INTRODUCTION OF THE RENTAL FAIRNESS ACT -- HON. ED BRYANT (Extensions of Remarks - May 26, 1999)

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HON. ED BRYANT OF TENNESSEE IN THE HOUSE OF REPRESENTATIVES WEDNESDAY, MAY 26, 1999

Mr. BRYANT. Mr. Speaker, I rise to introduce the ``Rental Fairness Act of 1999.'' This measure addresses two important issues. First, the impact of state vicarious liability laws on interstate commerce and motor vehicle renting and leasing consumers across the nation. Second, the question as to whether vehicle renting companies must be licensed to sell insurance products to their customers--insurance that is optional but frequently very important to many car and truck rental customers who are under insured or have no insurance at all.
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Title I of the Rental Fairness Act will, for a limited period of 3 years, adopt a federal presumption that companies that rent motor vehicles need not be licensed to sell insurance products to their customers for the term of the rental. Recently, class action lawsuits have been filed in three states accusing these rental companies of selling insurance without a license--despite the fact the these companies have been offering these products to their customers for almost three decades.

For many car and truck rental customers, these supplemental insurance purchases are not just a luxury--they are a necessity. For customers who carry minimal automobile insurance, or no insurance at all, the insurance products offered by car and truck rental companies are an important and inexpensive method of buying short-term, comprehensive insurance to protect themselves against accidents or theft. If this federal presumption is not adopted, these companies may cease to offer these products altogether--leaving many customers with no means of protecting themselves from potential liability during the rental of a motor vehicle.

The car and truck rental industry already has undertaken a huge effort to clarify their need to be licensed under each state's insurance laws on a state-by-state basis. To date, twenty-four states have clarified, either through regulation or legislation, their positions on this issue. Until the other states can act on this issue, Title I will offer this industry protection from these types of class action lawsuits.

Title I in no way undermines the primacy of the states in regulatory insurance. In fact, it specifically restates the primary role of the states in insurance regulation. Title I of the Act has the support of the trade associations representing insurance agents because these groups realize the rental companies do not compete directly with insurance agents on these types of face-to-face, rental transaction-specific insurance sales.

Title II of this act will pre-empt the laws of a small number of states that impose unlimited vicarious liability on companies that rent or lease motor vehicles. Normally under our system of jurisprudence, defendants in lawsuits are held liable based upon their actions or inactions only. Unfortunately, a small number of jurisdictions--six states and the District of Columbia--ignore his general principle this minority of states subject rental and leasing companies to unlimited liability for accidents caused by their customers that involve the company's vehicles--despite the fact that the company was not at fault for the accident in any way. This type of vicarious liability--liability without fault+holds these companies liable even when they have not been negligent in any way and the vehicle operated perfectly.

The measure I am introducing prevents states from holding companies liable for accidents involving their vehicles based solely upon their ownership of the vehicles. The bill makes clear that rental and leasing companies would still be liable if they negligently rent or lease the vehicle. The bill also would hold the companies liable if the vehicle did not operate properly. It makes clear that these companies are not, under this bill, excused from meeting state minimum insurance requirements on their motor vehicles.

Forty-four states have discarded the unfair and outmoded doctrine of vicarious liability for companies that rent or lease motor vehicles. This problem attracted my attention because of the impact the policies of these small number of states have on interstate commerce. These vicarious liability states impose what amounts to a tax on rental and leasing customers nationwide. Rental and leasing companies must attempt to recover the roughly $100 million they annually pay on vicarious liability claims from customers nationwide--not just from citizens in vicarious liability states. Smaller rental and leasing companies and licensees of the larger systems have been driven out of business by just one vicarious liability claim.

In addition, vicarious liability discourages competition in these states. There are motor vehicle rental companies that will not do business in these states for the fear of being held vicariously liable--reducing competition in these states and impacting all customers that rent or lease in these states. Finally, vicarious liability establishes an absurd legal disconnect. If a vehicle is purchases from a bank or finance company, then there is no vicarious liability. However, if that same vehicle is leased, vicarious liability applies.

For these collective reasons, Title II of the Act and the reforms it implements are long overdue. Everyone, companies and individuals alike, should be held liable only for harm they caused or could have prevented. The only way these companies can prevent this harm would be to go out of business. This is an absurd expectation that will be remedied by this bill.

I look forward to hearings on this matter and working with my colleagues to ensure its passage.
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