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? [PAGEBREAK] Here’s to You, Mr. Robinson: Permission to Drive

In Robinson v. Reid and Titan Indemnity, Court of Appeal of Michigan, February 7, 2008, the Court showed great understanding of the roles of the driver/renter and the credit card payer.

Mr. Robinson entered a Dollar Rent A Car office with a driver’s license, but without a credit card. The rental was refused because, as the counter representative stated, “we only rent to persons with a driver’s license and a major credit card.”

Robinson then asked to call a girlfriend using the Dollar telephone. The girlfriend showed up with a credit card and was named as the renter on the rental agreement. The rental agreement did not list Robinson as an authorized driver.

The counter representative handed the car keys to Robinson who drove the vehicle and presented the rental agreement to the security guard as he exited the Dollar parking lot. The guard permitted the vehicle to leave with Robinson behind the wheel after Robinson explained that his girlfriend had just rented the car for him.

Robinson then had an accident with an uninsured motorist. In order to recover from his own insurer, Titan Indemnity, Robinson had to prove that he was driving the rented car with permission of the owner—Dollar.

On Motion for Summary Judgment Titan argued that the Robinson did not have permission of Dollar because he was not listed as an authorized driver on the rental agreement. But the Court denied Titan’s motion and held that a jury could find that the behavior of the counter representative and the security guard could constitute an amendment of the rental agreement, and the jury could find that Robinson did have permission of Dollar to drive the car.

Note that this was a good decision for rental companies (“Here’s to You, Mr. Robinson!”). As readers of my past ARN articles already know, in order to reach the personal insurer of a driver or renter, the rental company has to give that person permission to drive. If suit was brought by Dollar against Robinson’s personal insurer (the same Titan Indemnity) for damage to a third person, the issue would have been the same.

Was Robinson driving with the permission of Dollar? In that case Dollar would have been in the embarrassing position of claiming that it gave Robinson permission to drive even though he was not listed on the rental agreement. Presumably, the Court would have decided that case the same way, found against Titan. The headline could have been: “Court Saves Rental Company from Itself.”

Beware of Renting for Someone Else

A few weeks ago I received a call from a clearly distressed woman. She said that she had “rented a van from Thrifty” for her son. She used her Visa card, and did not tell Thrifty that she was planning to give the vehicle to her son. The son took the van and went missing.

At the time of the call he was three weeks overdue. The caller wanted to know if she would be responsible for the loss of the van if her son never showed up.

Do you know the answer? The answer is probably yes, because she failed to inform Thrifty that someone else would be the driver and that she was just paying for the rental. If she had been honest, she may have been in the position of the Amex credit card holder in the Florida case, above, and been liable only for the rental charges through the due-in date.

A Few Tips

When a third party agrees to pay for a rental, the rental company can ask the credit-card-holding third party to pay for the rental “and all extensions.” If that phrase is not in your rental agreement, use an amendment.

A second solution is to make the credit card holder the renter and name the driver as an additional authorized driver. That way the credit card holder agrees to pay the full charges.

The third possibility, of course, is to decline the rental when the person intended to be the primary driver is credit-challenged.

Good rentals can result in cases when someone other than the driver pays for the rental. For example, when a disabled person rents a vehicle and someone else drives, the disabled person can be the one with the credit card. The driver is listed as the renter.

But be careful renting to a combination of persons, each of whom possesses only a part of your qualifying criteria.

This article was written by Michael LaPlaca, senior member of LaPlaca Law PC, a law firm in the Washington, D.C. area that specializes in car rental and franchise law. LaPlaca can be reached at