Litigating Personal Injury Cases in the Rental Car Context - Part Two

Litigating PI in the Rental Car Context (Part Two) 

Litigation involving drivers operating rental cars is more complex than it appears. While some familiar legal doctrines are involved, making sure they are correctly used is sometimes a challenge.

Some practitioners are raising an eyebrow due to a recent appellate decision dealing with insurance law finding that an "unlicensed driver" can be a permissive user of another's automobile. See Landros v Torres, 2012 DJDAR 6813 (5th Dist. May 24, 2012). As a result, we need to define the context that the "permissive use" doctrine applies in rental car law.

Permissive use is discussed in great depth in cases such as Hartford Accident & Indemnity Co. v. Abdullah (1979) 94 Cal.App.3d 81 and Elkington v. Cal. State Auto Assn. (1959) 173 Cal. App.2d 338.

However, there is a critical distinction regarding the "use" of an automobile when we look at a rental contract versus an "auto lease." Generally, the owner of the car (the "lessor"), pursuant to a written contract, gives permission to the contracting party (the "lessee") to use the vehicle for a specific time period for a fee. The lessee can take the vehicle typically throughout the U.S. and allow others to use the vehicle.

Contrast that circumstance with a rental car transaction. The rental term, by Civil Code Section 1936, is for a period less than 30 days. Allowing another person to drive your rental vehicle may be a rental contract violation. A failure to timely return a rental car may subject the renter to criminal penalties.

Knowing who can use a rental car is important for vicarious liability purposes. Section 1936(3) addresses the class of "users." Other than the renter, the typical user would be a spouse. That spouse does not need to be listed on the rental contract and the spouse is presumed to be a permissive driver under the statute if he or she has a valid license. The next typical driver is the "additional authorized driver" whose name and license information must appear on the rental agreement. This driver is permissive only under the terms of the rental contract. A third typically an employer or coworker of the renter. That driver is permissive based on the Civil Code if the driver "satisfies the rental company's minimum age requirements.

This brings up an important issue regarding who can rent both passenger vehicles and vans or trucks. Like many businesses, rental car companies can limit their risk by limiting who can rent their vehicles. In Lazar v Hertz (1999) 69 Cal.App.4th 1494, the plaintiff sued a rental car company asserting a civil rights violation for their refusal to rent to under 25-year-olds. The court found that the "legislative scheme anticipates and expressly approves" the adoption of minimum age requirements by car rental companies. Some companies will simply not rent to anyone under age 21.

Many rental car companies also limit the type of vehicles they will rent based on age minimums. For example, it would be very difficult to rent a pickup truck, a 12- or 15-passenger van at age 21 from most companies. The 15-passenger van is subject to specific federal regulations regarding their use as rental vehicles and some companies prohibit drivers under 25 from operating them. Renters of 15-passenger vans must be given a written memo regarding the special handling needed to operate such vehicles under the Civil Code.

Permissive use can be both express (verbal or by contract) and implied. See Coulston v. Cooper (1966) 245 Cal.App.2d 866. A party attempting to assert permissive use express or implied, must show that the vehicle's owner permitted that driver to use the vehicle. Such evidence asserted cannot be by speculation or assumption. See Elkington.

Unauthorized drivers.

Case law has been very consistent that the general rule is that a rental car company that provides a rental passenger vehicle to a licensed driver may be vicariously liable for injuries and damages to third parties. Rashtian v BRAC-BH, Inc. (1992) 9 Cal.App.4th 1847. However, in the circumstance where the driver is neither an express or implied driver, the rental car company is simply not liable. In Marquez v. Enterprise Rent-A-Car (1997) 53 Cal.App.4th 319, the court found that a renter executed a rental contract which contained the statement "no others" in regards to additional drivers. The renter then gave the car to a friend and an accident occurred. The court found that the renter "acted outside the scope of permission given to him by Enterprise" and denied the plaintiff's recovery against the rental car company.

Holding over.

Many times a rental car customer will want to keep the vehicle past the initial rental period. That renter's credit card company may not authorize the additional charges. Renters that simply keep driving the car, promising to "make good on the charges," in such circumstances are at risk. In that case, the rental car company is required to place the renter on notice pursuant to Vehicle Code Section 10855 to immediately return the car. Once five days passes after the expiration of the rental period, the renter driving such an "embezzled" vehicle is subject to arrest and criminal prosecution under Penal Code Section 484(a) and 487(d)(1).

Going to Mexico or out of state.

Taking a rental car vehicle into Mexico is permitted by some rental agreements. However, rental car companies protect their vehicles and require the renter to purchase an additional item-Mexican insurance. The renter gets an insurance card to carry with the vehicle. A third party insurer issues the Mexican insurance policy and these policies typically state that the "insured" is the rental car company.

Rental car companies can also restrict where a vehicle may be taken within the U.S. Many rental contracts state "Permission Granted to operate vehicle only in the state of rental" or alternatively listing one or more acceptable states.

Foreign renters.

Since we are talking about Mexico, perhaps a discussion1 about "foreign renters" is appropriate. A foreign renter is referred to in AB 621, which modified Civil Code Section 1936 in January. A foreign renter is "any renter who is not a resident of this country." If a foreign; renter purchases Supplemental Liability Protection or Supplemental Liability Insurance and is involved in an accident, the rental car company today is required to accept service of process on behalf of the renter. The insurer of the renter must confirm coverage of the SLP or SLI policy up to $1 million to third parties. A plaintiff that uses this procedure waives any recovery against the renter in excess of the policy. This law expires on Jan. 1, 2015.

Renting a car to a licensed foreign renter, by itself, is not negligent entrustment. Compliance by the rental car company with Vehicle Code Section 14608 in such cases has been found to be the applicable standard. See Osborne v Hertz Corporation (1988) 205 Cal.App.3d 703; Flores v Enterprise Rent-A-Car Company of Los Angeles (2010) 188 Cal.App.4th 1055.

Collision damage waivers.

Collision Damage Waivers are contract provisions placed in a rental contract allowing the renter to avoid responsibility to the rental car company for accidental damage to the rental vehicle while being operated by the renter. It does not protect the renter from claims for property damage to other vehicles and it does not protect the renter from liability claims from third parties. It is important to know that this "product" is regulated by Civil Code Section 1936 (g) (1). There is a fee to obtain this product and you have to initial the rental contract if you do not purchase it. Some credit cards provide limited amounts to cover accidental damage to the rental car. But be forewarned that some credit cards may require the renter's own insurance to reimburse the rental company as the first applicable damage policy.

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