Washington–Congress is being asked to preempt state laws that hold auto rental and leasing companies liable for damages caused by motorists who don't have adequate insurance to pay accident damages for which they are responsible.
The issue divides the insurance industry, which is split between personal lines writers who oppose efforts to preempt such laws, and commercial/surplus/excess lines writers, who insure auto and truck leasing and rental companies.
Sixteen states, plus the District of Columbia, currently have vicarious liability statutes in force, which mandate that rental and leasing firms have liability for damages their customers cause. Each state law is different, which the rental car companies say exacerbates the problem.
o Arizona, Connecticut, Delaware, Iowa, Maine, Nevada, New York and the District of Columbia all have no limits on the amount for which a car rental agency can be held liable.
o California, Florida, Idaho, Michigan, Minnesota, Oklahoma, Pennsylvania and Wisconsin allow vicarious liability with limits.
o Rhode Island allows vicarious liability with limits, which will become unlimited July 1.
The battle in Congress is being waged through an amendment to the highway construction bill, H.R. 3, added on the House floor during debate on the measure.
The amendment, offered by Rep. Sam Graves, R-Mo., would eliminate rental car and leasing company liability under owner's liability or similar laws. There is no such provision in the Senate version of the bill.
A House-Senate conference committee seeking to resolve differences in the bill held its first formal meeting last week. An extension to the current highway construction bill expires June 30, but observers believe work on the bill will not be completed by that time, necessitating another extension of the current fund program while negotiations continue.
Voicing the concerns of Allstate, State Farm and other personal lines writers, David Winston, vice president for government affairs at the National Association of Mutual Insurance Companies, said NAMIC believes the Graves amendment is "a misguided effort that will shift liability from rental car companies to individuals."
Mr. Winston explained that "this will cause auto insurance rates to go up for all customers, and will also have the unfortunate effect of increasing the number of uninsured drivers."
Tom James, vice president for government affairs for the Truck Renting and Leasing Association in Alexandria, Va., argues that "vicarious liability laws hold lease and rental car owners liable for the damages caused by the vehicle operators. They date from the horse-and-buggy era. It's commonsense tort reform."
Moreover, Mr. James said, at issue is a "patchwork of state laws==each state with vicarious liability statutes has a different approach that this federal law is designed to eliminate."
Carlton Carl, a representative of the American Trial Lawyers Association, said that the point of such state laws is that "rental car companies can and should require renters to have adequate insurance coverage in those states that have vicarious liability laws in cases where the driver is not adequately insured."
Mr. Carl said that the situation is particularly acute in New York City, where many rental drivers don't have cars, and therefore have no auto insurance.
"In the 16 states, plus Washington, D.C., that have such laws, it means that if a rental car driver is irresponsible==that is, uninsured or underinsured, something the rental car companies can prevent if they wanted, then the rental car company is responsible for accidents and damages," he said.
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