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Big Changes in Rental Car Liability That Can Affect You

Tue, Jul 26, 2011 at 2:10PM

Florida’s most important industry is tourism, which means there are many tourists renting vehicles while they are in our state.

The tourists share our roads and, unfortunately, sometimes cause accidents. Accidents involving visitors often occur because they are unfamiliar with the area. In the case of Vargas v. Enterprise Leasing Company, etc., the Florida Supreme Court recently reviewed whether a rental car company is responsible for the negligence of a driver of one of their vehicles.

This case has important consequences for all of us. Here is why.

Under Florida law, cars, trucks and vans are by definition, “motor vehicles.” Florida law considers motor vehicles to be “dangerous instrumentalities” because of their ability to cause great harm when operated negligently. Because of the great potential for harm, the owner of a motor vehicle is legally liable for the negligence of an operator who has permission to use it. This legal theory is known as “vicarious liability,” or liability for the acts of someone else.

Usually a negligent driver who causes an accident is in a vehicle they owned, and their insurance will cover compensation for someone they harmed. But sometimes the driver doesn’t own the vehicle they’re driving. In that case, the driver and owner may have separate insurance policies available to compensate an injured person. Strange as it may seem, in Florida the owner’s policy is considered the “primary” source of coverage even though the driver caused the harm. So, we look to the owner’s insurance policy for compensation before seeking the driver’s coverage.

For many years, rental car companies were held to the same standard as the rest of us. When a tourist caused an accident, the rental car company that owned the vehicle was also responsible. Although that burden could be shifted to the driver’s policy in some situations, we expected the rental company to pay for any injuries and damages that were caused by the negligence of their driver. Sadly, that is no longer the case.

Several years ago, a Federal law known as the Graves Amendment, carved out an exception to vicarious liability with respect to rental car companies. The Amendment took responsibility away from the rental car companies, a dramatic, 180 degree shift and a tremendous benefit to rental car industry nationwide.

After the Amendment, a number of Florida appellate courts wrestled with whether the federal law applied to state cases. Despite the Amendment, our state statutes require a rental car company to cover up to $10,000 in damages by one of their drivers. This minimum mandatory is due to “financial responsibility” laws that are more closely related to insurance requirements than negligence law.

But with the Amendment, the rental car companies argued they were no longer responsible for their drivers beyond the mandatory minimum. Some of the Appellate Courts agreed, others disagreed and the matter was referred to the Florida Supreme Court for a final decision.

In Vargas, the Court concluded the Amendment does apply to Florida cases, benefiting the rental car companies. While the Court’s decision was based on sound legal reasons, it is very bad for the residents of Florida.

So how does the Supreme Court’s decision affect you and your family? Let’s consider a situation where a man from another country flies into Orlando to visit Disney World. While there he rents a car from Hertz and decides to visit Daytona Beach for the day. On his return trip to Orlando, he runs a stop sign because he is unfamiliar with an intersection and hits a car occupied by a 40-year-old woman and her three children, all of whom are seriously injured and require extensive medical care. Who is responsible?

Under the court decision, the tourist is legally responsible for the injuries and damages he caused. But what if he has no insurance and leaves the country. No law requires the tourist to remain in the United States. The injured family could sue the tourist and obtain a judgment for all of the damages, but collecting on that judgment will be extremely difficult, if not impossible, because he is not a Florida resident.

If the tourist bought insurance, then it would cover the damages. But if not, all that is available is the minimum mandatory of $10,000 from the rental company. The injured family must look to their own insurance and personal assets to compensate for their medical bills and lost wages, as well as pain and suffering, as a result of the accident.

Is there a solution? Because there are so many uninsured drivers in Florida, it is wise, if possible, to purchase uninsured motorist (UM) coverage. It will cover you if you are injured in a motor accident caused by an uninsured driver. UM coverage can compensate you for medical bills, lost wages and pain and suffering. Although the purchase of UM coverage is expensive, it is often the only way to protect against drivers with no insurance. It would be wise to discuss UM insurance with your insurance agent.

We live in difficult economic times. Today the Federal and State governments seek to balance individual rights with the interests of corporate America. It serves no useful purpose to impose such harsh laws and responsibilities on businesses that they are ultimately forced to close their doors. On the other hand, is it fair to sacrifice individual rights for the benefit of corporate profit? This is a difficult issue and one with no easy answers.

The Graves Amendment is a business friendly law, clearly designed to insulate rental companies from liability. Unfortunately, it was passed at the expense of the individual. While the Florida Supreme Court’s ruling may be legally sound, it is another unfortunate example of an erosion of the rights of the little man.

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