Surety Bond Regulation for City Taxi Cabs

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The following is a guest article from the experts of Surety Bonds, the nation’s #1 surety bond supplier.

Walking through any metropolitan city can quickly turn into a game of high-stakes dodge ball, where the rubber balls have been replaced by golden yellow taxi cabs flying through crosswalks at breakneck speed. One unexpected sneeze or ankle twitch could land a cab driver in a heap of trouble, causing damage to their vehicle, surrounding property, passengers in the car and even pedestrians standing nearby.

While standard car insurance could help provide some financial assistance in the case of a taxi accident, cab drivers who are legally licensed to operate a taxi are required to secure a surety bond in addition to insurance. In fact, surety bonds for taxi drivers have been around for almost as long as car insurance itself. The first liability car insurance policy in the United States was written in 1898, though mandatory insurance laws did not begin appearing until 1927.

In January of 1922, a bonding law was passed requiring New York City’s cab drivers to obtain a $2,500 surety bond in order to carry passengers. At the time, there were widespread protests against the law as cab drivers and their supporters insisted that a $2,500 fee would bankrupt most of the city’s taxis. Granted, this amount would be like charging today’s taxi operators more than $30,000 just to operate. What drivers and their allies at the time did not realize, however, is that using surety bonds instead of regular insurance meant they could obtain a bond for $2,500 for as little as $60-300 in actual costs to them.

Despite protests, the law took effect in July 1922 and, unlike widespread predictions, the city’s cab drivers were not suddenly out of work. The law has remained intact and cab drivers nationwide are still required today to obtain surety bonds as part of their licensing process.

Depending on the state or city in which a taxi driver operates, the surety bond requirements range from $50-300 thousand. Drivers who are part of a fleet or larger company of taxis are often bonded in a group policy through their employer. Taxi surety bonds can cover damages caused by negligent operation of the vehicle including personal injury and property damage. By using surety bonds, it places financial responsibility for any accidents squarely on the shoulders of cab drivers themselves. This policy is meant to encourage safe driving practices among the thousands of yellow cabs patrolling city streets each year.