Presuming no purchase of damage waiver, is your rental car customer responsible for all damages while in possession of the vehicle? Like many aspects of the rental car business, it depends. It depends on what state you are in, the rental agreement terms and the type of damage.

For example, is the customer responsible for damages such as those caused by a falling tree, scratches to the paint from vandalism or from driving too close to a bush? How about a seat belt chewed by the family dog or mice that crawl into the engine and chew wires?

This article provides a general overview of the types of damages to the vehicle that can be allocated to the renter. While the amount of damage is a separate topic, generally, the renter’s responsibility is limited to the actual cost of repair, loss of use (in most but not all states), and administrative, towing and storage fees.

It is critical that you review the statutes of each state in which you operate, as many states limit the amount or type of damages that can be recovered.

The legal framework that governs the type of recoverable damages is based on bailment law, negligence, any applicable state statutes and the rental agreement terms.

An Overview of Bailment Law

The rental of a car creates a “bailment for hire.”1 In exchange for a fee, the rental car company (the “bailor”) deposits its property (the car) with the renter (the “bailee”). Absent an agreement, the bailee/renter is not responsible for damage unless the damage was caused by the bailee’s negligence. The bailee must exercise “reasonable care and diligence.”2

However, under general bailment principles, the parties can agree by contract to allocate responsibility for damages to the bailee — even those not caused by negligence. The ability to pass the responsibility by contract is what has led to the language in most rental agreements shifting the risk of damage to renters (and to some extent, the development of damage waivers).

Statutory Limitations

A few states, such as California and Nevada, have enacted statutes governing the types of damages for which a renter can be responsible. In other words, the statutes limit the damage responsibilities that can be passed on to the renter in the rental agreement. Other states, such as New York and Wisconsin, require notice and an opportunity to inspect before the renter can be held liable for damages. These statutes must be reviewed and monitored carefully.

A few examples of statutes to keep in mind:

  • In California, by contract terms the renter can be held responsible only for physical or mechanical damage resulting from a “collision,” certain losses due to theft, limited damages due to vandalism, and certain towing and specified charges. Recovery for damages caused by vandalism is limited to $500.3
  • In Nevada, by contract the renter can be responsible for physical damage, but only mechanical damage that is the result of a deliberate or negligent act.4 Nevada also limits responsibility for vandalism. 
  • Indiana limits mechanical damage recovery to losses resulting from collision, an impact or the renter’s deliberate act.5
  • In New York and Wisconsin, before a renter can be charged for damages, there must be an opportunity to inspect the vehicle before the rental company can recover damages.6[PAGEBREAK]

Review Your Rental Agreement Terms

Keeping in mind bailment principles and any applicable state statutes, a rental agreement can allocate the risk of damage to the renter. Take a moment to make sure your agreement does so. If the agreement does not shift the risk, your recovery from the renter may be limited.

Also, recall that damages caused by renter negligence are generally the responsibility of the renter.

The Tree, the Scratches, the Dog and the Mice

A renter may argue that damage from a falling tree is due to an act of nature and therefore should not be the responsibility of the renter. Under general bailment law, if your rental agreement does not allocate responsibility to the renter, the damage is probably your responsibility. However, assuming appropriate contract language and no statutory limit, the renter has responsibility for all damages, including those from acts of nature.

Even in California, the renter is responsible for damages due to a “collision.” Because the damage caused by a tree is due to a collision in its ordinary dictionary meaning, the damage would be the responsibility of the renter. The main point is that damages caused by an act of nature can be the responsibility of the renter while in possession of the vehicle.

The scratches resulting either from vandalism or driving too close to a bush raise a different issue. In states without statutes and with appropriate rental agreement language, the damages from both incidents are the responsibility of the renter. For those states with a statute, the cause of the damage could be important. For example, in California and Nevada, there are monetary caps on damages arising from vandalism ($500 for California and $2,500 for Nevada).

Accordingly, if it is determined that the scratches were in fact due to someone “keying” the car or some similar activity, there would be a maximum recovery from the renter. However, if the damages were due to scratches from an object (a collision), there would not be a cap.

This underscores the importance of inspecting the vehicle and asking the renter questions regarding the details and cause of any damages at the time a car is returned.

The seatbelt destroyed by the family dog raises an interesting question. The damage is probably not attributable to a “collision” and therefore, in California, does not seem to fit within the statutory limitations on renter responsibilities. However, an argument can be developed that such damages must be attributable to renter negligence (leaving the dog unmonitored in the car) and therefore the responsibility of the renter. In states without a statute, the renter is responsible.

In California, the damage from the mice may be the responsibility of the rental car company. The damage to the wires does not seem to be the result of a collision, and, depending on the circumstances, are probably not attributable to renter negligence. Perhaps an argument can be developed that the damage is caused by vandalism — but that may require a willful act by the mice — an issue beyond the scope of this article and my training. In those states without a statute, the damages are probably recoverable (again assuming appropriate contract terms).

Recovery Varies by State

Finally, regardless of whether the damage is due to trees, vandalism, dogs or mice, be sure to comply with the notice and opportunity to inspect procedures that apply in states such as Wisconsin and New York.

In sum, the type of damages you can recover may vary from state to state. As with most aspects of the business, the critical point is to review and stay current with the laws in every state in which you operate. Also, make sure your rental agreement allocates responsibility for damages in the way you want.

About the Author

Wesley D. Hurst is an attorney in Los Angeles with substantial experience in rental car company litigation and representation. He can be reached at whurst@polsinelli.com.

Case and Statute Citations

1. Truta v. Avis Rent A Car Systems, Inc., 193 Cal.App.3d 802 (1987).
2. Gordon H. Ball, Inc. v. Parreira, 214 Cal.App.2d 69 (1963).
3. California Civil Code §1936
4. Nevada Revised Stat. 482.31535
5. Ind. Code § 24-4-9-13
6. Wis. Stat. Ann. § 344.574(2); N.Y. Gen. Bus. Law § 396-z

You can also see additional articles from the September/October magazine issue here.