Though both New York and Connecticut have pending state bills seeking limits on vicarious liability, some rental industry leaders are focusing their lobbying efforts on federal reform. Spearheading the federal lobbying effort is the Vehicle Renting and Leasing Fairness Alliance (VRLFA), a coalition of car rental and leasing companies.

In recent months, the VRLFA has worked toward introducing an amendment into the federal transportation bill. If passed, the amendment would prevent vehicle rental and leasing companies from being held liable for injury, death or property damage arising from a renter’s or lessee’s negligence. This protection would not apply if a rental company was guilty of negligence or criminal wrongdoing, or if the company failed to maintain required state insurance limits.

Because vehicle rental and leasing companies engage in interstate commerce, reform at the federal level makes sense, says Tom James, vice president of government relations for the Truck Renting and Leasing Association (TRALA), which formed VRLFA. Lessors and rental companies can’t control where their customers drive, and liability laws vary greatly from state to state. There’s a need for a national standard. The amendment, if passed, would supersede vicarious liability laws in 15 states.

But the federal reform effort faces some major challenges — and those came to the fore in the House on April 1, after Congressman Sam Graves (R-Mo.) introduced the amendment. The amendment went down to defeat in a voice vote after a lively discussion. [PAGEBREAK]

In debate preceding the vote, opponents of the amendment raised some hot-button issues that will likely resurface, including states’ rights and the plight of accident victims burdened by medical costs. But the VRLFA isn’t ready to surrender.

“We’re now in a stage of exploring what our options are,” James says. “I think the vote puts us at a severe disadvantage. This is a setback, but it’s still not over.”

On April 2, the House approved the six-year, $275 billion transportation bill. The Senate approved a $318 billion transportation bill in February. At that time, Senator Fritz Hollings (D-S.C.) used Senate floor procedures to thwart efforts to introduce the same amendment.

A Bill Caught in a Stalemate
The transportation bill has been fraught with its own set of problems. President Bush threatened to veto any transportation bill that spends more than $256 billion over six years. To avert a confrontation with the White House, House Speaker J. Dennis Hastert (R-Ill.) sought a spending compromise from the Bush administration and stalled handing the bill over to congressional negotiators.

Finally, during the first weekend of May, Republican leaders and White House Chief of Staff Andrew H. Card Jr. opted to begin formal House-Senate negotiations on the bill. Bush also agreed to raise his spending ceiling to $275 billion, which is still far below the level sought by the Senate version of the bill.

At press time, Senate Majority Leader Bill Frist (R-Tenn.) was expected to name Republican and Democratic members of the House-Senate conference committee before May 9.

“We are cautiously optimistic that the House-Senate conference committee will review and favorably adopt our provision,” says Bob Muhs, vice president of government affairs for Avis. [PAGEBREAK]

A Need to Educate Lawmakers
If the amendment isn’t adopted into the transportation bill, however, repealing vicarious liability at the federal level will take a sustained, industry-wide lobbying effort, industry leaders say. Part of that effort will need to concentrate on educating legislators about how costs arising from vicarious liability are passed on to consumers. What’s more, legislators need to understand how vicarious liability has caused fleet insurance rates to skyrocket, resulting in many small rental businesses closing, particularly in New York. Fewer competitors in the marketplace mean fewer options and higher rates for consumers.

Industry representatives also need to dispel the common assumption that a repeal of vicarious liability would shield rental car operators from all liability — even if they were negligent.

After Congressman Graves introduced the amendment in the House, he stressed that the amendment wouldn’t provide blanket protection from all liability.

“While this amendment seeks to level the playing field, I want to emphasize that the provision will not allow car and truck renting and leasing companies to escape liability if they are at fault,” he said. “Accident victims will continue to be compensated according to individual state law.”

Nonetheless, that didn’t stop Congressman James Oberstar (D-Minn.) from arguing that a repeal would leave innocent accident victims unprotected.

“[Vicarious liability] is a very complex issue of state law, and it varies from one part of the country to another,” Oberstar said. “But states, as far as we can ascertain, that have adopted such a policy have concluded that, without it, harm to innocent children, to bystanders would go totally uncompensated, even if the rental car company had leased, say, to an obvious drug abuser or someone with a very bad driving record.” [PAGEBREAK]

Congressman Jerrold Nadler (D-N.Y.) also argued that despite having unlimited vicarious liability, New York is still “one of the most active car rental markets in the country,” and that vicarious liability is necessary to protect innocent victims injured by rental customers who have no car insurance.

New York state law prohibits rental operators from refusing to rent to customers because they have no car insurance.

Graves’ response to the amendment’s opponents reflected the rental industry’s frustration.

“The fact that a company can be liable simply because they own the vehicle, even though they were not involved, I think is ridiculous,” he said. “The bottom line is that this is still going to require that vehicles be covered by the state-established minimum levels for insurance.”

In the past year, scores of independents and franchisees have shuttered their businesses in New York because vicarious liability has made fleet insurance rates unaffordable for them.

“My insurance [cost] increased 134% from the year before, and I had to pay it upfront,” says Sharon Faulkner, a Thrifty franchisee in Albany, N.Y.

Faulkner says she has written to Senator Hillary Clinton (D-N.Y.) about the need to repeal vicarious liability. Faulkner also testified in a Senate subcommittee hearing back in September 1999 during a similar federal tort reform effort.

Senator John McCain (R-Ariz.) had introduced the “Motor Vehicle Rental Fairness Act of 1999,” which also sought to repeal vicarious liability for rental car companies. But the bill died in committee after the Association of Trial Lawyers of America mounted a heavy lobbying campaign attacking the legislation.