Knowing When Not to Rent
Lawsuits against car rental companies alleging negligent entrustment are increasing in frequency. Negligent entrustment is the act of giving or renting a car to a person not competent to drive or, as we'll see, likely to cause injury to others. If that person later has an accident, a car rental company could be held liable for the resulting injuries.
Car rental companies have always been exposed to liability for this behavior. So why the recent increase in negligent entrustment lawsuits? I think the increase is more than just a coincidence. Injured plaintiffs who are now blocked by the Graves Amendment are more interested in suing rental companies for negligent acts, which are not protected by the law.
The mere allegation in a lawsuit that the rental company negligently entrusted a rented car to someone may be enough to survive a motion to dismiss the suit - thereby getting the plaintiff to the discovery stage. Discovery can be lengthy and expensive. In order to avoid these costs (interrogatories, depositions and other processes), rental companies and their insurers are likely to offer money to settle the claims. The settlements will have to be recovered through premiums and could affect your cost of insurance.
States with Vicarious Liability
Here are two recent examples of cases in which plaintiffs were allowed to go to discovery. The cases are from New York and Connecticut, states that made rental companies vicariously liable for renters' negligence before the Graves Amendment.
Ellis v. Jarmin is a December 2009 Connecticut case. Enterprise rented a car to Mr. Jarmin, who had multiple outstanding arrest warrants. Police spotted Jarmin and pursued the rented car to arrest him on the warrants. Jarmin fled in the car but stopped to allow passengers to run away. In doing so, however, one of the passengers - Ellis - was injured.
Ellis sued Enterprise alleging that it should have known that Jarmin had warrants outstanding, that he would flee, and that he might cause injury to others. Enterprise moved to dismiss the lawsuit. The court denied the motion, but it was sympathetic to Enterprise's position.
"The plaintiff's complaint does not allege how Enterprise should have become aware of Jarmin's outstanding arrest warrants ... but pleadings must be construed broadly," said the court. In other words, the court knew that Ellis was not likely to succeed. Nevertheless the court permitted Ellis to go fishing during discovery in hopes of finding that Enterprise knew or should have known that Jarmin was likely to cause injury to others. Fairness for Ellis means increased costs for Enterprise.