Aged-Based Rental Laws: Do You Know Your Obligations?

On April 30, 2019, Maryland Governor Larry Hogan signed Maryland S.B. 247, which amends the Maryland Transportation Code to prohibit age-based discrimination in connection with vehicle rentals under certain circumstances.

New Section 18-109 of the Maryland Transportation Code prohibits Maryland rental companies, auto repair facilities, and auto dealers from: (1) refusing to rent or loan replacement vehicles to an individual who is at least age 18 if that individual’s own vehicle is out of service because of a repair covered by warranty, a recall, or a repair resulting from a recall; and (2) charging an individual at least age 18 a higher fee, based solely on age, for use of a replacement vehicle. 

The amended law will be effective October 1, 2019. When the Maryland law takes effect, the state will join New York and Michigan in requiring rentals to persons at least age 18.

Here’s a look at the age-based rental laws in those states:

New York’s 'Severe Hardship' Laws

New York Gen. Bus. Law § 391-g requires rentals to persons at least age 18, as long as insurance coverage for persons of that age is available. A rental company that “knowingly” violates Section 391-g can be subject to a $500 fine (which may be interpreted as applying to each violation).

In addition, a renter’s spouse who is at least age 18 is defined as an “authorized driver” under New York law (even if the spouse is not listed separately on the rental agreement), and New York-based rental companies must  display signage disclosing the prohibition on discrimination based on age and other characteristics (including gender, religion, race, color, ethnic origin, or marital status).

As discussed in greater detail below, New York does permit rental companies to charge an underage surcharge based on the actual extra costs for insurance related to the underage renter.

According to a case brought by the New York Attorney General against several rental companies in the mid-1990s, the purpose of the New York law requiring rentals to 18-year-olds was to prevent “severe hardship to competent drivers who are as safe and reliable as drivers over age 21.” (People v. Alamo Rent A Car, et al., 89 N.Y.2d 560 [Ct. of Appeals 1997]).  

Michigan: Civil Rights for Under 25s

In Michigan, car rental companies are prohibited from refusing to rent to individuals who are at least age 18. Section 102 of the Michigan Elliott-Larsen Civil Rights Act provides that “the opportunity to obtain…the full and equal utilization of public accommodations… without discrimination because of religion, race, color, national origin, age, sex, height, weight, familial status, or marital status” is a civil right.

The term “public accommodation” is defined in the Act as “a business… or transportation facility… whether licensed or not, whose goods, services, facilities… or accommodations are extended, offered, sold, or otherwise made available to the public.” 

The Michigan Attorney General previously concluded that an automobile leasing company was a place of public accommodation subject to the Act because the leasing company was clearly a “business” and a “transportation facility” whose services are “extended, offered, sold, or otherwise made available to the public.” 

As a result, the Attorney General found that an automobile leasing company (or other business or transportation facility) could not refuse services to persons between the ages of 18 and 21 solely because of their age. 

Young Driver Surcharges OK — at Reasonable Amounts

It is generally permissible to establish a young driver surcharge. Many companies presently have policies to add a surcharge for drivers under the age of 25. As with any fee or charge, it is important to provide full disclosure to the renter before he or she commits to the rental. 

For example, California Civil Code Section 1939.19 requires rental car companies to include mandatory charges at the time a rental charge quote is provided to a prospective renter. 

An additional factor to consider is that the application of the surcharge should be consistent across all customers — any flexibility to waive the fee should be part of a clear policy and should, of course, be implemented in a nondiscriminatory manner.

As to the pricing of the surcharge, as noted above, New York requires rental car companies to offer cars to young drivers. New York, however, specifically allows a rental car company to add a surcharge, so long as the amount of the surcharge is based on the increased insurance costs incurred by the rental car company in renting to young drivers.

Liability and Young Drivers

Renting to young drivers and the setting of a surcharge should be part of a general rental policy. As long as rental companies follow best practices in visually inspecting drivers’ licenses, there should be no separate liability for renting to a driver who just happens to be young.  

Occasionally, counsel for injured parties will argue in the course of litigation that the imposition of a higher rental fee for a young driver is an indication that a rental company is aware of the risk of entrusting a vehicle to a young driver. Counsel for the plaintiffs in those cases continue the argument to claim that a rental company should have responsibility for injuries or losses caused by a young driver. These points are raised as part of a negligent entrustment theory. 

The authors are not aware of this argument having been accepted by a court-indeed, negligent entrustment claims based on rentals to young drivers have been specifically rejected by a number of courts- but the argument underscores the importance of complying with state driver’s license inspection laws to confirm the renter possesses a facially valid license.

Moreover, even if a particular rental transaction does not comply with a company age policy — for example. renting to a driver younger than a company minimum age policy — that fact by itself is not sufficient to establish a negligent entrustment claim. (Mathews v. Federated)

Avoiding Age Discrimination Claims with Older Drivers

At the other end of age spectrum, should a rental company establish a maximum age for renters? 

First, there are no laws that establish a maximum age to be eligible to rent a car. Generally, as long as the renter presents a facially valid driver’s license and appears competent, a rental company can proceed with a rental to an older driver. Indeed, to do otherwise could lead to  an age discrimination claim.

Additionally, to the extent a company plans to impose an older driver surcharge, such a practice should be carefully evaluated with risk advisors and counsel. Any surcharge should be fully disclosed at the time of a reservation or rental rate quote and in the rental agreement.

Furthermore, rental car companies should consider whether the amount of the surcharge should not exceed any  additional insurance costs occasioned by renting to older drivers.

Editor's note: Leslie J. Pujo is an attorney with Plave Koch PLC in Reston, Va., focusing on mobility and vehicle use, as well as franchising. She can be reached at lpujo@plavekoch.com. Wesley D. Hurst is an attorney in the Los Angeles office of Polsinelli and leads the firm’s Mobility & Vehicle Use practice. He can be reached at whurst@polsinelli.com.