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

Whether you are a lawyer advising a client on a personal injury case regarding a driver operating a rental car or you are renting a car yourself, it may be beneficial to know the different words of art in the rental car world.

Knowing who is on first helps a lot. And if you thought the California Vehicle Code provides stunning clarity in this field you are going to be somewhat disappointed.

Who is a renter?

For example, California Vehicle Code Section 508 defines a "renter" as anyone who is engaged "in the business of renting, leasing or bailing vehicles for a fixed rate or price for a term not exceeding four months." That sounds more like a statute relating to commercial transactions (Le. lessor, guarantor, bailor, etc.). But when you read a rental contract with any number of car rental entities in California you will find that a "renter" is defined in those contracts in terms contrary to Section 508. The contracts typically state that a "renter" is a person who contracts with a business that provides a passenger vehicle for a period of less than 30 days. So while doing research for this area of the law, you may wish to review California Civil Code Section 1936 (a) .

Rental car companies took Civil Code Section 1936 and modified the wording to apply it to many of their rental contracts. Published opinions in the appellate courts rely heavily on Section 1936. That section, as well as Vehicle Code Section 14608, lists the mechanical process the rental companies have to go through to rent you a passenger vehicle as defined by Vehicle Code Section 465. Everything from "comparing signatures" to what "renter's" information need be on the rental contract are set forth. Cases discussing both code sections define a "facially valid" license, which refers to what driver's identification is presented. A facially valid license needs to: look consistent with a governmentally issued driver's license; appear to have a signature consistent with the person presenting themselves at the counter; and the license presented must appear "valid" so as to not expire until after the rental period. See Philadelphia Indemnity Ins. Co. v. Montes-Harris (2006) 40 Cal.4th 151.

Ownership liability.

Loaning your BMW to your neighbor, even if you charge him or her per day, does not make you a rental company under the various codes. But if you do loan out your car and an accident arises, you may be liable in another way. You are the person that has "ownership" of your motor vehicle. Individuals as well as the for-profit rental companies may be held responsible for "owner's liability" in the amount of $15,000 to anyone person injured through the fault of a person operating your vehicle with your permission. Owner's liability is therefore a unique "liability without fault" principle in this state. This is liability without fault on your part for the accident. While auto insurance may apply to this fact pattern, realize that as an owner, you may very well be in litigation anyway under the statute involved, Vehicle Code Section 17151(a).

There are circumstances where you may decide against filing suit against the rental car company, even when one of their rental vehicles is involved in an accident, such as when the renter has his or her own policy of auto insurance. Under those circumstances, the rental car company's ownership liability is essentially extinguished once the renter's insurance carrier confirms coverage. The renter's insurance is thus determined to be "primary." In that scenario, naming the rental car company wastes a filing fee and your time. See Rashtian v. Bric-BH, Inc. (1992) 9 Cal.App.4th 1847; Enterprise Rent-A-Car Company of San Francisco v. Workmen's Auto Insurance (1997) 58 Cal.App.4th 1543.

It is important to know about all the California Codes that make up the litigation world of "Rental Car Law" and the court opinions that cite them. And while you are doing that, realize that Congress has recently stepped into rental car law in every state, like it or not, with the Graves Amendment, found at 49 U.S.C. Section 30106, entitled the Transportation Equity Act of 2005. The Graves Amendment applies only to rental car companies, even though it is based on liability to third parties based on "ownership" of a vehicle. In essence, the amendment seeks to insulate a rental car company for liability to third parties when the only basis for liability is that the rental car company owned the rental vehicle. There are no California published cases on the amendment to date, however numerous federal courts have upheld it. The exceptions to the amendment are product defect or negligent entrustment situations asserted against a rental car company.

The terms and conditions.

The business of renting automobiles in California is contractual by statute. The Rental Contract is a form that has various terms and conditions. Many of the paragraphs printed are required by Civil Code Section 1936 and other statutes. Each contract requires the person obtaining the vehicle for use (the renter) to agree to price, duration, driving area, method of payment, etc. with the entity that is in the business of providing vehicles for a fee to the public (rental company). The contract has to be written with specific phrases as required by Section 1936 and the rental document must actually be signed by the person receiving the rental car keys. Vehicle Code Sections 14608 and 14609; see Flores v Enterprise Rent-A-Car Company of Los Angeles (2010) 188 Cal.App.4th 1055.

Insurance and claims.

In a typical accident case, the person driving the rental vehicle had the option to "buy insurance" at the point of rental (the rental counter). The rental companies call this product Supplemental Liability Insurance (SLO or a Supplemental Liability Protection (SLP). But if a person did so, they did not buy a policy of insurance from the rental company. They paid a fee to the rental company to secure a policy of insurance for themselves through an admitted carrier in California. There may be a normal temptation to name the rental company in the complaint as the "insurer" of the driver. However, they are simply not insurers and a demurrer typically will be successful. The auto liability insurer that provides the renter a policy of insurance is the renter's insurance carrier. Seek to discover the name of the carrier and the limits of the policy right away.

When a renter purchases the rental company product SLP or SLI, that policy is in play even if there is no insurance policy that the renter has in his or her own name. But if the renter does not have personal insurance and did not buy the SLP or SLI, what happens after an accident? Some lawyers believe that every driver has to have insurance in California, even if they simply rent a car. They cite to the proof of financial responsibility laws found in Proposition 213. Proposition 213 is really Civil Code Section 3333.4 and it is part of the California regulatory scheme to protect persons from negligent drivers. But the answer is that such drivers do not have to have liability insurance to rent a car and they do not have to buy SLP or SLI. There is still a limited safety net for victims under the Vehicle Code.

This article merely broaches the world of rental car law and cannot address every situation. In the next article, I will discuss the actual meanings of the phrases "foreign renter," "permissive driver," "contractual violations," "renter's age discrimination" (after Lazar v. Hertz (1999) 69 Cal. App.4th 1494.) and those "Collision Damage Waivers" offered by rental car companies.

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