department of Financial Services said this week that Lyft exposes drivers and the private auto insurance market “to intolerable risk, cost and uncertainty.”
But Lyft does not plan to cease operations, a spokeswoman said.
“We’re having productive conversations with the DFS and believe we can resolve every issue outlined in the letter,” Lyft spokeswoman Katie Dally said in an email.
Lyft, based in California, operates in 65 cities. It began operations in Buffalo on April 24, allowing people looking for rides to use a smartphone application to connect with drivers who use personal cars to take the riders where they want to go. Riders are asked for a donation based on a rate schedule that takes into account time and distance.
Taxi and livery companies here and elsewhere in the country have waged campaigns to ban Lyft and similar services, contending that they operate like cabs but without the same regulations or insurance costs.
In a letter to Lyft’s CEO this week, the state’s top insurance regulator said that Lyft’s insurance policy and other materials show that the Lyft service violates state insurance laws. The violations “shift the insurance costs of a commercial enterprise to private citizens and their insurers.”
“Lyft’s ongoing law violations will not be tolerated and must halt,” State Financial Services Superintendent Benjamin M. Lawsky wrote in a letter sent this week to Lyft CEO Logan Green.
If the company did not certify that it has ceased operations by Thursday, the state would “take appropriate action,” Lawsky wrote.
The state declined to comment on how it will proceed in light of Lyft’s statement that it will not shut down.
Indeed, on Thursday afternoon, at least five Lyft cars were available to riders. Lyft plans to begin service in New York City today, despite Lawsky’s letter and a notice from the city’s Taxi and Limousine Commission that it would impound Lyft vehicles and levy fines.
In Pittsburgh, despite a similar cease-and-desist order from the Pennsylvania Public Utility Commission, Lyft continues to operate. Bills introduced in the Pennsylvania State Legislature this week seek to legalize the service.
At least 18 state insurance departments have issued advisories alerting the public of potential insurance risks. Until Tuesday, New York’s Insurance Department had not weighed in.
Lawsky’s Tuesday letter to Lyft included more than just an order to cease and desist. It also spelled out how the company, according to Lawsky, acted in bad faith.
Lyft planned to begin operating in New York City this week but concealed its plans from the state after the state specifically asked in June if Lyft planned to launch there, according to Lawsky’s letter.
Lawsky also described how Lyft began operating in Buffalo and Rochester without letting the state know, and then when the state asked for Lyft’s insurance policy, it wouldn’t turn it over.
Lyft took “the unusual position that an insurance policy that covers thousands of New York citizens is a trade secret and would be provided only under seal or protective order,” Lawsky wrote. The state later reviewed the policy.
The state said Lyft violated New York laws by:
• Acting as an insurance producer without a license by soliciting, negotiating and selling a policy to drivers.
• Procuring and selling a policy written by an unlicensed and unauthorized insurer and aiding the insurer in doing business in the state.
• Requiring that drivers obtain insurance from a specific insurer as a requirement for joining Lyft.
• Misrepresenting to drivers that fares are “donations.”