Understanding Third Party Accountability

Do your customers need a major credit card and a driver’s license to rent from you? Do you ever break that policy? Sure you do.

You state your policy; the renter pleads his case; you relent and let a friend use his credit card to pay for the rental. Then, the renter has an accident. Who pays for damage to your car? Who pays for damage to the other car and for personal injuries to others? Will the renter’s insurance company pay? Will the credit card holder’s insurance company pay?

Here are some cases that examine the legal results when a third party promises to pay for a rental. Included are a few tips on how to avoid the worst of circumstances.

Responsibility for Payment: The Case of the Deadbeat Brother

At an independent rental company in Florida, a renter showed up with only a driver’s license. He brought along his brother who had an American Express card. The rental agreement was filled out with the brother as the credit card payer. No additional authorized drivers other than the renter were listed.

The rental agreement showed a due-back date three days after the rental. However, the renter kept the car for two additional weeks.

After the car was returned, the rental company hit the brother’s Amex card for the full two-week rental. The brother protested the charge and Amex kicked it back to the rental company. The rental company then sued the renter and his brother for the unpaid two weeks of rental charges.

A Florida trial court found only the renter liable for the charges. The court dismissed the suit against the brother with the Amex card, holding that by the terms of the rental agreement the brother had only agreed to pay for the “rental,” which was defined as a three-day event. The rental company only collected for the three days and had to pay its attorney to bring the suit.

Would it have made a difference if the brother was listed as an additional driver? Would the outcome have changed if the brother with the credit card was named as the renter?

The Cost of Friendship: Whose Insurance Company Pays for Injury to Third Persons?

Tom Davis was denied at the Hertz counter because he had no credit card. Davis called a “Friend” and asked him to present his credit card for payment of the Davis rental. Hertz rented the car to Friend. Friend never drove the car; Davis ultimately paid cash for the rental.

Davis had an accident causing the death of a third party. The third party’s estate sued everybody for multiple millions.

A court held that Friend’s personal auto insurer was on the risk for the loss under vicarious liability theory. The court found that Mr. Davis was driving with permission of Friend, and by granting that permission, Friend became vicariously liable.

Note that vicarious liability still applies to personal auto losses in Florida and about 12 other states Hertz Corporation v. Amerisure Insurance, 677 So. 2d 22 [Court of Appeal of Florida, Second District, 1993].

The case shows how a dogged collection effort can bring good results. Hertz had already paid and settled with the estate of the deceased, but then went after the card holder’s insurance company for reimbursement.

Would you have thought to sue the insurance company of the credit card holder?

CONTINUED:  Understanding Third Party Accountability
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