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Vehicle Rental Firms Succeed In Pre-empting Liability In Florida, Other States

October 19, 2005

Tucked inside the recently signed $287 billion federal transportation funding act is a 'tort reform' provision eliminating vicarious liability laws applying to auto rental and leasing companies in 16 states, including Florida, and the District of Columbia.

The provision, opposed by the National Conference of State Legislators and some consumer groups, was authored by Rep. Sam Graves, R-Mo. It prohibits states from holding owners of motor vehicle rental and leasing companies liable for accidents involving their vehicles, provided there is no negligence or criminal wrongdoing on the owners' part.

States whose vicarious liability statutes are pre-empted are Florida, Arizona, Connecticut, Delaware, Iowa, Maine, Nevada, New York, California, Idaho, Michigan, Minnesota, Oklahoma, Pennsylvania, Wisconsin and Rhode Island. Under those state laws, owners of leasing or rental companies could be held liable for injuries caused by a negligent driver if the driver did not have sufficient insurance coverage.

The provision is the culmination of a 10-year lobbying effort by various transportation groups, said Thomas James, vice president for government relations for the Truck Renting and Leasing Association. A similar provision reached President Clinton's desk in 1996 as part of a larger products liability bill, which Clinton vetoed.

'Aside from the merits of the issue of being held liable without any allegation of fault, we felt federal legislation was necessary because of the nature of the national fleet of rented and leased vehicles,' James said. He added, 'Our trucks travel interstate all the time in the daily operation of their business. There is a patchwork of vicarious liability laws. You can be a Mississippi company that has a truck driving up I-95. It crosses into New York and suddenly it's a bet-the-business situation. We felt federal uniformity was necessary.'

Regardless of your position on vicarious liability, 'the rescinding of these statutes was a terrible mistake in terms of timing,' said an attorney, who with Mark S. Moller earlier this year won a $20.3 million judgment against Budget Rent-a-Car because one of its vehicles ran a red light and struck a van, which careened into 25-year-old Ethan Ruby, leaving him severely paralyzed in 2000.

'Nothing was put into force here to protect these innocent victims, such as a pool of benefits or minimum standards for rental companies,' he said. 'The next person is not going to have any recourse for pain and suffering, loss of income and, most importantly, a place to live and medical care to stay alive.' Taxpayers will pick up the tab for medical care, but even there, he added, benefits offered through Medicaid or other government programs are minimal.

The 'highly profitable' auto rental and leasing business is in the best position to assume the risk to the public of the misuse of their vehicles, Moller said. 'Rental car companies are going to be let off the hook for giving their cars to bad drivers who cause accidents,' he said. 'Rental car companies are simply making money without concern for who they put behind the wheel. The people who pay the price are victims of that kind of profit-driven exculpation.'

James said the law, which is effective immediately even for claims involving injuries that occurred before the effective date, will save the industry 'billions of dollars' in liability awards, attorney fees and supplemental insurance premiums. It also will open or reopen markets avoided by vehicle lessors because of the threat of vicarious liability.