November
2005
In August, Congress eliminated an antiquated
law that drove car-leasing companies out of New York and
led to increased rental-car costs in several other states.
Among the benefits, the Transportation Bill, signed by
President Bush on August 10, abolishes “vicarious liability”
- as it relates to vehicles - nationwide. This law benefits
car-leasing and car-rental companies.
Under vicarious liability, a person
who is hurt in a crash involving a leased or rented vehicle
can collect damages from the leasing or rental company,
regardless of whether the company acted negligently or
behaved wrongfully. Originally crafted in the age of horse
and carriages, the concept of vicarious liability was
used as a means to hold wealthy horse owners responsible
for the actions of their carriage drivers. As time went
on, vicarious liability expanded to automobiles.
Most states, including Indiana, never
permitted claims based on vicarious liability. However,
the few states* which did created a nationwide problem.
For example, car-rental companies faced liability anytime
their rental customers headed to or through one of the
vicarious liability states. The law supersedes these inconsistent
state laws and should restore car-leasing programs in
New York and reduce car rental rates in several states.
Even though the law abolishes vicarious
liability, leasing and rental companies are not completely
immune from liability. The law specifically preserves
the owner’s liability for negligence or criminal wrongdoing
and does not eliminate the financial responsibility requirements
for the privilege of registering and operating a motor
vehicle or the liability insurance requirements under
state law.
*Arizona, Connecticut, Delaware, Iowa,
Maine, Nevada, New York, Rhode Island and the District
of Columbia had no limits on the amount for which a car
rental agency could be held vicariously liable. California,
Idaho, Michigan, Minnesota, Oklahoma, Pennsylvania, and
Wisconsin allowed vicarious liability with limits.
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