What issues should car rental companies follow in the coming year, and what legal updates are relevant to the industry? The following is a brief recap of recent court cases involving rental companies, along with legal issues to watch in 2023 and beyond.

Operational Reminders from Recent Cases

Importance of Qualifying Additional Authorized Drivers

Two recent cases address the importance of qualifying an additional driver, not just the primary renter. The first is an unpublished ruling from the West Virginia Supreme Court of Appeals. In that case, an additional driver was added to the rental eight days after the initial rental and at a different location from where the rental started. The rental company employee completed a driver’s license inspection and allowed the additional driver to swap vehicles (the original car had transmission issues). The next day, the additional driver caused an accident, which resulted in a fatality and serious injuries to third parties. In finding that there was no negligent entrustment, the court noted that the rental employee requested and reviewed the driver’s license and did not observe any signs of impairment or intoxication.

In a California Court of Appeal case, a renter was accompanied by the additional driver at the time of the rental. The additional driver presented a facially valid license from another country. The rental company kept a record of the license number, expiration date, and issuing jurisdiction. The additional driver was involved in an accident shortly after the rental, and the injured third parties sued the rental company alleging negligent entrustment. The plaintiff argued that the company was negligent by asserting it had not complied with California law regarding driver’s license inspections. Based on the company’s rental records, the Court of Appeal found that the rental company had complied with its obligations of inspecting the additional driver’s license. The court also rejected an argument by the plaintiff that the rental company had a duty to investigate whether the driver was truly a resident of a foreign jurisdiction at the time of the rental.

These are important reminders of the need to qualify additional drivers and maintain rental records confirming compliance.

Claims Regarding Fatigued Renters

There have been several recent cases in which plaintiffs allege negligent entrustment based on claims that the rental company allowed a fatigued driver to use a vehicle. The West Virginia case discussed above involved such an argument. The plaintiffs asserted that because the original rental vehicle had been driven thousands of miles between March 13 and March 21 when the vehicle was swapped for a replacement, the driver must have been overly fatigued and that contributed to the accident the next day. The rental employee stated he did not observe any signs of fatigue. The court rejected the testimony of a sleep expert who said that someone who drove a substantial distance in eight days would be fatigued. The expert did not claim an observer would (or should) know that such a driver would not be competent to drive safely. The court found that there was no evidence the driver appeared incompetent. 

A California trial court reached a similar conclusion in a case where a passenger in van pool vehicle claimed the van pool operator should not have approved one of the van pool members to be an authorized driver. The passenger was injured when the driver dozed off on the commute home. The court rejected an argument by the plaintiff that the rental company had a duty to monitor the driver during the period the vehicle was used by the carpool members. Records that the driver had been initially qualified were critical to the case.     

Claims Regarding Renter’s Driving Experience, Foreign Language, and Driver’s License Inspection

The Colorado Federal District Court recently found that an RV rental company did not have a duty to require renters to have prior RV driving experience or to confirm that a foreign renter could read and follow English road signs. According to the court, the “reason to know” standard for finding negligent entrustment does not create a duty to seek unknown facts at the time of rental, such as inquiring about a driver’s experience or English language skills.

The court also found that an alleged violation of the Colorado driver’s license inspection statute did not constitute negligent entrustment since inspection of a driver’s license would not give the rental company reason to know that the renter was likely to harm others. The court noted, however, that if the plaintiff had alleged that violation of the driver’s license inspection statute was negligence per se (rather than negligent entrustment), the outcome might have been different.  That comment is a reminder of the importance of checking the driver’s license of all authorized drivers and maintaining records.

Other Developing Issues

Several other issues to watch in 2023 and beyond include:

• Privacy laws and telematics – Telematics technology continues to advance and provides rental operators powerful tools for monitoring vehicles and improving customer experience. Before using telematics systems, rental operators should consult with privacy counsel to determine the dos and don’ts under developing privacy laws. This is especially important in view of recent legislative activity regarding privacy.

• Tracking driver behavior – Before tracking driver behavior, such as speed and hard braking, operators should review privacy issues and establish policies for use of information.   

• Safeguarding customer personal information collected by the vehicle – Rental operators must ensure that they follow the same principles for safeguarding and protecting all customer personal information – whether it is collected through the rental contract or by the vehicle.

• Full and accurate disclosures for optional product sales – The new year is a good time to review websites and rental agreements to ensure that optional product disclosures are complete, accurate, and comply with applicable law requirements.

Leslie Pujo is an attorney and partner at Plave Koch LLC, and Wesley Hurst is an attorney and senior partner at Polsinelli.