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Lyft pays New York $300K to settle lawsuit

Ride-hailing company agrees to settle with local lawmakers after it was accused of illegally operating in the state.

Ride-hailing service Lyft distinguishes itself with a glowing pink mustache that drivers place on their dashboard.
Ride-hailing service Lyft distinguishes itself with a glowing pink mustache that drivers place on their dashboard. Lyft

Lyft's yearlong tussle with New York State lawmakers ended Thursday when the ride-hailing service agreed to pay $300,000 in penalties to settle a lawsuit alleging it illegally operated in the state.

New York Attorney General Eric Schneiderman and former State Superintendent of Financial Services Benjamin Lawsky sued Lyft last July claiming the service violated state laws by allowing drivers without state-authorized insurance and a commercial license to ferry passengers.

"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," Schneiderman said in a statement. "However, it's critical that the laws put in place to protect consumers and ensure fair competition are not violated in the process. Today'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."

Lyft is a ride-hailing service that pairs passengers with drivers using a smartphone app. It operates in more than 60 cities in the US and has raised $1 billion in venture funding, valuing it at $2.5 billion.

But it hasn't been an easy road for Lyft, or its ride-hailing rival Uber. The two companies have dealt with regulatory battles, cease-and-desist letters and lawsuits from states and cities across the country. From Pennsylvania to Texas to Nevada, local lawmakers have spoken out against ride-hailing companies, saying there needs to be tighter regulations on insurance, car inspections and driver background checks.

The battle in New York mostly involved the type of insurance drivers carry. When Lyft first launched in New York it rolled out its peer-to-peer service where drivers can pick up passengers using their own car. The company covers these drivers with its own group insurance policy, but such policies aren't permitted under New York State insurance law. The state requires drivers to carry insurance only from state-authorized insurers.

Because of this sticking point, Lyft has been able to operate only a black-car service in New York and had to terminate its peer-to-peer service. For now, the company will continue with the black-car service and is lobbying the state to change its laws covering group insurance so it can resume the peer-to-peer offering.

"Today's mutually agreed upon settlement does not require any changes to existing Lyft service in New York," a Lyft spokeswoman said. "The settlement is part of our continued efforts to return true, peer-to-peer ride sharing to New York State."