Understanding Legalities Around Telematics, Rental Fleet Electrification

Using telematics and other vehicle technologies (like electric vehicles and connected cars) can help a rental fleet improve its customer service, fleet maintenance, and vehicle safety. With more federal and state incentive programs and increased adoption of EVs among consumers, more rental companies are adding EVs to their fleets.    

As technologies such as telematics and electric vehicles constantly evolve, car rental companies must keep up with changing legalities surrounding state rental laws, privacy considerations, and customer disclosures.

During the 2022 International Car Rental Show, attorneys Leslie Pujo of Plave Koch and Wes Hurst of Polsinelli led a seminar focused on new and developing laws and legal considerations that rental operators should consider when using these technologies.

EVs & Possible Legal Issues

From a legal standpoint, should a rental company create practices to educate their customers about EVs? Currently, there’s not a statute triggering a legal duty to offer this type of EV education to customers, according to Pujo. However, rental operators might want to update rental agreements or provide other materials to include disclosures on features of driving EVs, such as information on range, charging requirements, and driving do's and don'ts. 

During the seminar, a few attendees said they voluntarily provide instructions to help alleviate customer anxiety with EVs, especially related to range anxiety. For example, one rental operator said that he provides EV renters a list of public fast-charging stations on the route to a local top destination.

“Some rental companies are providing written instructions on issues that they know arise,” said Pujo. They’re asking renters if they have driven EVs before and pointing out OEM manuals and operational procedures on each electric model.

If the rental EV comes back at a lower charge level than when it went out, will the rental company have the customer pay a fee for recharging?

From a legal standpoint, if a rental company plans to charge the customer for not returning the EV at a specific battery level, the company needs to disclose that information in its rental contract, according to Wes Hurst, an attorney at Polsinelli, who heads a practice specializing in mobility and use of vehicles.

“If the EV goes out at 80% charged and you want it back at 80%, put that expectation in your rental contract,” said Hurst. “If you are planning to charge the customer, include how much you will charge in the contract so the customer goes into it with full understanding of what they will be charged.” Hurst also pointed out that a rental company should determine whether any electricity retail sales laws would apply if it imposes a recharging fee for failure to return the vehicle at the same charge level.

In relation to EVs, telematics can be used to understand if the EV will make it back by its due date, as well as the battery state of charge upon return. Why not just flip on that vehicle’s telematics system and find out?

This situation could be an issue if you live in certain states, according to Hurst. While on rent, tracking and monitoring of rental cars by GPS or other technologies is restricted or prohibited in at least three states: California, New York, and to a limited extent, Connecticut.

“In other states, you can track a rental vehicle’s battery level but should disclose the fact that you’re going to be tracking that information in the rental contract,” said Hurst.

For EVs, topics like customer education, battery level, charging fees, and telematics should be addressed in the rental agreement.

“If you are going to charge a fee for recharging, it needs to be clear in your rental agreement,” said Pujo. “Telematics should definitely be disclosed in the rental agreement. And maybe include acknowledgement that the renter understands information about the technology, the driving, and the charging and that you offered training on the EV.”

Telematics & Legal Considerations

For rental companies, telematics systems provide numerous data sets about vehicle performance and how it’s being used. In addition to locating a vehicle or tracking vehicle diagnostics, telematics can also be used to track driver behavior.

When it comes to monitoring driver behavior, telematics systems can record and alert to a renter’s speed and the number of incidences of hard braking and hard turns. Yet car rental companies need to be mindful of state laws, particularly in California and New York, where pulling this data is prohibited or restricted. If a company chooses to monitor its renters’ driving habits, Hurst recommends disclosing that this type of monitoring can be done during a rental (in states where it’s legal).

“The legal consideration for all these types of data is disclose, disclose, disclose,” said Hurst. “If you’re going to be gathering information from the car, make sure that it’s disclosed in the rental contract.”

According to Hurst, monitoring a person’s driving habits can lead to an interesting legal question: If a company is monitoring a specific renter and concludes that this person is not considered a safe driver, what should be done? Once the rental vehicle is returned, should that person be put on a “do not rent” list for the future? Where does a rental operator draw the line? How many times are renters allowed to speed before they aren’t allowed to rent vehicles anymore?

Hurst recommends being careful about what information is obtained from telematics and what is done with that data. If there is an accident with a company’s rental car and the injured parties get access to that vehicle data somehow, they might argue the company should have taken some action.  That is a highly subjective argument that may not be successful.  But, Hurst noted, “wherever you drew the line, you could get accused of putting it in the wrong place when there’s an accident."

State Vehicle Rental Laws

Going further on California’s laws around telematics: California generally prohibits rental companies from using “electronic surveillance technology” for cars on rent. Telematics is included in the California statute’s definition of electronic surveillance technology, according to Pujo.

However, electronic surveillance technology in California doesn’t include the event data recorder or the sensory diagnostic module, which monitors functions related to repair, service, and maintenance. Does monitoring an EV’s battery level (with telematics) fall into the categories of service or maintenance for the vehicle? According to Hurst, that issue has not been decided.  

Additionally, in California, there are a few exceptions where a rental company is permitted to use telematics, generally to locate lost, stolen, or abandoned vehicles, to respond to a law enforcement subpoena, to respond to a renter’s request for roadside assistance, or to record start/end time of the rental, mileage and fuel levels said Pujo.

New York bans the use of GPS technology to impose costs, fines, or charges on a renter or authorized driver. Connecticut requires disclosure of using telematics on rental vehicles. Additionally, Connecticut has a lengthy process if a rental company wants to use GPS technology to repossess a vehicle. In Montana, rental companies are required to disclose to renters if they are using GPS technology for anything other than locating the vehicle.

In New Jersey, a pending bill would require rental companies that use locating tracking data to share that data at the request of law enforcement. Additionally, rental companies in New Jersey would need to include a clear disclosure in the rental agreement that advises renters that the telematics technology will be used.

The use and storage of some types of personal data could be subject to states’ general privacy laws. Similar to California, Colorado and Virginia have enacted legislation regarding customer privacy; the statutes will go into effect in 2023. These privacy laws provide regulation with respect to the handling of personal data, particularly if a company is going to take that data and use it for marketing purposes, said Hurst.